Detroit Explained

Megan has written a comprehensive overview about the former Big Three automakers. Some key insights:

Detroit didn’t make a big profit by selling you a Ford Taurus.  It made money on financing your Ford Taurus; often, the car was sold at a loss in order to get the finance business.  The Big Three were banks manufacturing cars as a loss leader.

The really miserable thing is that even a total bankruptcy may not be enough.   Wipe out the shareholders, cut the bondholders to the bone, shuck the gold-plated medical benefits, toss out the UAW contracts, close the dealers–and we still may be left with companies that cannot make a profit without a now-defunct financing business based on ever-growing loans to ever-poorer credit risks.  The Big Three, with the help of the UAW and all their other partners, has spent 25 years building a reputation for poor reliability and ugly cars.  Brands matter.  Once destroyed, they’re very hard to repair in the best of times.  These are not, quite, the best of times, are they?

Read the comments too!


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