Don’t Bail Out US Automakers

All of a sudden, the czar’s of the old guard Big 3 are interested in Washington again. (By Big 3 I mean Ford, GM, and Chrysler, not the real big 3 of Toyota, Honda, and Ford.) The news is full of stories of their CEO’s begging for federal bailout money to keep afloat. I can hear the words from here, “We only want $25 billion.” They probably each took their own corporate jets over there and are staying at $10,000 per night suites.

Here’s why giving the Big 3 $25 billion is a bad idea:

#1 Their problem isn’t bad loans, it’s bad labor contracts. I lived in Detroit for 5 years and I was totally sickened by labor practices. Over the last few generations an entitlement attitude has run rampant among workers. In short, until they can clean house and only keep the best workers regardless of union status or seniority any bailout will just be wasted on pouring more money into a broken vessel. Most people don’t know this, but they pay people not to work! They want federal dollars to keep paying people not to work! For $25 billion we need a federal right to work law. People should have a choice whether to join a union or not. Closed shops should be outlawed in every state… especially Michigan. Face a fact… unions were great at one point, but have helped bankrupt the auto industry.

#2 Their problem isn’t bad loans, it’s over-generous retirement plans. In the last few year’s they have gotten wise and started buying people out. But the Big 3 are levied with a tax their competitors don’t pay… pensions. (Most have been structured on 401k plans since day one.) Until they can shed those pension problems the federal government shouldn’t give them a dime. I don’t think that they should just fore go the pensions. I think, once and for all, they should sell those debts off and let someone try to make a buck on distributing those dollars.

#3 Their problem isn’t bad loans, it’s trying to sell cars people don’t want. Have you walked on a car lot lately? The Chrysler cars mostly look like space ships. The Ford ones look like Tonka trucks. The GM ones look like cars from the 1980s. I know that’s judgmental and I’m uneducated. But I was recently looking to buy a new car and literally laughed on most of the “U.S. Automaker” lots. For 20+ years they have whined about “foreign cars” on their market. The reason people aren’t buying them isn’t because they hate America, it’s because Honda, Nissan, Toyota, Volkswagen, and the rest are selling cars people want to drive.

I have no doubt that the auto industry will get bailed out. They will become federally subsidized, just like the airline and farming industries. If it’s not the $25 billion today it’ll be $100 billion next week. My only hope is that in getting the money they will start to repair the damage.

Meanwhile, I hope Michigan continues to look for a new economy. I hope they invest in the health care industry, technology, and financial industry. Michigan is full of amazingly brilliant people who want to succeed. Let’s hope that they get it sorted out soon!


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13 responses to “Don’t Bail Out US Automakers”

  1. tony sheng Avatar

    totally with you on the labor union issue. i worked for a fortune 20 telecom for over ten years and even there, the union had a huge hold on the work – it was beyond unbelievable. unions were right at one time, but in today’s economy, they seldom make sense.

  2. patti Avatar

    I agree with you, Adam, but you know we’re going to hear the crying of the unions about how elderly UAW retirees are going to be left destitute and without health care; how it will hurt.too.much to let so many people have to find new work, new trades; that the economic ripple effects will be devastating.

    The fact is, a bailout (by whatever name anyone wants to call it) of businesses like auto manufacturers, et al, stifles innovation, adaptation, and growth. It actually kills American ingenuity by taking away the drive to innovate and find a better way (something the auto industry might well be reminded of, since it’s very existence was predicated on one such innovation by Henry Ford)!

    So many of “us” get wrapped up in not wanting anything to be painful for anyone that it makes us forget how things really work. We don’t let businesses fail – even when they’re broken – we don’t let our children fail – so they never learn how to handle stress and disappointment OR how to creatively adapt to a challenge.

    Too many of us get emotionally involved with money, forgetting that money can’t return the favor… it just doesn’t care.

  3. adam mclane Avatar

    Yup, we know the solution will be to put the former big 3 on eternal welfare. My only hope is it comes with some changes… like a right to work law.

  4. Jonathan Wright Avatar

    I didn’t learn anything about how to care for myself financially in college, until my family stopped offering to bail me out. Eventually I learned to stop asking for handouts.

  5. pattigeorge Avatar
    pattigeorge

    Some things to read or watch regarding our request for funds to support our automotive industry:

    Bob Nardelli’s Senate/House written testimony at http://blog.chryslerllc.com/blog.do?id=537&p=entry

    Mark Phelan’s article, “6 myths about the Detroit 3,” in the Detroit Free Press at http://www.freep.com/apps/pbcs.dll/article?AID=2008811170379

    and a Chrysler video “Straight Talk About Assistance” at http://www.youtube.com/watch?v=uPODSNAbkOU

    Thanks. Patti, Chrysler

  6. adam mclane Avatar

    Patti George- I read those pieces, watched the video. While Chrysler may be the smallest seeking a bailout of the 3… bailing them out without fixing the core problems is still is just washing more money down the drain.

    This is a matter of economics. Tons of supply and no demand for product. You can’t blame this on either gas prices or credit shortfalls. There is a systemic issue as mentioned in the post.

  7. patti Avatar

    pattigeorge – I find your (and the others companies) arguments entirely disingenuous when your execs were too important to set aside their private jets for their begging trip. ( http://abcnews.go.com/Blotter/WallStreet/story?id=6285739&page=1 )

  8. adam mclane Avatar

    Unbelievable! When I wrote that this morning I was half joking. With this story hitting the airwaves tonight, they should just pack it in. The commentator had it exactly right… they just don’t get it.

  9. pattigeorge Avatar
    pattigeorge

    Adam:

    We do have strict policies governing business travel. We also have a long-standing requirement that certain designated members of our leadership utilize charted flights or leased aircraft for business-related travel to ensure their uninterrupted safety and security. From a practicality standpoint, it’s also far more productive for these executives to utilize non-commercial air travel and makes better fiscal sense for the Company. We don’t own a passenger aircraft – leased and chartered aircraft are used when needed.

  10. adam mclane Avatar

    Pattigeorge, you’ve got nothing to stand on. A company so deep in the red that they need to beg for billions of dollars simply cannot justify corporate jets while, your own video portrays, hundreds of thousands of jobs are at stake.

    As the news report showed your executive could have saved $19,000 by flying commercial. They aren’t that important, they are just people. In a few week may be looking for a job like the hundreds of thousands of people put out of work already by mismanagement.

    Here’s a clue: Change the stupid policy! It’s emblematic that the people in charge have no idea what they are doing. It’s not like it’s just me noticing… it was on the nightly news!

    The American people don’t live in Big 3-centric Detroit, don’t care about your policies, and shouldn’t be asked to pay for private jets. The rest of us aren’t falling for it, hopefully our elected officials won’t be so stuffed with lobbyists cash as to push this plea through.

    It’s time economics takes over and allows the better companies to survive while the weaker ones to go bankrupt.

  11. Todd Porter Avatar

    It is time that the “Big 3” look at how Toyota and Honda do business and try to copy their model. They are successful and the The “Big 3” are not.

    As someone whose livelihood is tied pretty closely to the success of the “Big 3” I say don’t bail them out also. We have a free market system in this country and if they can’t make it then so be it. Besides I dispute their numbers of people and businesses that will go under as a result of their bankruptcy or failure, because the “Big 3” has shipped most of those jobs out the country anyway. But yet they want our country to help them out. Why not start by bringing jobs back to our country and actually becoming an American car company like Toyota and Honda are becoming.

    And, yes, we need right to work laws in our country and more importantly in my state of Michigan.

  12. Matt Cleaver Avatar

    Todd – By “copy their model” do you mean “make cars that aren’t horrible”? Because, I don’t care what people’s model is, if the cars are no good they don’t work. I’m surprised they’ve lasted this long.

    Adam, in your post you say the “real big 3 of Toyota, Honda, and Ford.” Did you really mean Ford? Maybe Volkswagen? Fiat? Nissan/Renault?

  13. Todd Porter Avatar

    Matt, that is exactly what I mean.

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