Sinking Vehicles

gm-ford-chrysler

While the “Detroit 3” are asking for a bailout from Washington, they’re being criticized for not having a plan to use the money. Not one of the three has said specifically what they would do with the cash. I guess they want us to trust that they’ll do the right thing. Well, obviously, that’s not how business works. The government only spends bailout money with strings attached. Call it twine as opposed to rope if you want, but there are strings in these deals. The sub-prime mortgage mess notwithstanding, who lends money to someone without knowing how they’re gonna get paid back? We need their business plans people!

The questions becomes: do you think it’s worth lending a hand to save some of our last great manufacturers?  Will money even do the trick?  The automakers will have to cut jobs regardless of a bailout. It’s just a matter of how many and when. Let’s remember that the government loaned Chrysler money in the late 70’s and the company paid it back with interest. Let’s also keep in mind that, GM still sells more cars globally than everyone but Toyota, if you count Toyota’s subsidiary Daihatsu. That’s promising by itself. But to truly be competitive as a company, to become attractive to shareholders, GM needs more restructuring. They have to cut costs. The work is pretty efficient. The budget is not. They’ll have to sit down with the workers’ union again. That’s gonna be a mess.

Blame bad management. Blame bad vehicles. Blame whatever you want. I would argue, the problem began when they made promises they couldn’t keep. It’s like Social Security, with the government promising a security blanket it didn’t know it wouldn’t be able to afford someday. Years ago, when no automaker could touch GM, it was easy to promise big wages and big pensions. So what now? Leave retirees out to dry? Pay the workers minimum wage? Fire everyone, liquidate in bankruptcy, and go out of business? Let their suppliers, dealers, and others who would suffer collateral damage fall? We’ll see…

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