I’m a bit peeved at what I’ve been seeing in the news lately about this automotive bailout package, and I feel the need to vent my frustration. Let’s start with what I think is an apt analogy of the situation.
Have you ever owned a car that’s getting on in years and getting less reliable? Something small goes wrong and you fix it. Then repeat that process two or three more times. Then one day the mechanic tells you that the head gasket is blown and it’s going to cost thousands to fix it. So what do you do? Dump a bunch of money into an old jalopy that’s probably going to fail again shortly? Or do you finally bite the bullet and get something better?
In my opinion, today’s American auto industry is that jalopy that needs replacing. Do people really believe that all they need is a mere 14 billion dollars and all of their problems will be fixed? Not a chance. The leadership of these companies has consistently sacrificed long term vision for short term gain. Like the million dollar ad campaigns running during football games touting the incredible new Ford F-150 that gets a whopping 21 MPG. Are they serious? This is why Honda and Toyota are eating their lunch.
Then there’s the UAW which is just as short sighted and greedy as any auto executive. Did they really think that a business that pays thousands of workers to do nothing can be competitive in today’s world? Or that their company can stay profitable when over $1500 of every car they produce goes to pay retiree benefits?
I’m sorry, but $16 billion is not going to even come close to fixing this problem if GM needs $4 billion just to make payroll this month. They’ve gotten themselves into this mess, don’t ask me to help get them out.
Lastly, I would like to dispel a myth that the politicians and auto industry itself is trying to sell us all. That myth is this: If GM, Ford, and Chrysler fail, there will be a total destruction the auto industry in America. Do not fall for this false logic. Do you really believe that GM’s many factories, car models, intellectual property, and manufacturing knowledge would simply pass into the night and forever be lost? Not a chance. What would happen is that they would be forced to sell off various pieces of their business to pay their bills and save what little they can save.
The end result? America will be left with a much stronger auto industry. Think about it: Right now we’ve got the “Big Three” in America. I contend that our auto industry would be much better off if we had “The medium sized 12″. And that’s exactly what would happen. Ford, GM, and Chrysler will sell off various assets and factories to investors that will then operate much smaller (and hopefully smarter) auto companies. That would mean more competition and as a result, more innovation in the new and improved American auto industry.
Will there be short term pain? Almost certainly. Just as there is short term pain for the car owner that has to go out and buy a new vehicle. But in the end, that new car owner will have a more reliable vehicle that is going to cost him or her a lot less to maintain. In the long run, getting rid of the old jalopy is always the right decision.
