Saturday, December 06, 2008

The Big Three - Consumer Perspective

I am torn at this point much like Don on how much to help the American auto business. But we can't blame them for all the issues they are dealing with at this point.

When the consumer can't afford to purchase car - American or Japanese - without taking out a 60 or 72 month loan and with the quality of cars improving so that the average car is lasting longer than ever without needing major repair work, the industry should have started to downsize years ago. I have a 2002 Chevy Impala with almost 110K miles on it. I have never had a major issue with the car, like the way it drives and have no plans to replace it in the next 12 months. Just 20 years ago, that same car would have been traded in long ago and a new one purchase. Maybe even two cars in the same period I have owned that car. And the auto companies were building cars people wanted for the last few years - SUVs and crossovers.

I was listening to WGN radio in Chicago last week when the topic was what can of help to give the auto industry. Two owners of major dealerships were talking to the host about the status of car sales. Both suprised me when they explained that since the price of a gallon of gas had fallen below $2.50 a gallon in early November here in Chicago, auto sales had taken off. And what they were selling were pick up trucks and SUVs. The Chevy dealer said he was sold out of Suburbans and the bigger SUVs. The Ford dealer said the F-150 were selling at or above list since the demand was high and he had a hard time getting them from Ford. A man claiming to be a Toyota dealer called and said he was selling SUVs also and couldn't move a Corolla even with a big discount. Who is to blame for the companies not building smaller, more efficient cars - we are - the consumers.

My youngest son has a Chevy Cobalt - I hate it. It is cramped and uncomfortable. It gets great gas milage - but who cares if you have to be uncomfortable with every mile you drive.

If you really want to help the auto industry and many other depressed industries in this country - implement a government sponsered, cost controlled health care system that covers everyone with an emphasis on prevention - not treatment. This will take the stress off the manufactures to pay retiree health care benefits, increase profit and allow real research into fuel cell and electric car development. It will also allow the industry to pay a fair wage and keep the workers spending. I had an argument with a freind last week over auto worker wages.

He claimed, incorrectly, that the average worker in the industry made about $75,000 a year. When I explained that the right wing radio folks had distorted that wage level by taking all the wages paid plus the unemployemnt sub-pay paid to laid off workers and benefits and included retiree benefits and divided it by number of current workers in the industry to get that number. It was actually more like $57,000 a year. Not a bad wage, but still not $75,000. When I pointed out that his wife- an accountant and me -with a degree in economics and an MBA - both made over $100K and we had to set in an office all day and not work in the conditions in a factory- he had no response. Then when I pointed out that with his bonus and commission as a salesman, he also made more than $75K and all he did was drive around and sell ink. My point here is that the auto workers are not overpaid. We have to have a well paid working middle class or the dream we have had as Americans is gone. You can't buy a house,a car and put your kids to college without a descent wage.

Let's hope this temporary loan will hold the industry over until Jan. 20 and that the Republicans who want to see the industry fail in order to bust the UAW will not succeed in causing the downfall of a major company before we have a chance to fix it.

Tim

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