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March 30th, 2009
01:09 PM ET

The wrong-minded auto rescue

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/03/30/art.getty.cars.jpg]
Ronald Glantz
Fortune

Despite talking a tough line today, Washington seems determined to bail out Detroit, despite the objections of the public (61% opposed it, according to a CNN poll in February). The public is correct. Money diverted to a dying industry is taken away from areas with better prospects.

Unfortunately, changing the chairman is only window dressing at this point. Carlos Ghosn succeeded in turning around Nissan (NSANY) because the problem was only stodgy styling and high component costs - consumers knew the engineering, assembly, and dealers were terrific.

Detroit's problem is not just health care and retirement "legacy" costs. There is another legacy cost that is just as important – decades of bad cars and trucks. Does anyone remember Schlitz? It was the second-largest selling beer in the country as recently as 1976. Then the formula was changed so that it didn't taste as good. Schlitz restored the original formula, but it was too late. Consumers were unwilling to spend a couple of bucks to see if Schlitz was back to premium quality. Budweiser was good enough.

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Filed under: auto bailout • Economy
soundoff (9 Responses)
  1. Isabel (Brazil)

    My car is Citroën, but if these carmakers go into bankruptcy. How are the people who have these cars?

    March 30, 2009 at 8:38 pm |
  2. Teresa

    I for one do not want a foreign made car sitting in my driveway. You can say all you want about the american made cars, but I also want to buy american made products. I have faith in my fellow americans and I dont want their businesses to go under. If we all keep buying foreign, we will put all of our fellow americans out of work.

    Firing Wagoner is a joke to me. Were all the CEOS and helpers at AIG fired? Im with XTINA , Chicago: why havent they fired the Senators watching the banking business?

    @ earle, florida: FYI, the autoworkers pay taxes too, and a lot of them.
    It's their money too.

    March 30, 2009 at 6:16 pm |
  3. Lash Larue

    Obama,......No business experience...Telling GM how to run a Business..Why is he not outraged,with the CEO of GM getting 20 million in retirement?AFTER being Bailed out by the Tax Payers?..Where is the outrage?...

    March 30, 2009 at 5:59 pm |
  4. Joanne Pacicca, Solvay, NY

    How arrogant can these beggars be? Come on, they have no plan, they can't control their costs, their production lines, their pay structures, their advertising, their slumping sales~they want money to allocate in any way they please. This is a signal...read it, D.C. they are mocking you.

    March 30, 2009 at 4:47 pm |
  5. Annie Kate

    The last time I bought a new car I went to my auto mechanic first and asked them what car currently on the market held its value better; performed well; and had a good repair record. I got several suggestions – none of them were American cars. In looking at hybrid cars the best ones are again the non-American cars. Maybe instead of saving GM and Chrysler and Ford, we should make conditions better for the imports to have more factories over here in the US.

    March 30, 2009 at 3:57 pm |
  6. xtina, chicago IL

    Dear Mr Obama, if you fire the CEO of GM because GM is badly managed, why haven't you given the boot to Sens. Dodd and Frank? After all, they run the banking committee and have turned a blind eye to the horrible practices of banks under their watch and have indirectly caused a catastrophic amt. of foreclosures.
    If heads must roll, Dodd and Frank's should have rolled first.

    March 30, 2009 at 3:48 pm |
  7. earle,florida

    Did you notice that Ford Motors is a survivor, thankyou! Hasn't taken "one penny",and has the best cars for the future. It has several protoypes close too ,or already in production, that being the Ford Fushion! My next car hands-down(JMHO)! GM is got to pay for it's past sins,period,and Chrysler deserves nothing, being a private company? I never quite figured out why were bailing out a private (Chrysler) company,with the taxpayers never seeing one-cent of it's profit,but just all it's debt?

    March 30, 2009 at 3:08 pm |
  8. joey

    Let Detroit fall. For those who believe it will collapse the econmy you are wrong. So few jobs areleft in the auto industry today. Where the american carmakers fall the forgein carmakers will rise. Toyota, Honda, Nissan and Hyundai with be there. Besides they are better quality cars that last much longer with day to day use. Forgein autos are more environmentally concious and the companies are ran better. It is time that the millionaires and billionaires fall in this country. For to long has America been ran by companies instead of the people. I lost my job because of GM' faltering now so should the big wigs that have run GM in the ground. All they are doing is taking TARP money and blowing it. Who says a Chevrolet Z71 is worth $40,000? Detroit!!! I can tell you the engines made mostly of aluminum do not cost $500 dollars to build parts and labor.

    March 30, 2009 at 2:53 pm |
  9. Sharon S

    There is another problem with Detroit the Union that has long been taking tons of money from he workers of these car companies so the employees would get this outragious amounts of pay and benefits!

    So Detroit no only has been making cheap cars with over inflated prices they have been allowing a old Dinasaur called the Union to drag them down also!!!

    I think Most Americans are pretty sick of the American Car companies and I feel that even if they get a bailout they will do worse than AIG did and go bankrupt anyway! Sad very sad that the stupid idiots we put in office refuse to even listen to the people they are supposed to be representing!

    let Detroit bankrupt and Clean out the House and I mean White HOUSE then maybe the people can put some people up there who WILL listen to what we say and how we feel!

    March 30, 2009 at 2:45 pm |