Wednesday, November 19, 2008

American Dream

What is your definition of the "American Dream"?

I saw a lottery winner on tv the other day and he said "Now I can start living the American Dream."

Is the American Dream just to have a lot of money? Is it to have a big house and lots of cars and not working and just having things? Is Paris Hilton living the American Dream?

I grew up in a Middle Class home (single parent of 5), we had a house, a car, we never "wanted" for anything (except for non-necessaties just to keep up with the Fritz's). But I really think my mom had the American Dream. She was a hard working woman, who made her own way in the world, she saved her well earned money and invested in her future. She owned her own home, she raised her family (quite well, I might add), sent all of her children to parochial school and when she was ready, she was able to retire on her terms. After retirement she did quite a bit of travel both domestic and abroad.

The American Dream is what I think of when I think about what is going on with the Auto Industry right now. There are hundreds of thousands of folks trying to live the American Dream in Michigan, but for circumstances beyond their control, it may all come to an end.

I don't think of the Auto Industry going to the Government for a loan right now as a Bailout. It is a loan. It is not the first time it has happened.

From ProRublica:

In 1979 Chrysler suffered a loss of $1.1 billion. That year the corporation requested aid from the government. In 1980 the Chrysler Loan Guarantee Act was passed, which provided $1.5 billion in loans to rescue Chrysler from insolvency. In addition, the government's aid was to be matched by U.S. and foreign banks.

By 1983, seven years earlier than the scheduled deadline, Chrysler had paid back its loan with the aid of the guarantees from the U.S. government. The corporation bought back the 14.4 million stock warrants. A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter. Warrants are like call options, but with much longer time spans -- sometimes years. (Washington Post) given to the government in exchange for the loan guarantee. Because Chrysler's finances had improved and its stock had bounced back -- it reported $1.7 billion in profits for the second quarter of 1984 -- the government netted a profit of more than $660 million from its bailout investment.

Can anyone reading this say they have never needed a loan? A bailout if you will? Did you take out a loan to go to college? To buy your car? Your house? Shit happens and sometimes you need someone to come by and give you a hand.

Am I biased because my roots are in Detroit and in the Auto Industry. Possibly. Am I treating this completely differently than I thought of the Wall Street Bailout (or Rescue)? Yes I am. As far as I know at right this moment, the Big 3 have not sent their highly paid executives on a multi-million dollar retreat recently. Do I think the Wall Street Bailout could have been handled differently? Oh boy do I ever! I think instead of giving a hand out to the banks to loan out even more money, I think the Government should have made one payment on each of the outstanding loans. That would have helped Main Street and got Wall Street a little lift as well. Grassroots. That's where things begin, you have to start from the bottom and let things grow, not start from the top and let shit roll down hill.

Back to the Big 3. There are many reasons given why people are leery of buying American cars. Taj refuses, he thinks they are completely unreliable and will not last half as long as a Foreign made car. @GoDOTchris watched her Honda Civic reach 200,000 miles this week. That is quite a feat. But it happen in Ford's and Chevy's as well. When are we going to stop looking elsewhere, for the cheaper or better? And start finding a way to make cheaper and better here? This is not the first time an American industry has been threatened.

From Wiz Bang Blue:

The American television industry ran into similar problems as well with better and stronger and more innovative foreign competition from Japan, where American brands like Magnavox, Emerson, General Electric, RCA, Quasar and Zenith all failed. While RCA was purchased by an European company, Zenith continued as the final holdout in the American television industry until they owed so much money to a South Korean bank to finance their losses in business that they were taken over by the bank and became a South Korean brand, and no American television brands exist today.

Is that where we want to head with the Auto Industry? What is left in America that we manufacture? Are Levi's the sole holdout?

What do I think should happen with the Auto Industry, well, I don't know for certain. I know that whatever happens, there needs to be something that forces them into the 21 century here in the US. There are many more Hybrid and alternative fuel cars made by the Big 3 that are sold overseas. They need to bring them here. If there is a loan made, there need to be terms and concessions from both the Industry and the Unions.

When you have a family member in trouble, do you not rush to their aid? I do and I know my family does. And when you broaden your perspective aren't all Americans family?

Tell me what is your idea of the American Dream?

Added Wednesday after posting:
Before you get your panties in a bunch over the Ford CEO travelling to Washington in the company jet, chill your jets. On page 46 of the Ford 2008 Proxy Statement (from the shareholders meeting) it clearly states:

Perquisites and Other Benefits (page 46)

We provided certain perquisites and other benefits to senior management in 2007, the most significant of which are summarized below. The Committee periodically reviews our policies on officer perquisites.

Company Aircraft: During 2007, Mr. Mulally was required to use our aircraft for all business and personal air travel for security reasons. The family and guests of Mr. Mulally were allowed to accompany him on our aircraft. In addition, in order to ease the burden of Mr. Mulally moving to Southeast Michigan and away from his family in Seattle, Washington, the Compensation Committee clarified that his arrangement covers travel by his wife, children, and guests on Company aircraft for personal reasons without him at Company expense, at his request. Except for the Executive Chairman, no other executive is permitted to use our aircraft for personal reasons. In addition, for retention purposes the Company pays the costs, including first class commercial airfare, for personal travel for Mr. Fields to and from his home in Florida. The Company continues to provide tax relief as a result of the imputed income associated with Mr. Fields’ arrangement. We believe the cost to the Company in providing this relief is significantly outweighed by the security and retention benefits we receive.
The incremental cost for personal use of Company aircraft, including our valuation methodology for such use, isincluded in column (i) of the Summary Compensation Table on p. 50 and footnote 5 on pp. 51-52.


  1. The story you give is compelling but it is not the whole story.

    1. The Auto Industry is not universally suffering. Cars made in Kentucky, Alabama, Tennessee, Ohio and Indiana are doing well. They are Toyotas, Nissans, Mercedes, Hondas and Masdas.

    2. The past Chrysler problem did not stem from the same problem as Detroit has today. Then, the Chrysler problem was basicly the designs. Iacocca was hired to get new designs and get new cars built, which he did. He needed capital to do it and they turned to the suppliers and the government to do it. Our Company, Interlock, as a Chrysler supplier, did not get paid for almost a year. We were asked to fund the new tooling ourselves and include tooling costs into the piece price.

    3. Todays problem for the Detroit Automotive Industry is the extra costs it has that other automotive companies do not have. It is estimated that each car Detroit produces has from $2,500 to #3,500 more dollars of fixed costs that other car companies do not have.

    4. The additional costs stem from the collective bargining gains the unions made in years past. Both sides bargined in good faith and now unforseen circumstances have overtaken both sides. Detroit is now unable to compete with those additional costs.

    5. Bailing out Detroit does not solve the problem of cost competition. They will recieve money and it will carry them further down the road, but their excess costs remain.

    6. Detroit's Automotive Industry is built on the bankruptcies of other automotive companies; Hudson, Studebaker, Nash, Willys, LsSalle, Kiaser and Tucker. When they went out of business their plants and assets were obtained by the present Big Three.

    7. This is all an anguishing condition for Detroit and an anguishing condition for tax payers. I believe Obama will get relief for Detroit but Ddetroit will always have to come back for more.

    I believe the American Dream is living in freedom. Our freedoms have made us the greatest nation on earth and given us the highest standard of living. Our prosperity is routed in the innovation of risk taking entrepreneurs (Ford, Gates etc.). I like the saying "The happiest people are not those that have the most but those that need the least." I thank God that my parents immigrated to America and not to Europe or Asia or stayed in Canada.

    I have always owned American brand cars except once when I bought a Honda Civic (the worst car I've ever owned). I now own two Mercurys and thinking of replacing the one with 120,000 miles on it. Having said that, I believe the best thing for the American auto industry is chapter 11 bankruptcy reorganization. Yes it will hurt and some will not survive but in the end I believe it is the only way the industry can survive. I believe competition is the only thing that forced the industry to change for the better so far. Survival is a tremendous motivator. A bailout/government loan is like giving money to a crack addict. It simply enables them to continue to ruin themselves toward inevitable destruction. Without bankruptcy the auto industry is unable to legally make the changes necessary in their dealer and labor contracts to compete in the worldwide marketplace. If the US auto industry does not survive it will be a near term tragedy but long term a healthy US economy will survive and even thrive. The US stopped producing VCRs and TVs in the 80s. Since then the US economy has thrived and TV value has improved greatly.

    That's what I think.

  3. John said;
    "The happiest people are not those that have the most but those that need the least."

    I go with that.
    As I commented on BogHer, all this is symptomatic and needs to be played out at a different level.