Detroit and the Rest of America

Daniel Howes from the Detroit News has an interesting and insightful piece about GM, Chrysler and what it means for the nation.   I’d recommend that you read the entire thing.

Don’t read it because you want to read something enlightening and positive.   It’s not.

Read it because it carries what I feel is a very important message:

We need to be aware of the changes that are going on around us so we can adjust to the new realities.

A lot of people aren’t fully grasping the implications of what’s happening and what it means to the housing industry, the banking industry, the auto industry, the manufacturing industry and the sooner people can grasp that, the healthier we’ll all be.

Read it and let me know what you think,

Tom Vanderwell

Carmakers’ nightmare continues | detnews.com | The Detroit News

The point is that the Bigger America also is looking for the kind of certainty and stability that has been eluding the Detroit Bubble for a lot longer. And it’s not coming — at least not yet — because we haven’t found bottom.

Detroit’s deepening business troubles, fast becoming America’s, too, are a cautionary tale for a country beset with the legacies of its own financial overreach. We wrote the screenplay for that movie here, starring Detroit auto execs, UAW leaders and a whole lot of people who ignored the changes around them because it was too hard to change.

Detroit

Let Detroit Go Bankrupt – by Mitt Romney

IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.

Detroit needs a turnaround, not a check….

I have several prescriptions for Detroit’s automakers…

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota……

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

……The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat…..

But don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

Op-Ed Contributor – Let Detroit Go Bankrupt – NYTimes.com.

All I’m going to say about this is two things:

1. Go to the link above and read the entire article.   He lays out a convincing case.

2. When the Republican primary was held in Michigan, I voted for Mitt Romney because I felt he had the type of business sense that we need for this type of economic challenge.

Have a good day!

Tom Vanderwell

GM-Chrysler talks worry Detroit – Oct. 18, 2008

In the doomsday scenario raising anxiety around the Motor City, General Motors Corp. makes a deal for Chrysler, keeps Jeep and the minivans, and vaporizes the rest of the company.

via GM-Chrysler talks worry Detroit – Oct. 18, 2008

So what does a potential merger between GM and Chrysler have to do with real estate and mortgages?

Not much unless you live in a rust belt state……

Let me explain it…..

Merger = Job Cuts

Job Cuts = Homes for Sale

Homes for Sale = Higher Inventory

Higher Inventory + Already High Inventory = Lower Prices

Lower Prices + Very Little Equity = More people in financially tough times

It’s not an equation that has a lot of good in it.

Tom