Detroit was losing money in the “good years”

Detroit is claiming they need help because of the sudden economic downturn. That didn’t sound right to me. My recollection was that the news out of Detroit had been bad for years.

Sure enough. GM’s losses were 2 billion dollars in 2006 and 39 billion in 2007. Ford’s losses were 12 billion dollars in 2006 and 3 billion in 2007. Ah, the gold old days when we were young and hearts were merry.

It’s no wonder U.S automakers can’t survive a downturn. They can’t even turn a profit in the boom years.

A bridge loan may be necessary to save Detroit, but it isn’t sufficient. Those companies have to change their business models to survive. Reigning in their princely employee compensation has to be part of the change.

Previously:

- Auto sales worst in 25 years; worst since WWII adjusted for population
- Feeling sympathy for Detroit?
- Detroit bailout?

This entry was posted in Misc. Bookmark the permalink.

 

 

One Response to Detroit was losing money in the “good years”

  1. Splashman says:

    “A bridge loan may be necessary to save Detroit…”

    Um, tell me why, exactly, Detroit should be ‘saved’? As the rest of your post points out, Detroit couldn’t catch a clue or a profit during the industry’s boom years. To pour money into that industry at the beginning of an economic downturn is the quintessential definition of “money pit.” Today it’s $25B. Tomorrow it will be $100B, then $500B. And the Big 3 still won’t turn a profit — why should they?

    Here’s the mayor of Lansing, MI, head-to-head with Peter Schiff.

    Part 1: http://www.youtube.com/watch?v=-BmqthF1LVM
    Part 2: http://www.youtube.com/watch?v=3ah_Zr7DPTM

    A “bridge loan” is denial — head in the sand. The problem will only get bigger.