The Inevitable No-Win Pass-The-Buck Buy-Out

Most people in this country agree that there are some things that are wrong and some things that are right in the current economic roller-coaster we're riding. That we as a nation rarely agree on anything -- to wit, look at the popular vote from last month's Presidential Election -- is not shocking but it is somewhat disconcerting.

There are major issues which are addressed -- and sometimes resolved -- during election years. Abortion, gay marriage, nationalized health insurance -- topics like these inspire extreme opinion, belief and passion among our nation and yet, polarize the masses like two similarly-charged magnets.

So where do we as a nation stand on the auto bailout now being finalized in Congress and the White House?

There's certainly no real way to answer that question; however, most people with whom I've discussed this topic are, like me, divided. On one side, there is the opinion which suggests that GM, Chrysler and Ford have been doing the wrong things for so long that they don't deserve bailout monies. American cars are, without a doubt, inferior to import vehicles in almost every possible category. They are not built as well, their performance is -- generally speaking -- inferior, and the prices for "comparable" vehicles isn't enough to justify the mass-defection of Americans to imported cars and brands.

What's telling is the fact that Toyota has managed to build quality vehicles (the Camry and some other high-selling, high-rated vehicles) in America (I believe their factory is located in Lexington, Kentucky) whereas GM and other American auto manufacturers have farmed out auto production on some models to Mexico, with results similar to cars built on US soil. Why is it, then, that Toyota and other non-American car manufacturers can somehow assemble quality automobiles on US soil but American car manufacturers seemingly cannot?

Makes one wonder -- if not entirely doubt -- Ford's slogan "Quality is job one." Clearly, it isn't.

So why should the US taxpayers be responsible -- in part, if not in full -- for a $15 billion bailout of an American auto industry that has shown disinterest for self-improvement and for surpassing other auto manufacturers? Let's face it; there are some iconic designs in America's auto portfolio that are still manufactured today. The Mustang and the Corvette are two that come to my mind; and while both are nice-looking vehicles, I doubt anyone -- with a straight face -- could tell me either vehicle was especially well-made or a good example of a quality automobile.

The American auto industry has dropped the ball and ignored quality standards to which other companies around the world aspire. Assuming that statement is accurate -- and frankly, I believe many people agree with that statement (regardless of its truth) -- if the US bails out the Ford, GM and Chrysler, won't these policies -- and the downward spiral -- simply be delayed until Federal dollars are no longer there?

Well, according to the details that have been leaking forth from Capitol Hill, there are some strings that will tie the hands of the bailed-out Big Three. Similar to the bank bailout, the government will insure that executives aren't compensated with huge, ridiculous EOY bonuses. Further, from what I understand, these monies would be contingent on some policy restructuring (ie developing more energy-efficient vehicles and electric/hybrids).

So should we as a nation support this bailout? It's clear that we probably don't have much choice. If it doesn't happen and the big three are allowed to implode, what would be the problem?

The most obvious problem is that all the jobs that these companies provide would be lost. That would put one hell of a dent in the unemployment figures for this and next month. Moreover, in an instant, American's final manufacturing component would evaporate. In years past, this nation's manufacturing supremacy -- in steel, items like TV's, typewriters, sewing machines, etc. -- has abated and deferred to the Japanese. Assuming the American auto industry disappears, so too would this aspect of manufacturing. The problem isn't that we should be so concerned that the Japanese have superior manufacturing; the problem is that we would have none. Part of the problem with allowing this to happen is that in years past, ie World War II, Korea, et al, American car companies suspended -- for better or worse -- their production of consumer automobiles and shifted production to mechanized hardware like tanks, troop transports, planes, etc. If the auto industry disappears, that's yet another thing America would have to buy rather than produce on its own.

And whether we're talking about a household or a country, when things are tight economically, it's far more efficient to produce in-house than to go out and buy what could be self-made.

I think that there are serious consequences with bailing out the American auto industry; first and foremost, why invest billions in companies who show no sense of remorse or understanding that they have created their own problems? Clearly, by showing up to the hearings this and last week in DC in private planes, neither GM nor Chrysler nor Ford show very much understanding of waste management and scaling down operations to fit the economic climate. Second, while it's clear these companies have never needed to show any sense of the dangers around them, they similarly show little, if any, ability to shift with the times. While the world seems intent on producing smaller, more efficient hybrid-powered cars, what the world seemingly needs less now is larger, bulkier, SUV-type vehicles (hello Escalade, Hummer). According to the reports from this past summer, car dealerships were so frantic to sell SUV's (during the so-called "gas crisis") that they were selling them below cost. And to show how little GM and the others get it, do we really need a hybrid-powered Escalade?

No one should expect GM to shift gears in an instant and become more like Subaru or other environmentally-conscious auto manufacturers; however, without supervision, it's clear that GM, Chrysler and Ford know very little about change or adaptation to the economic and environmental times which are no longer on the far horizon but are here now and today.

Finally, the other -- and perhaps, most pressing -- concern we should have regarding this impending bailout is not that the monies as offered will not save these manufacturers. It will -- at least for the short term. And to answer what should be our secondary concern, ie how do we know this will save these companies long-term, the government will focus on preventing these companies from maintaining their typical, sloth-like behavior -- in essence, they will supervise or nationalize these companies.

My problem with that is that the government is the last entity I'd want at the helm of a company. To wit, I choose to deal with Fedex or UPS rather than the US Postal Service because the bureaucracy is minimal with the aforementioned choices. So how can a monolith like GM get better, be more streamlined and increase its efficiency if it's operated like the IRS or another Federal entity? The answer, of course, is it cannot.

So while supervision will insure these companies don't continue their race towards obsolescence -- like many of their products -- by supervision, they will be directed towards safer financial and efficient operation.

The only question remains: how long will this supervision last, and if these companies are worth saving, why would they require anything beyond an influx of capital to insure it happens?

The answer is it's a no-win situation; of course, none of these companies is truly worth saving. Their products have consistently been inferior to their foreign competitors and the only superior aspect of American auto manufacturing over the past thirty -- if not more -- years is the benefits and security of American auto union employees. Of course, now that the unions have successfully placed and hammered home several nails in the coffins of these companies, their security has evaporated along with their employers.

My recommendation, in a nutshell: contribute the bail-out/influx of capital with the government a ten-year board member on each of GM, Chrysler and Ford; insure that 70% of those products destined for consumers of each of the three be hybrid or eminently fuel efficient (30 MPG or better); mandate a realistic and rigorous timetable for the repayment of these monies; insure that each company build new factories which are environmental bastions of efficiency, including solar, wind and/or renewable energies; and finally, restructure auto unions' grip over a complacent, head-in-the-sand mentality that has plagued the executive branches of these companies.

Also, have each of them start driving Toyotas to and from work, and ban them from ownership of private planes, yachts and anything not produced by their own employees.

And finally, buckle your seatbelts and strap in -- no matter what, it's going to be a bumpy ride.