US auto industry CEOs flew to Washington DC this week on privately chartered jets to ask Congress for a portion of the bailout package.
The auto industry wants to place the blame on the overall economy, credit markets, and basically say, “Daddy, its not my fault! Help me out here!”
The US auto industry however isn’t in this place due to external conditions alone. They have buried their heads in the sand for the past 25 years, hoping that all would turn out for the best. They ignored the demand for more efficient autos, and totally missed every trend again and again. Just about the only thing they they continue to do well is work-trucks. They weren’t agile. They were slow. They were overconfident. They were proud and now they have failed. They made wide assumptions that by using 0% interest loans, consumers would snap up their cars instantly and ignore anything from Europe or Asia.
Additionally, they played ball with the unions and agreed to massive pensions plans, never looking forward to the future or anticipating the problems that would occur when everyone went to retire, or the market shifted. They had no backup plans.
And now, Detroit is in trouble. Certainly these companies going out of business would mean the loss of thousands of jobs of innocent, hard working people. At the same time, the markets would shift and new jobs would become available. Asian and European car makers such as BMW and Honda have been making cars in the US for years. People don’t consider them “US Made” cars, but often they are.
There is no need to prop up failing companies with arrogant CEOs. When questioned why they were flying private jets, chartered at over $20,000/flight, they answered that it was in the safety interests of the executives and standard policy. Then when asked by a US House member if the CEOs would lower their salaries to $1 in exchange for the assistance, the CEOs said no. Take note, that CEOs have done so prior in hopes of reviving the companies. Their companies don’t make money, and yet they make massive amounts, plus bonuses. It’s not that they are geniuses that are making companies soar, they are miserable failures that don’t deserve a dime. I could do a better job. Yes, I could do a better job.
Here’s what I’d do:
- Cut lines that they aren’t able to compete in
- Reintroduce the GM EV. Surely the plans are in some file cabinet.
- Push Diesel and biodiesel cars. They aren’t just for europeans.
- Zero Executive Benefits plans. The Executives have the same benefits as other members in the company.
- Don’t play ball with the unions. No more pensions in the future. They will strike, but the company can holdout longer than them. Who today gets pensions (not people in startsups for sure…)?
- Introduce accountability in all departments, with strict review plans
- Fire weak performers. There are no jobs simply due to tenure. Get people working more hours. These jobs average ~40 hours a week. The average needs to be more like 50-60.
- Make all departments feel like a startup. They sink or swim based on their performance.
- Cut costs drastically. No AIG-style retreats. No corporate jets. No Aeron chairs. Give departments small budgets and make them be creative.
- Hire younger people. They are more creative, and don’t expect pensions.
- Crowdsource things where possible.
- Go green.
- Go Agile. Development should be faster, and fail quicker and cheaper.
- Find other ways to create income and revenue associated with the cars, asides from just the cars. Think outside the box. They haven’t done that in 100 years with cars.
Not all of that is perfect, but its a start.
I don’t want my tax dollars bailing out any company period, let alone a US car company. I feel bad for the people working there on the lines, but there are more jobs to be had. I’d rather see us put the $25B into retraining and giving more flexible skills to those people so they can go elsewhere.
To the people working there, I’d say that no job is safe. They should have know that and assessed the risk. The company I work for could fire me tomorrow, or go out of business. It happens. I never assume that my job is ’safe’ completely, and I always have other skills, education and training to fall back on. If you put yourself into a single pigeonhole skill and expect that the job will always last, then you have done yourself wrong. America didn’t bail out the Valley in the tech bust, they aren’t saving programmers without jobs or lower rates, why should factory workers be any different?
This is the no-regulations, free trade, that the big boys always want. No regulation, means no help. This is capitalisim. Companies must fail. There must be risk. If there is a sufficient market demand than someone will buy them out, or the demand in the market overall will hold them up.
Can anyone explain why tax dollars should hold up bad business plans and poor execution?
I agree with everything you said in this post, but I think there are a few points that you’ve overlooked: for one thing, the staggering number of Americans employed not only by the auto industry, but by the secondary industries kept in business by the auto industry: all the factory workers who make mufflers, windshield wipers, car stereos, etc – if they are all put out of business, I fear their unemployment will send shockwaves through the whole nation.
I heard an interview on NPR last night with someone who dropped out of high school to work in a Ford factory, where he’s held the same job for 20 years ~ I agree, bad bad plan on his part, but even if we take a Social Darwinist stance, when hundreds of thousands of people are in that boat, it becomes everyone’s problem, not just the problems of factory workers about to get the axe.
So yeah, I definitely agree: no handouts for Ford execs… But my inner socialist is hoping we’ll see massive investment in green technology, turning facory towns like Dayton, Ohio & Janesville, WI into the next producers of hydrogen fuel cells and wind turbines and whatever else that hasn’t even been thought of yet…
And who says we can’t keep producing cars in these factories? Let’s create an open competition for scientists to innovate the best new design for green transportation – let the goverment buy out the bankrupt Ford factories on the cheap, and offer them as a prize to the scientists who come up with the best ideas – and invest in retrofitting the factories to produce these new, smarter cars! Bingo, factory workers have a new job, America has less crap on the road, and the goverment just invested in an industry that can actually remain profitable in the new century ~ sounds like a winning combination to me!
Amber, those are some great ideas!
Factories are Factories, and in WWII we were able to show that we could convert factories to make almost anything. I think we should use the employees (if they want to work there) and the factories to make all sorts of other stuff.
In the end its that that these companies are overvalued. The market will compensate. Someone will buy them out.