Just Say No!

stuck-hummer

With regard to saving the auto industry, there are at least two broad possibilities that have not been broached much by the media:

  • Merger with and/or buyout by a foreign auto manufacturer, say, Toyota or Honda.
  • Government aid not related to manufacturing operations but to the retirees that in large part are sucking the automaker dry.

I was not in favor of a financial bailout and I am not in favor of a direct auto bailout, either.  Management and the unions have only themselves and each other to blame for their predicament.  Americans voted with their pocketbooks years ago; it’s not like anyone other than GM management didn’t see this coming.

So instead of a bailout, consider those options above.

A buyout by a strong foreign manufacturer, however unlikely, is something that would change domestic management culture overnight.  A buyout (as opposed to a bankruptcy) would help to salvage the hundreds of parts suppliers on whom the foreign automakers rely just as heavily as the domestic auto companies.  The show-stoppers are health care, retirement obligations and the unions.  Especially the unions, who have far less leverage today than during strong economic periods; so if Toyota was to make a move, now would be a good time to buy into the domestic industry on the cheap.

The second idea is to improve competitive costs against foreign manufacturers by relieving the auto industry of a $1,500 per vehicle levy – retiree benefits – by taking them off the automakers’ hands, in return for ownership in the company.  Socialized health care and pensions for retirees.  Let’s call that, hmmm, Medicare and Social Security, respectively.

GM management will fight tooth and nail against the former, and the unions the latter.  So instead, Congress will be hard pressed not to take the easy way out and simply give the automakers a blank check with few strings attached.  It is the worst possible option, and the one they are likely to take.

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One Response to Just Say No!

  1. novice101 says:

    The Big Three certainly didn’t come across as ‘Big’ on the senate floor. The reasons given to the senators did not sound convincing.

    A foreigner’s view:

    http://novice101.wordpress.com/2008/11/19/big-three-vs-senators-who-is-right/

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