Can Chrysler, Ford and General Motors Survive?
The Big Three Are Looking for $25 Billion Plus to Help Weather a Longer Than Expected Recession
I talked yesterday about my feelings surrounding the auto-bailout for Chrysler, Ford and General Motors, and the more I read about what Congress is doing and the debates that are flying around the more frustrated I get. Now CNN is reporting that Congress wants the automakers to show how they plan on spending their bailout dollars before they’re willing to offer any. Generally speaking this isn’t a bad idea, but what I find most frustrating is that they haven’t publicly asked the same from companies like AIG or banks taking money from the already approved $700 billion bailout. Doesn’t it seem logical that any company coming to Uncle Sam for a loan/bailout would be held to the same standards?
At the same time they’re asking for $25 billion in taxpayer money – these auto company CEOs are idiots. They all came from the same state in their own private luxury jets. The average American will never see first class, let alone the inside of a private luxury jet, and while continuing to pay their taxes will probably end up eating Mac-and-Cheese to get through this depression recession and these beggars can’t even share a ride or fly commercial. That’s saying two things – they are neither green nor frugal, and that should be disconcerting to everyone. These companies need to get both quickly and those changes need to start at the top.
I’ve voiced my opinions about what needs to be done for the economy, and now I would like to talk about what needs to be done for the auto-industry to succeed. My experience is limited, my economic knowledge is nill, but I am a consumer and do understand that there are obvious changes that should be visisble to anyone with half an interest in fixing these problems.
- Become Competitive With Toyota and Honda. The Big 3 have lost their edge. Americans have lost their faith in these companies and it’s not going to get better for them overnight. With few exceptions, the American auto industry has lost its vision, quality, and competitiveness in today’s market. Their cars are dated, of lower quality, and often priced higher than the foreign competitors. Until they realize that the competition isn’t amongst each other they will never reach a level of success that can sustain the industry.
- Reduce Costs and Long-Term Obligations. A huge problem with the Big Three right now is simple – the Unions. They’ve done an outstanding job of increasing the costs of their members through collective bargaining, but in times like this they’re a roadblock to solving the big problems that face all three manufacturers. In order to survive these companies are going to have to reduce their medical expenses, reduce their pension costs, and reduce their labor costs. If the Union isn’t going to work with them to make these changes it’s going to be a nearly impossible battle for these companies.
- Reduce Their Corporate Perks and Salaries. Being the president of Ford can be a very, very rewarding job. But the payroll numbers are only half the story, and looking back to the Lee Iacoca days of Chrysler it’s obvious that the private lunchrooms, limousines in waiting and private air travel are going to have to be cut. The extravagant car shows, announcements and excessive advertising will have to be dropped, too. Salaries for all levels will have to be adjusted to help these companies survived and the people at the top will need to accept that for a while it’s going to be very, very lean.
- Improve the Car Buying Experience. If you asked most Americans if they would prefer to buy a new car or go to the dentist and I would be willing to bet that a very high percentage would prefer to visit the dentist to have their teeth pulled without Novocaine. Buying a car has become that bad of an experience – especially for domestic brands. GM did a good thing with Saturn – their one-price structure – and it worked very well. Why they wouldn’t bring that out company-wide, I still don’t understand. Using Scion as an example – everything is spelled out for you. From the cost of each service to the cost of every accessory. You don’t need to negotiate and you don’t need to worry about being taken advantage of. This model works and it works well – generally the consumer will appreciate being treated like an adult and the margins for the dealers, while not huge, will not vary, which means that they can consistently budget for their business.
These are obviously a non-auto-executives ideas. I don’t know anything about the car business, but I do know what it takes to succeed in business and these guys aren’t doing it. They need help and they need to take their thousands of employees and become lean and mean to become competitive again. For now, I am simply saying loan them the money and give them a chance to deal with lean times. If they then fail, at least it’s not for lack of trying.
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