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No to Auto Bailout

Detroit 3: Dead Men Walking

Toronto: November 18, 2008—Lemon-Aid author and former NDP MP Consumer Critic, Phil Edmonston, calls the Detroit 3 corporate welfare bums unworthy of government aid. Instead of a $25 billion bailout, Edmonston says Chrysler, Ford, and General Motors need the ‘tough love’ of bankruptcy and a buyout.

When federal Finance Minister Flaherty refused to bail out Canada’s financial institutions earlier this year, he did the right thing. Now, it’s Detroit’s turn to learn that Canadian taxpayers cannot be bullied into squandering millions for a temporary cash “fix”, when the industry needs fixing, says Edmonston.

“Detroit makes bad cars that nobody wants, with Chrysler and GM heading the list. Detroit also makes expensive marketing goofs like GM selling the same car through three divisions (Tahoe, Yukon, Escalade), Chrysler, Ford, and GM backing away from leasing, instead of making realistic residual values, and all three manufacturers forcing dealers to order poor sellers if they want some ‘hot’ models. Neither does Detroit have any realistic business plan to make money, and instead, trots out the following myths to beg for handouts:

Automakers are losing billions because of “legacy costs” of retirement pay and health care for workers in Detroit. Not true. Other countries’ workers have pensions, too, although those pensions are more highly socialized than in the United States. But the cost of labor in a car or truck is barely more than a tenth of the price of an average vehicle (The average labor costs of a car or truck are slightly above $2,000, and an average car or truck costs about $24,000).

Detroit makes the best cars in the world. Wrong. Check the frequency of repair stats in any Lemon-Aid, Consumer Reports, or J. D. Power survey. American models are shown to lack quality, performance, and styling. Can you tell the difference between a 2008 Impala and a Malibu? A Cobalt and a Caliber? Detroit needs sexy, reliable cars. All three automakers should hire the quality-control people from Honda, Hyundai and Kia (Toyota quality has slipped of late) and have them supervise the plants around Detroit and Oshawa, just the way the Japanese hired W. Edwards Deming to teach them American quality control after World War II.

Detroit’s bailout won’t cost us anything. Are you kidding? The $25 billion “bridge loan” given last month is estimated to cost American taxpayers about $8 billion. Also add on to that the billions that won’t be spent on infrastructure repairs that could create many more jobs and a greener environment. Canada and Quebec wasted hundreds of millions of dollars over a five-year period bailing out GM’s Boisbriand, Quebec factory, that’s now been replaced by a successful—mega mall.

The truth is like many of the airlines that successfully reorganized and merged while in Chapter 11 bankruptcy, Detroit needs ‘tough love’ in order to throw off the yoke of its inbred, short-sighted, arrogant, corporate welfare bums that are asking Washington for another $25 billion on top of the $25 billion they were give last month. The same companies are just now toting up how big of a handout they will ask from Ottawa.

Instead of a bailout, the Detroit 3 need a buyout. Preferably, by the federal government which could buy the companies in bankruptcy for 10 cents on the dollar, and renegotiate worker salaries and benefits and supplier contracts. It would be nice to see the three automakers organized into one lean, green, and aggressive automaker with (why not?) Lee Iacocca, David Suzuki, or Bob White at the wheel (for a $1 a year, maybe $2). They may even be able to call it…AMERICAN MOTORS…That name is free now.

Sadly, this is not likely to happen because of Republican moderates who will cast their lot with Democrats for a bailout. A House win is a sure thing, but the Senate will be tight. Expect McCain and Lieberman to vote for the bailout and watch how many ‘earmarks’ will be thrown in to make the Kool-Aid sweeter.

“In Canada, we should continue a watchful approach, and keep our purses shut.”

Phil will be in Toronto November 21 through December 2. To schedule an interview with him on the above topic or any other automotive concern, Email or call him directly at:; Tel.: 416-628-2821. You may also contact his publisher for a free copy of the Lemon-Aid 2009 SUV, Van, and Truck Guide: Max Arambulo at

Copyright 2006