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Big 3 can point to better vehicles as they take their plea to Congress
(Buffalo News, The (NY) Via Acquire Media NewsEdge) Dec. 4--WASHINGTON -- American automakers head back to Capitol Hill today, hat in hand, after driving here from Detroit in vehicles that -- if you believe the experts -- are better than some of their foreign-made rivals.
General Motors Chairman Rick Wagoner will arrive in a hybrid version of the 2008 Chevrolet Malibu, one of Car and Driver magazine's 10 best cars of the year.
Ford Chairman Alan R. Mulally will arrive in a hybrid Ford Escape, which outranks similar vehicles by Hyundai, Mazda and Nissan in the latest Consumer Reports buying guide.
And while Consumer Reports doesn't recommend the Chrysler Aspen, the big SUV that Chrysler Chairman Robert Nardelli is expected to be driving outranks competitors from Infiniti and Mercedes-Benz in the magazine's most recent rankings.
The executives' road trip is meant to prove a point that got lost amid their politically incorrect arrival via separate corporate jets during their plea for a federal bailout two weeks ago.
The once-Big Three might need up to $34 billion in federal assistance in order to survive, but it's not because the automakers are building bad cars.
In fact, GM and Ford in particular have dramatically improved their products in recent years, auto industry experts said.
It's just that U. S. automakers are stuck with more factories and workers than they need at a time of plummeting auto sales, while continuing to build vehicles at a far higher cost than the foreign competition.
'It's very tough,' said Jon Linkov, managing editor for autos at Consumer Reports magazine. 'Just at the point when two of the Big Three [GM and Ford] seem to be getting a lot better, the sins of the past are coming home to roost.'
For that reason, the bailout is expected to be a hard sell.
Senate Majority Leader Harry Reid said Wednesday the aid package doesn't have the support to pass Congress.
And it's partly because some lawmakers talk as if Detroit is filling its showrooms with Edsels and Pacers.
'At the end of the day, you have to build cars people want to buy,' Sen. Lindsey Graham, R-S. C., said last month.
Today's appearance by the executives at a Senate Banking Committee hearing is meant to prove, however, that the quality of Detroit's product is the least of its problems.
In the restructuring plans the automakers submitted to Congress on Tuesday, the automakers stress that they're now bleeding cash because auto sales have plummeted from an average of 17 million a year in the past nine years to 10.5 million this year.
That sales drop has hit foreign manufacturers as well, but they simply have more cash on hand to weather the storm, said Kim Korth, president at IRN Inc., an automotive consulting firm.
While the Big Three 'took too long to get their act together,' their primary problem is not product quality, she stressed.
Instead, 'they're caught in a situation where they have not yet learned how to make money on small cars,' which are increasingly popular, Korth noted.
Meanwhile, trucks and SUVs are becoming less popular, but the Detroit Three are stuck with factories designed to build them and not easily converted to other vehicles, several sources said.
The plans the three companies submitted Tuesday aim to shrink their operations to fit the new reality. GM, for example, proposes a shift toward more fuel-efficient vehicles that involves the closing of several plants, sale or elimination of several brands and the closing of many smaller dealerships.
Congress called on the Big Three to submit restructuring plans after the automakers' plea for $25 billion in federal loans fell on deaf ears two weeks ago.
Now, the automakers are saying they may need as much as $34 billion, with GM by far the most desperate for help.
Bankruptcy would be the worst option, auto executives said Wednesday. Fritz Henderson, GM's president, told NBC that bankruptcy would further undermine the public's confidence in the company's vehicles.
'We want them to be confident in their ability to buy our cars and trucks,' Henderson said.
And Jim Press, Chrysler's vice chairman, told Associated Press that an auto bankruptcy would have a devastating impact. 'It could trigger a depression,' Press said.
Amid such arguments, President- elect Barack Obama said he couldn't comment on the proposals until he has seen them, and White House spokesman Dana Perino was noncommittal.
'The White House is not ruling anything in or out,' Perino told reporters. 'We have said we want to try and help these companies. We would only do so if these plans provide viability.'
The Detroit Three -- or at least GM and Ford -- would be plenty viable if viability were based on product quality alone, several analysts said.
For proof, just look at the quality ratings. U. S. vehicles top the J. D. Power and Associates 2008 quality ratings in the midsize car, large car, midsize SUV, large pickup and van categories.
Ford's three nameplates now look, 'in reliability terms, more like a good Japanese nameplate,' according to Consumer Reports 'Best & Worst New Cars 2009,' which notes that GM products are 'more of a mixed bag' while Chrysler continues to lag.
And Karl Brauer, editor in chief of Edmunds.com, an auto Web site, said that in general, 'there's no doubt that the American manufacturers have refocused on better quality and rebuilding their image.'
The increased quality tends to be focused on middle-of-the-line and higher-end vehicles. American small cars still tend to lag behind their foreign competitors in terms of quality, and there's an obvious reason for it.
Union contracts and pensions boost costs by an extra $2,300 per vehicle for American manufacturers, and those extra expenses lead to cost-cutting on smaller American models, Brauer said.
Besides, with bigger SUVs being far more profitable so long as they were popular, American manufacturers simply haven't put much emphasis on smaller and more fuel-efficient vehicles until recently.
'They just haven't been on that playing field for a long time,' said Neal Oddes, director of product research at Edmunds. com.
The Detroit Three are vowing to put a new focus on smaller vehicles as part of their bailout proposal, but the industry's image appears to be an obstacle to getting Congress to act.
A CNN poll showed that 61 percent of those surveyed are against federal aid to the automakers. Support for the aid fell after the hearings of two weeks ago, as Americans reacted negatively to the executives' performance and their arrival in those corporate jets.
Meanwhile, the public's view of the quality of American autos lags behind the reality, said Jennifer Moore, a Ford spokeswoman. 'People tend to remember the negative,' she said. 'And we say if you've had a negative experience, go back to the showroom and take a look at a Ford vehicle and drive a Ford vehicle. You will definitely be pleased.'
Drivers will probably be even more pleased with the American cars of the future, Brauer said. The American manufacturers have several new products in the works, like the electric Chevrolet Volt, that are just the kind of vehicles meant to appeal to drivers during an era of volatile fuel prices.
'If [the American manufacturers] could go two more years without going out of business, they would be very competitive with the foreign manufacturers,' Brauer said. 'But they can't go two more years without help from the government.'
To see more of The Buffalo News, N.Y., or to subscribe to the newspaper, go to http://www.buffalonews.com.
Copyright (c) 2008, The Buffalo News, N.Y.
Distributed by McClatchy-Tribune Information Services.
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