The Great Debate

Halting the Corvair made America safer

Ralph Nader

May 10, 2012 12:43 EDT

This is a response to an excerpt from Paul Ingrassia’s Engines of Change: A History of the American Dream in Fifteen Cars, published this month by Simon & Schuster.

The causal stretch by Paul Ingrassia over three decades and millions of intervening human events leads him to conclude that “decades after its demise, in the election of 2000, the Corvair’s legacy improbably helped to put George W. Bush in the White House.”

Egads! – as the British say. His otherworldly trek through American history reminds me of Edward Lorenz’s “butterfly effect,” in which the trail of a tornado is traced all the way back to the flapping of a butterfly’s wings thousands of miles distant. It is one thing to lament the deadly, dancing design of the Corvair until the 1965 model, when the stabilizing, dual-link suspension system was finally installed; it is quite another to burden this automotive offspring of GM’s Ed Cole with the lawless, corporatist, war-starting, anti-democratic Bush regime selected by five Supreme Court justices-turned-Republican politicians in their 5-4 dictate of Bush v. Gore.

The Corvair was an attractive but lethal car. The government-sponsored taskforce, under President Richard Nixon, shaped by a former GM man, could not whitewash the Corvair’s role in the avoidable deaths and injuries of so many unsuspecting motorists. The novel Corvair, with its air-cooled rear engine was widely disliked by auto dealers, but for the wrong reasons. As the famous John DeLorean (former GM vice-president and author of On a Clear Day You Can See General Motors) related, inside the company it was common knowledge that on certain turns the Corvair became unstable. This loss of control even led to the deaths of some children of GM executives. GM also designed the leading edge of the steering mechanism just two inches from the surface of the front tire, thereby exposing the driver to the rearward displacement of the steering column, especially in a left-front collision. Moreover, as GM admitted in a belated public recall, Corvairs emitted a risky amount of odorless carbon monoxide from their heater exchange system during cold weather.

The tragic saga of the Corvair and its victims did, as Ingrassia points out, produce consequences, but only as part of broader revelations regarding the industry suppression of long-known safety devices now taken for granted by car owners.

Today people expect air bags, seat belts, padded dash panels, head-restraints, better brakes, steady vehicle handling and overall crash protection. Auto companies now boast about their vehicles’ safety in their advertisements. Consumers expect their cars to be recalled and fixed when there is a defect attributed to the manufacturer.

Federal auto and highway safety regulation, still too intermittent in my view, has worked to save over a million American lives while helping to diminish or prevent many more injuries. Hundreds of billions of dollars in medical and disability expenditures have been saved as well. To his credit, after warning that the first federal motor vehicle regulations could shut down the industry in 1966, Henry Ford II recognized a few years later that federal standards made cars safer, more fuel-efficient and cleaner.

How the Corvair’s rise and fall changed America forever

Paul Ingrassia

May 9, 2012 11:24 EDT

This is an excerpt from Engines of Change: A History of the American Dream in Fifteen Cars, published this month by Simon & Schuster.

However it unfolds, this year’s U.S. presidential election is unlikely to be as close as the one America experienced in 2000. That election was decided, after months of contention and suspense, by disputed ballots and a razor-thin result in Florida.

The historic events, however, were set in motion 40 years earlier by a badly flawed automobile, the Chevrolet Corvair. In the mid-1960s the Corvair made Ralph Nader famous. It also made lawyers ubiquitous, thereby making lawsuits one of the great growth industries of the late 20th Century. And decades after its demise, in the election of 2000, the Corvair’s legacy improbably helped to put George W. Bush in the White House. The car’s story is one of genius, hubris, irony and tragedy, not to mention unforeseen long-term effects on American life and thought.

The Corvair debuted as a 1960 model as one of the first American “compact cars.” (The term was coined by American Motors Chairman George Romney, later Michigan’s governor and father of current presidential candidate Mitt Romney.) The car was “the most profoundly revolutionary car … ever offered by a major manufacturer,” wrote Sports Car Illustrated when the Corvair was launched. It was the brainchild of a brilliant and uber-confident General Motors engineer, Edward N. Cole.

(View a slideshow of the fifteen cars that changed America here or click on the photo above)

Cole grew up in a small Michigan town, where he learned to tune old automobiles fast enough to outrun any other cars in the county. He attended the General Motors Institute in Flint, Mich., alternating study with internships at GM. After graduation he helped GM’s Cadillac division win a big Army tank contract by boosting the performance and reliability of the tank’s engine.

Fiat’s over-ambitious expansion strategy

Paul Taylor

Apr 24, 2009 13:38 EDT

– 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.

The troubleshooter who turned around the Italian group seems to want both deals. “It is quite possible for Fiat to engage in both of those transactions and to execute them properly,” he said on Thursday. Marchionne sees a wave of consolidation coming in the automobile sector and is determined to gain critical mass to survive. But his strategy looks over-ambitious.

Fiat has little cash and 4.8 billion euros in debt to repay this year, so Marchionne needs deals that cost little or nothing. That means he has to target companies in a weaker position than his.

Fiat would not take on any of Chrysler’s debts, and GM seems willing to give away a 51 percent stake in Opel free to anyone who will invest in it as a going concern, with the U.S. auto maker keeping a minority holding. GM needs Opel’s technology to produce the smaller, greener cars which are the condition for a U.S. government lifeline.

But even if the financials were to add up, which is a big “if”, the challenge for Fiat of turning such an alliance into a viable, profitable group looks daunting.

One rule for banks, another for autos

James Saft

Apr 1, 2009 08:25 EDT

– James Saft is a Reuters columnist. The opinions expressed are his own –

There is one law, it appears, for failing U.S. automakers but sadly quite another for similarly failing banks.

The Obama administration has decided to play hardball with auto firms; rejecting recovery plans from General Motors and Chrysler LLC (GM.N) and warning they could be thrown into bankruptcy. Chrysler, which is controlled by Cerberus Capital Management CBS.UL, has 30 days to complete an alliance with Italy’s Fiat SpA (FIA.MI) or face losing its government funding. GM chief executive Rick Wagoner is out at government request, as will be most of his board of directors in coming months.

This is painful and risky but probably for the best; the auto industry has far too much capacity and both firms have blundered repeatedly, avoiding making hard decisions to improve their competitiveness and products. In short, this is what is supposed to happen in capitalism when you fail.

It is also a huge contrast to what is being done for U.S. banks, where management has generally remained entrenched and where Treasury Secretary Geithner and his predecessor have thrown cheap money and other subsidies at doubtful banks in ever more complicated forms. Most recently, going as far as cutting hedge funds and other investors into the deal under the public private partnership in order to create the illusion of a return to market forces.

If the U.S. administration thinks the auto tough love will make them look like they are taking a hard line with highly compensated executives, they could not be more wrong. If anything it will increase the perception of the divide between how Main Street and Wall Street are treated when they come begging at the public trough.

To be fair, the case against the automakers is pretty airtight. Even given a recovery, which is by no means a sure thing, they may not be viable. The best counterargument, that bankruptcy causes rolling failures among suppliers and that consumers will shun automakers which are in bankruptcy. Those possibilities are hard to measure, and even if true, probably not enough to justify keeping the two on life support for what could be an indefinite period.

Transfusions don’t stop the bleeding

– Louis E. Lataif is dean of the Boston University School of Management and a former Ford executive. The views expressed are his own. —

The federal government now wants to shore up ailing auto suppliers with a $5 billion bailout, despite a rising chorus of criticism against more government bailouts. The public is beginning to see bailouts as “transfusions,” rather than a closing of the wound, and is losing patience with them. The “wound” is falling housing values and toxic mortgage-backed securities which have paralyzed financial markets – not the auto industry.

The hastily approved $787 billion “stimulus package,” including aggressive spending programs unrelated to declining home values or the constricted capital markets, is tantamount to administering repeated, expensive blood transfusions rather than stopping the bleeding. Of course, if the blood flow at the wound eventually coagulates (one day the economy will rebound) then the transfusions can be claimed to have worked. But the delayed cure would have come at a crippling cost to the next generations of taxpayers.

Concerning help for “Detroit,” there may be no manufacturing industry more fundamental to the U.S. economy than the auto industry, accounting as it does for more than 10 percent of American jobs. Detroit is not without fault, but it has been dealt a lethal blow by the consumer credit crunch which it did not create. At a nine million-plus vehicle annual selling rate (three million below the scrappage rate), no auto company, American or foreign, can survive. But bailouts, a few billion dollars at a time, first to the auto manufacturers and now to suppliers, are both a political and business nightmare.

If the federal government is willing to spend trillions to “right the economy,” then it should reasonably serve as lender of last resort for critical industries. It should grant interest-bearing bridge loans to the ailing auto manufacturers — probably $150 billion for 18 months. The pent-up auto demand in 2010-2013 would be enormous. The companies could then be required to repay the loans with interest, making the taxpayers whole.

If these companies are “bridged” until auto demand recovers, their supply base will survive without separate bailouts. To let auto manufacturers fail, in this environment, will create untold collateral damage; the already weakened supply base, so intertwined among all the manufacturers, could shut down the entire industry. An auto bankruptcy would seriously deepen and lengthen the recession for us all.

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

– 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.

In December, George W. Bush granted $17.4 billion in temporary loans on the condition those firms convert two-thirds of their debt into equity. Another condition was to persuade the UAW to accept stock for one half of what these companies owe to fund retiree health care and align wages, benefits and work rules with those of the Japanese automakers operating in the United States.

GM and Chrysler must complete these negotiations by March 31 or repay the money and face bankruptcy.

At U.S.-based Toyota factories, workers receive about $25 dollars an hour and good health care benefits. But they don’t retire at 50 after 30 years or get as much time off and huge severance packages. Toyota does not endure the medieval work rules and job classifications imposed by UAW contracts.

Most other Americans would be happy to get Toyota pay, benefits and working conditions. If Gettelfinger continues stubborn resistance to a better package than most Americans enjoy, then Detroit automakers will continue to require government subsidies or not have enough profits to invest and compete in hybrid and other new technologies that will transform personal transportation over the next decade.

Eventually, Washington will tire of their begging, they will march through bankruptcy, and their factories will be sold off to Japanese, Korean, European and Chinese automakers.

Bailout for automakers?

As Congress debates legislation to help struggling automakers, many Americans say they are uneasy with the plan, arguing that while it may save jobs, it would reward companies for pursuing bad business practices. Some even question whether automakers will be viable, even with support.

“They need to restructure. If they get bailed out they are not going to do it,” said Eric Smith, a paint contractor interviewed in Chamblee, Georgia, on the outskirts of Atlanta.

U.S. automakers say federal aid is vital to their survival, and there could be devastating ramifications for the broader economy if the sector is not stabilized.

“This is an issue of the whole auto industry, if that becomes under severe pressure, the impact on the whole U.S. economy will be devastating,” GM Chief Executive Rick Wagoner said in an appearance on a NBC-affiliated television station in Detroit.

Retired Gen. Wesley Clark says that a rescue of U.S. automakers is important both economically and for national security. In a New York Times opinion piece, Clark wrote that the U.S. auto industry has played an important role in successive military campaigns, from World War II to today, and its ability to continue to develop new technologies is imperative for national security.

Some are calling for executive shake-ups if it would ensure congressional backing for a bailout. “If it was the difference between getting this kind of support or not, obviously the management should consider resigning,” Carl Levin, a staunch industry ally, said on NBC’s “Meet the Press.”