The Great Debate UK

from The Great Debate:

Car czars

This piece originally appeared in Reuters Magazine.

Henry Ford had to fight to build the Model T, even within the company that bore his name. The Russian immigrant engineer who saved the Chevy Corvette bucked the General Motors brass to do it. Lee Iacocca and Hal Sperlich built the minivan at Chrysler only after the vehicle—and they—had been rejected at Ford.

Those three cars were not just huge commercial successes—each also placed its stamp on American life, much as the iPad has today. Two were utterly practical while the third was ostentatiously stylish, but what they all had in common is this: The people who created them overcame formidable obstacles to put them on the road. Unblinking determination is a common theme in the biggest American business success stories, such as Ray Kroc’s damn the-odds effort to build McDonalds and Steve Jobs’ audacity in reshaping Apple. Luck and timing are involved too, but they aren’t enough. The special sauce (apologies to Kroc) is a strain of determination that blends self-belief with belief in the commercial potential of a product.

Determination and self-belief sometimes goes awry in the auto industry, as in other arenas. Exhibit A is the Chevrolet Corvair, introduced in 1960 with an innovative air-cooled, rear-mounted engine that produced 29 miles a gallon, more than double most cars of its day. Despite the weight concentrated in the car’s rear, Ed Cole, the Corvair’s creator, stoutly rejected putting a weight-stabilizing bar under the car’s front end. The result was a plethora of accidents and a muckraking 1965 book by an unknown lawyer named Ralph Nader: Unsafe at Any Speed. The Corvair scandal prompted a boom in product-liability litigation that continues to this day.

Then there’s John Z. DeLorean, whose 1970s effort to build an “ethical sports car” in Belfast collapsed amid financial overreach. Most guys would have tried to rescue their company with an IPO or junk bonds, but DeLorean tried selling cocaine. Though he was acquitted at trial when a jury judged that the FBI entrapped him, his career and his company were finished.

from The Great Debate:

Chrysler makes a comeback, again

By Paul Ingrassia
The opinions expressed are his own.

History repeated itself this week, more or less. Back in 1983 Chrysler, recovering from virtual bankruptcy three years earlier, paid off $1.2 billion in government-guaranteed loans seven years before they were due. On Tuesday Chrysler, recovering from actual bankruptcy in 2009, repaid $7.6 billion in loans made directly by the U.S. government six years before the due date. Chrysler refinanced its debt with private money.

Who would have thought two years ago that Chrysler would survive longer than, say, Charlie Sheen on the airwaves or Osama bin Laden on the lam? American and Canadian taxpayers might not ever recover their full investment in Chrysler because the value of the stock that they bought in the company, and still own, remains uncertain. But the bailouts of Chrysler and General Motors helped prevent the Great Recession from becoming Great Depression II, and stand as President Barack Obama's only outright domestic-policy success to date.

from The Great Debate:

Fiat’s over-ambitious expansion strategy

paul-taylor
-- Paul Taylor is a Reuters columnist. The opinions expressed are his own --

Could Italy's cash-strapped Fiat, Europe's sixth auto maker, build a workable alliance with Chrysler and Opel to become be a profitable global player? Or would it be a marriage of losers, doomed to fail?

Fiat CEO Sergio Marchionne has made clear that his interest in Opel, the European arm of ailing General Motors, is more than just a well-timed tactic to get better terms in the alliance he is negotiating with troubled U.S. number three Chrysler. Chrysler faces likely bankruptcy if a deal is not clinched by April 30.

from The Great Debate:

Revival of U.S. automaking awaits if UAW will follow Toyota

morici-- Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission. The views expressed are his own. --

General Motors and Chrysler are on the anvil of history. United Auto Workers President Ron Gettelfinger holds the hammer and will determine whether they emerge more competitive or shattered in pieces and sold to foreign investors.

from The Great Debate:

Bush’s auto plan will test Obama’s union loyalties

morici-- Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.  The opinions expressed are his own. --

President Bush has agreed to lend GM and Chrysler $17.4 billion on the condition these firms complete a plan to accomplish financial viability.

from Ask...:

Money, money everywhere …except in your pocket?

There's lots of money sloshing around the financial system these days. The Federal Reserve has established a target range of 0-0.25 percent for its key rate, bringing it closer to unconventional action to lift the economy out of a year-long recession.

From Washington, the first package aimed at rescuing the credit crisis-hit banking sector amounted to $700 billion. Treasury can use only half of that amount and it has already pledged all but $15 billion of it. The Senate has refused to pass a $14 billion rescue package for Detroit's three major car companies last week, leaving it in the hands of the Bush administration to work out a deal.

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