GM and Chrysler informed Congress they could run out of cash in weeks. We are about to find out how many weeks they meant. The bailout bill had passed in the House of Representatives, but Senate Republicans wanted further modifications made to the bill. The collapse of the bill came after talks broke down with UAW officials. The sticking point was wages. The US Senators called for steep reductions to take effect in 2009, calling on the UAW to put US autoworkers pay on par with its Japanese competition.ÂÂ
The UAW appeared willing to concede to this request, but not until 2011-when the current union contract is set to expire. The Senate wanted to see all participants take drastic, immediate cuts. The UAW’s desire to wait until 2011 assured that reluctant Senators would vote on to the bill.
Daily news reports cited the devastating effects a collapse of the Big Three would have on an economy already in recession, experiencing record levels of jobs losses and real estate foreclosures. Yet in a Marist poll, the majority of Americans were not in favor of bailing out these companies.ÂÂ
Here is my take on why-
1. The average American is already “bailout weary”. Bailing out the finance sector dominated headlines and news programs on an hourly, even minute-by-minute basis. When the Big Three came asking for money, the reaction was “Who now? And who’s next?”ÂÂ
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Too many models
Chrysler and Cerberus couldn’t provide the UAW with specific product guarantees because they’ve figured out they have too many vehicles that do too little for sales and the bottom line.
The Auburn Hills, MI-based automaker is expected to cut at least five vehicles from its product lineup, including the much ballyhooed, but cannibalizing Jeep Commander. Did they really need another Grand Cherokee that, if possible, looks cheaper and is less comfortable? Clearly not.
Other models expected to get the boot include the Dodge Magnum wagon and PT Cruiser. Additionally, newly hired executive Jim Press, fresh from Toyota North America, sat in a Sebring and discovered in less than five seconds why Chrysler is having some problems: the interiors look cheap. So the automaker is also undertaking a review of its interiors and will made adjustments according, according to a published report.
Tweaking the interiors is just one of many changes Cerberus is going to be trying to affect over the next two years. Shutting down plants is likely next and in spite of the new contract being more favorable to the UAW than many expected, it does allow for the closure of some plants.
However, Chrysler is not the only one that should be and probably will be reviewing product lineups. Ford is still seeing Wall Street analysts call for the death of the Mercury brand. They cannot see the value in the mid-level product linuep. For example, a fully equipped Ford Fusion is just as appealing as the Mercury Milan. The only difference is the front fascia, rear fasica and the price. Ford CEO Alan Mulally has said in the past that every aspect of the company is being reviewed. If they’re willing to dismantle the Premier Automotive Group (Jaguar, Land Rover, Aston Martin and Volvo), cutting Mercury might not be as far fetched as some think.