Monday, November 17, 2008
The Great Depression didn't result in all the Detroit automakers going bankrupt:
But this financial crisis may. And things got really, really bad during the Great Depression. So why is Detroit more fragile this time around?
Why? Dunno since I'm not an industry historian but fun to throw some stuff out:
No imports or non-union transplants to compete against. Few, if any, pensioners to support out of current cash.
Autos were still a growth industry.
Less whitecollar bloat -- fewer lines of production, less regulations and legal hassles, less marketing, less advertising, less everything.
After the go-go 20s their physical plant was not that much in need of reinvestment so they were good-to-go with what the plant they had. Just reduce the shifts to match demand.
There probably was a great deal of consolidation in the industry where the weaker players died. The majors today are the survivors from then and have 50 years of bloat around their middles to show for it.
I love to hear Willie Nelson's "On the Road Again." But what will happen if the big 3 go bust? It might get lonely out there.
To add to the first comments: oil. At that time oil was just getting started and the USA was the top "producer". now we import 60% of what we consume. We could also elaborate on healthcare costs: if we had national healthcare coverage the cost of producing an auto would fall enough to make domestic autos profitable. However, the real issue is to move to mass transit, that is, convert the auto workforce to making trains, trollies, bicycles, etc. Our standard of living is falling and taking the car with it.
Cars weren't as pervasive in the '30s as they are now. They were still something of a luxury item.
And, much as American car makers hate to admit it, Japanese cars have been better for nearly 20 years, at least for those of us who want well-designed, fuel-efficient cars.
Another reason is that the executives who ran the companies then had backgrounds in manufacturing. They knew how to make things. Today's executives are lawyers and accountants and MBAs. They've never made anything and don't know how to do it. All they know is about stock options and tax deductions and other useless stuff.
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