Quick Solution to a Detroit Auto Bailout

In reading all the discussion about the possibility of a bailout of GM, Ford and maybe Chrysler, it appears to me that no one has asked and answered the fundamental questions behind the issue.

First let me say that this is not about the quality of cars they build. I just bought a Ford for my dad. Im looking at trading in at least my personal Lexus coupe for another Ford I like. I think Ford makes great cars. There are some great GM cars as well. Unfortunately, while the companies make cars I like, they can’t seem to run their businesses in a way that will allow them to survive.  The issue is not about car quality. Even consumer reports says that the Big 3 now makes reliable cars.  This is about their business model.

The reality of markets is this, If GM, Ford and Chrysler disappeared that doesn’t mean the demand for cars will disappear. We will still buy cars. The question is what brand we will buy, where will those cars be built,  by what company and how many jobs will be created to fulfill the demand ?   According to Cars.com the Toyota Camry is built in Lafeyette Indiana and has more than 75pct American Components. The Honda Civic is built in the US with more than 70pct of US made components. The Big 3 are not the only manufacturers making cars in the US. If they go away, buy American Made could still survive.

It would be nice to have GM, Ford and Chrysler survive in some new profitable form, but we shouldn’t lie to ourselves and make it sound like the demand for GM, Ford and Chrysler cars couldn’t move to other cards made in the USA. Its a lie to suggest that 100pct of the jobs at these companies and their vendors will disappear.  Jobs will be created in the businesses of those car companies that fulfill the demand for cars that the Big 3 leave behind.  That said, it would be nice to find a solution that maintains as much of these institutions as possible and keeps their employees in their jobs if at all possible.

My Solutions ?

Take a page from the FDIC. The government should be in discussions with foreign automakers that have US manufacturing operations to discuss buying/assuming the operations of GM, Ford and/or Chrysler and rolling the acquisitions into Toyota, Honda, whoever with a requirement that the cars continue to be built in the US and any profits remain in the US.

It is unfortunate that there are not any well run or even profitable car manufacturers in the US that could assume the operations, but it is what it is.  It will take the US operations of foreign car companies taking  over manufacturing facitilities, dealership relationships, vendor contracts, the whole works. I realize that this is more difficult than assuming bank branches. That manufacturing facilities are different between operators. I didn’t say this would be easy. It wouldn’t be. But its far better than the alternative. I would rather see money used to retool manufacturing than fund a business operation that just doesn’t work and hasnt worked for years.

Of course every induced merger requires concessions. The concessions being that some negotiated percentage of  GM/Ford/Chrysler employees would roll into the cost, pay and benefits structure of the acquirer. The taxpayers would guarantee the BANK debt acquired by whoever takes over the companies. Bond debt would be paid if after everyone else that is owed money, including the government.

Sure, the CEO and management of GM would be upset.  Just as Im sure the CEO and management of banks that were taken over were. Thats life in the big city.

If I’m providing loan guarantees, or direct government loans to car companies to protect jobs,  I would much rather have Toyota US Operations running GM with a Toyota USA cost and manufacturing model than GM, with a GM cost and manufacturing model running GM.  They can apply business principles that actually do work and save whatever part of the Big 3 can be saved.   IMHO, this will keep the largest chunk possible of the  job base in the US and turn the auto industry into income tax payers rather than a taxpayer money pit. Call me crazy. Its time for the US auto industry to go down in history as an example of how not to run a business.  If we want manufacturing to be a priority in this country, we have to find business models that work. We cant just depend on protectionist policies to keep unproductive, unprofitable businesses alive because we think they are too big to fail.

And if there is no Sheila Blair with a plan for the auto industry.  Let em go bankrupt with the government providing financing to help them come out with a brand new business structure. Of course there should be some caveats:

1.. The bankruptcy court puts the designs of all parts, patents and technology of all big 3 cars into the public domain so no one ever has to worry about getting their car fixed. Someone will always be able to build parts or systems for all makes and models.   In fact, making the designs open source could possibly lead to better parts, car designs and repair solutions.

2.  The bankruptcy court assigns to their boards someone who has a clue about how to cut costs and manufacture in a cut throat environment. Michael Dell and Andy Grove come to mind.

3.  The court creates a warranty fund, much like the FDIC, where every car sold has some dollar amount go into the fund to pay for warranty service for a maximum of up to 3 years. In the event the Big 3 cant survive out of bankruptcy, repairs on the cars for models sold while the companies are in bankruptcy become a tax credit, with the treasury being reimbursed for these repairs from the fund. (btw, I hate to do something using tax credits, so if anyone else has a better suggestion on how to deal with and pay for warranties..)

I’m probably missing something, but if the fear of bankruptcy is buyers will turn away for fear of parts and warranties concerns, problem solved.  In fact, knowing that the government will now help protect warranties could help sales.

Bottom line is this: When doing things the same was as its always been done doesnt work….. stop doing it that way. That applies not only to businesses, but consumers as well.

My last car purchase, for my dad,  was American. The next car I buy will be made in America.   I can think of so many reasons why its the right thing to do.  I’m going to give Detroit another chance and buy American. It wont matter if they are owned by Toyota or Honda, in or out of bankruptcy or as is.  What will matter is whether or not I like the car.  I’m coming back with an open mind. The product better be as good as advertised or you have lost me forever.

27 thoughts on “Quick Solution to a Detroit Auto Bailout

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    Comment by larrybailey2 -

  2. Check out this video about the Detroit auto bailout, its awesome!! Enjoy http://www.youtube.com/watch?v=Sl6zcW2dOo4

    Comment by Sandra -

  3. Why doesn’t GM stop manufacturing the same car under different brands? Why have a Chevy, Buick, Pontiac, etc…..just have a GM!!

    Comment by Jon -

  4. I think that the US automakers and their dealers need to learn a hard lesson and for several of them it should be going out of business. I recently tried to purchase a Ford Expedition at a dealership in Georgia and must say the sales experience was terrible. I caught them in several lies and when I pointed out that my employeer purchases over 1000 cars per year from Ford and since they were not honoring our contract I would be contacting Ford. Their response was to call my employeer and complain that I was rude and non-supportive of the US auto industry! When I pointed out, during the sales process, that Toyota made better products the response was “several polls show that US products ONLY lag behind Toyota by 2-3 percentage points in quality.” This type of a margin, to me, is a very big one at a $55,000 vehilce! The bottom line is the attitude of US Carmakers and the dealers – its terrible and they act as if we the public owe it to them to bail them out! Get your business plan in order starting with customer service and quality. I was treated like a king at Toyota when I left Ford and went to Toyota to buy an SUV! If you can’t provide customer service and quality products then don’t expect my tax dollars to be used to save your butt – go under!

    Comment by Marc -

  5. Real solution to this problem is simpler than most people think. Just
    give each American family a check of $10,000 that can only be exchanged
    to trade in an old car for a new American made car. Look what a 25B$
    investment by US Govt will buy! 2.5 new American cars sold! Each new car
    sold creates 5 jobs in the U.S.! 12.5 million jobs created!
    comment by Arvind Karnik, Masachusetts

    Comment by Arvind Karnik -

  6. I don’t get why the oposite approach hasn’t been discussed. Why not take the big 3 and split it up into smaller segments. That will shrink the power of the union and open the door to inovation through more competition.

    Comment by Edward -

  7. No one wants anybody to work for $10 an hour. also how about those who build jet planes, you want to pay them enough to be able to buy one ?????? any business must balance cost to make and deliver the product with product demand /revenues. paying double or more for labor costs than the compeditors does not work and the tax payers should not have their pockets picked to make it work.

    Comment by AL WWJS -

  8. i believe if wall street can be bailed out, so should main street. after all main street is what supports the country. the working stiff. they want the auto workers to work for $10.00 an hour and no benifits. The person building the car should at least make enough to buy what he builds. what would you want the industry to do about all the retires? you know these car mfg. have been around for a hundred years, they have retires that live on those pensions. yes they have more expenses then the foregin care makers. the foregin car mfg have only been here for approximately 20 years give or take some. they don’t have retires. besides if the government would have been doing theirjob in making sure the auto mfg. were funding the pension funds like they should have been all along there would not be this problem. if americans bought american there would not be problems. buy your foregin cars where the profits are sent overseas, instead of keeping them in this country. government needs to fix the free trade agreements and make them fair trade agreements, leavel the playing field so we can compete. Let’s not forget the credit problem and banks holding onto the money, that is a big concern for everyone today. the car mfg. didn’t get to this point by themselves, it is the economy stupid.

    Congress voted themselves raises again. they want to make money, they just don’t want the working mank to make any. they throw the working man a few crumbs every now and again. Not only that, they want to take away benifits, medical benifits. Why congress has the best health program there is and on the tax payers dime, from the time they take office. Why shouldn’t the woring people of this nation have the same right to medical insurance. These elected officals work for you. you should at least have the same if not better then the elected officials working and being paid by your tax money.

    congress never asked the bankers hard questions like they did the automobile ceo’s. they gave the bankers a blank check for their bail out. the auto mfg. got a loan, and not $700billion, only $14 billion. auto mfg didn’t get a blank check. they jumped through hoops for their crumbs. the wall street bankers never had to make a conssession of any kind, they haven’t even turned loose of any oth the money that is supose to help the economy. then they still are paying out bonus and extras to people in thier org. so they don’t loose good people. Where do they think thes so called good people will go ? To another bankrupt bank?

    something else to remember about the automobile business. when congress wanted them to file bankrupsy. then compared auto’s to the airlines. listen people, the air lines provide a service. the auto industry makes cars to sell. the second most expensive thing a person buy next to a home. no one will buy a car from a bankrupt company. would you buy siding for your house or carpet in you home from a bankrupt company?? i don’t think so. no one would buy a new car from a bankrupt company either. it is dumb even to suggest it. i hope they succeed and show the country once and for all the uaw is american all the way and its workers are the best money can buy.

    Comment by b daug -

  9. Here is actually another solution that doesn’t just help the auto makers but also home-owners and retailers as well:

    General Motors announced a new plann that can actually save GM, Homeowners AND retailers. See the story at: http://watchingmarcitz.wordpress.com/2008/12/21/homeowners-auto-industry-retailers-saved-by-new-plan/

    Comment by marcitz -

  10. i have a question that has NEVER been discussed – what does the auto industry do with existing inventory — to ‘bail them out’ means to give them cash to pay workers to make more cars — but the US hasn’t been buying cars for the past 6-12 months because they can’t afford them, they don’t have jobs, they can’t get fiancing, etc.
    so, when we ‘bail them out, they make more, while the DEMAND doesn’t change… it is a simple supply and demand issue.

    I have an idea that i think will solve the auto industry, starting the process removing the reliance on foreign oil, and help with the environment.

    idea: create a trade in system for autos – with the government being the broker/financer of the trade in system.

    people who have a car over 10 years old can trade in their car for a ‘green’ car (has to get over 30mpg) for $500/month.

    the $500/month will include insurance on the car, ALL maintenance (tires, oil change, etc), gas, etc.
    the monthly cost of the new car will be most likely be LOWER than the maintenance/gas of their existing old car.

    why 10 years old or older?
    1. carbon imprint on environment is large
    2. those consumers most likely can’t afford or can’t get approved

    the car is not owned by the consumer – autos become a utility – a
    ‘subscription’ (using software lingo) — where there will always be a reacurring revenue stream (and predictable) for the auto manufacturs.
    people won’t hold on to older cars longer, they will continue to pay their
    ‘car utility’

    if auto makers are responsible for the maintenance of the cars, they
    will start making more reliable cars which are cheaper to fix. And if they are responsible to the gas, they will make sure that their cars get great gas mileage.

    AND, it can create jobs NOW – cars on the assembly line or cars on lots that have a sub 30mpg ranking, will have to be modified to qualify.
    this will provide immediate work for the assembly line, until the existing supply lowers.

    this idea solves many problems:
    american consumers reliance on gas
    how to increase sales of US autos
    financing of new car sales
    job creation
    with the auto industry in a mess,one thing that has not been discussed is:
    what to do with the inventory !!
    what is going to be done with the existing inventory?
    to keep the union jobs, they have to continue to MAKE cars but with
    this recession, people aren’t buying cars (supply and demand)!
    there isn’t a DEMAND for cars right now, so they have to STOP making them.

    there is also a huge problem with consumer financing. with people out of
    work and the economy in question, people can’tafford cars, or can’t get financing.

    environment/oil dependence – most of the cars still get under 30 miles to
    the gallon. most consumers (if were to buy a car) would want a 30mpg+ car.

    relationship with auto dealers/makers – for years, trade in values were low
    (and still are), and people know that when they trade their car in, they
    won’t get what they believe is ‘fair market value’ – and with demand low –
    especially for older cars with low gas mileage, consumers will get little/no
    return on their existing car – therefore, financing become even more of a
    problem.

    please let me know if you have any questions.. i would love to have this idea floated to the ‘big 3’. i thought of this idea all on my own.. thoughts?

    jim keeter
    jim_keeter@yahoo.com
    425 503 8523

    Comment by jkeeter -

  11. Since the U.S. has become a Bailout Nation, why don’t we just give them the $100 billion now, check it off Obama’s to-do list and stop wasting time and taxpayer’s money on a Congress that seems to be operating without a compass. This has already dragged on too long.

    In my opinion, any so-called Car Czar that can rescue these two companies with $14 billion, also wears a cape and can leap off tall buildings. This whole deal strikes me as a way to buy time. The auto industry has a long row to hoe before they reap any results, what with restructuring, slashing their work force, closing plants, dealing with UAW, etc not to mention actually producing cars that consumers want.

    So what exactly is on the Car Czar’s to-do list? So far it sounds like he’ll come up with some guidelines for restructuring GM and Chrysler by the first of next year. But if the auto execs can’t prove that they have a plan to reinvent themselves by Feb 15, they have to give the money back. Give me a break!

    If the $14 billion is an emergency loan, it’s just a survival kit, so what money will be left to give back? One forecasting firm is saying that with or without the bailout, Chrysler is already a lost cause. And what restructuring plan? Didn’t they already submit a plan? Furthermore, under whose leadership will these terms be set? A lame duck’s or will they be enacted after Obama takes the oath?

    Apparently the bill will restrict executive compensation, but why are these two CEO’s still there? I personally would have resigned a long time ago. But these poor excuses for leaders either weren’t paying attention to the mess they were creating, or they just didn’t care. Who are they going to blame now? The reluctant consumer? Oil prices? Japanese and Korean cars? The economy? Who?

    I’ll tell you who’s to blame. It’s you, the auto industry CEOs who bear the full responsibility. You were the ones who were either too complacent or else didn’t have the vision to foresee the geopolitical and economic forces that shaped competition as you continued to crank out gas-guzzling SUVs. It is you who have not mastered the core principles of leadership or even the most basic skills required to manage. I’m referring to the bottom-line business basics of planning, organizing, motivating, performance management, risk management, forecasting, and so on. It’s all there in Management 101!

    And I also fault the boards of directors for failing in their oversight. Boards are charged with the responsibilities of setting broad policies and objectives, selecting, appointing, supporting and reviewing the performance of the chief executive, ensuring the availability of adequate financial resources, approving annual budgets, being accountable to the stakeholders for the organization’s performance.

    These are standard duties for members of any corporate board, but they should be even more rigorously adhered to by high-profile publicly-traded corporations. I give these CEOs and their boards a failing grade on all points –they not only failed, they failed miserably!

    And what’s worse, millions of people are being affected, not only throughout the Rustbelt, but millions more across America and around the globe in places like Argentina and other countries where there are manufacturing plants. You have let down all your stakeholders!

    Perhaps the savior in the cape, the one they will call the Car Czar, will do a better job than the two CEOs have done. And while the czar will only be a puppet position until Obama takes the reins, I’d like to suggest this as the first order of the day—fire everybody at the top of the auto industry chart who was responsible for creating so much grief.

    This comment was posted by Jose Roncal, co-author of “The Big Gamble: Are you investing or speculating?” – For more information, visit http://www.financialspeculation.com

    Comment by jroncal -

  12. G.M. U.A.W. workers get $102 an hour in pay and benifits–new cars sales cannot cover this expense. so now instead of useing a good business model and lowering the cost of new cars they vote to pick the pockets of those who make $15 to $40 an hour in pay and benifits so that they can continue on in an very bad business model. SOCIALISM

    Also for many years we hear about U.A.W. workers clocking in for 8 hours and doing 3 hours of work,or having a friend clock them in then not even showing up, or clocking in then leaving to do something else, one guy got mad, shot 5 shots at other workers, got fired then the union made the Co. hire him back and pay him in full for the time he was out.
    If you can do all this and still get people to buy enough cars to pay for it is one thing, but don’t pick my pocket so you can get by with it!!!!!!!!

    Comment by aljnsbcglobalnet -

  13. Why don’t the oil companies bail out the “Big” Three? It would be in their best financial interest to do so and could be looked at as a long term investment.

    And Etson’s figures are somewhat misleading. Those numbers take fleet into account, not just retail or Polk registrations, which is a more accurate indicator of consumer demand.

    Fleet sales take into account rental cars and any government purchases (police, etc).

    If you look at just retail, GM is not even close to being a market
    leader.

    -Rian

    Comment by riank -

  14. Why would any of the profitable car companies want to assume the debt and negligence of the U.S. Auto Makers? That does not make sense. If I am Toyota I would love to see GM, Ford and Chrysler go under. That provides a larger percent of the market for my cars. I also have more access to the workforce that builds cars, now I can open more plants and make more Tundras and Camrys.

    The problem with the Big 3 is the labor unions. The UAW has sucked the life out of these companies and they can no longer operate profitable. If these companies want to keep their doors open then they need to get rid of the UAW. Fire all of the workers and only hire those back that will not be apart of the Union and pay comparable wages to the rest of the industry. No more $78 an hour for tightening a bolt.

    http://www.ballardpresents.com

    Comment by ballardpresents -

  15. Pingback: dustbury.com » The maverick approach

  16. The unions should have realized they were killing their golden goose.

    Comment by OSweet -

  17. If US Government really want to help auto industry, here is a very
    powerful and simple to implement solution, just like increase FDIC
    insurance limit from $100,000 to $500,000 (too bad, they only did
    half what I proposed and temporary to end of 2009).

    For auto industry, if you look at data, ALL had sales drop around 35%
    including Toyota, Honda, …etc, not just GM, Ford and Chrysler, the
    only difference is that GM, Ford and Chrysler do NOT have cash to
    survive, like millions got laid off, some will become homeless in next
    year or two, many will be fine.

    So, what is the simple solution? Back in 80’s Auto Loan Interest can
    be deducted from tax like home mortgage payment, but it was cancelled.
    Why NOT let auto loan interest tax deductible again, and include the
    auto sales tax?

    Doing so, will IMMEDIATELY bring up the auto sales, and the
    government does not lose much as many auto sales are EXTRA, and they
    only lose the tax they were not going to get any way. And, there is
    no up front money need to be loaned to auto industry because they will
    have lots of extra sales due to the tax law changed.

    Once GM, Ford and Chrysler …etc got millions of extra auto sales
    money will flow into their hands, and there is no need for outsiders
    waste time to tell them what to do; they are the auto experts; they
    know how to do.

    Unfortunately, my simple solution could NEVER reach Obama, nor thru
    his Change.gov. This is the hardest part in this country.

    Famous people get to be heard, but real talent people are not.

    What people talk about “auto solutions” here or other places are really
    not an implementable solution, and NOT an WIN WIN solution.

    I am the only person in this country has the solution because I use
    my own money to help homeless people, so I know how to make every
    dollar win.

    For example, have you ever thought about to bring homeless people to
    Macy’s to buy all the clothes, shoes, …etc they need just like you
    bring your kids or dad or mom to? NO! If you can NOT treat
    American homeless families like your own families. YOUR solution is
    not going to be a win win solution.

    For example, if you want let auto industry fail, it is simply because
    your brother or sister or even your children NOT working in GM, Ford
    or Chrysler. You do NOT have an honest feeling.

    So, before trying to provide a solution, try to spend some of YOUR
    OWN money (don’t go out to cry for donation!) and help just ONE
    homeless family to recover and back to normal, as you will do to help\
    your children when they became homeless, you will realize all your
    solutions here are very ugly.

    Do you know why home mortgage interest are tax deductible? because
    we encourgage American to have dream come true. We want them to have
    a home ownership. So, how do we encourage people to buy new cars?
    Same thing, give tax advantage, and you shall see those making lots of
    money to make high tax brackets will sure to buy buy buy…

    When you encourage those with high tax brackets buy new cars, those
    who can not afford new cars will have cheaper and newer used cars to
    buy, not to mention auto industry.

    Comment by wjcheng -

  18. The funds for the bailout should come from a consortum of the banks
    who received the 300 billion.

    Comment by delmaraven -

  19. Pingback: theceodaily.com» Morning Update » December 8, 2008

  20. Mark,

    First, I’d like to thank you for your loyalty to and your confidence in Ford. I’m always a little beleaguered to see Ford lumped in with the other U.S. auto manufacturers. We’re doing our best to try to separate ourselves, and recently have launched The Ford Story at http://thefordstory.com.

    There we describe our advances in quality, technology and green solutions, among others. As a matter of fact, Ford was back on the road to profitability in Q1 of 2008, thanks to the transformation plan executed under Alan Mulally after he arrived in 2006. And Alan *is* someone who knows how to make the necessary restructuring changes and cost cuts. We’re already in the midst of that at Ford.

    Second, I feel the necessity to comment on a few of your suggestions above. If it were so simple as you make it out to be, don’t you think we would have addressed that already? If a venture capital firm can’t make a go of it, that should tell you that the industry is a little more complext than you’re assuming.

    Bankruptcy disrupts the entire supply chain, which in turn affects any auto manufacturers not filing for bankruptcy.

    Are you really suggesting open-sourcing vehicles that undergo such stringent safety testing and environmental regulations? I can’t speak for others, but I honestly can’t say that I’d buy a vehicle from an untested and unproved company or individual.

    And I can’t imagine the manufacturing industry in this country being entirely controlled by foreign entities. When there’s national security at stake, it’s a pretty hefty risk to assume.

    I encourage you to take a look at the Ford Story site or to visit a little “manifesto” I wrote on my own blog at: http://www.scottmonty.com/2008/11/how-you-can-use-social-media-to-help-us.html

    Scott Monty
    Global Digital Communications
    Ford Motor Company

    From MC>
    Thx for the post Scott. Im not suggesting open sourcing manufacturing of cars although I wouldnt be opposed at all. It would be the job of the new manufacturers to prove their safety and for consumers to decide.

    What i am saying is that more competition at all levels will make car building better. Separating Intellectual Property from manufacturing has worked in other industries and would work well in the automotive industry as well. Open Sourcing of 100pct of the IP at the Big 3 would give every engineer , programmer and designer the opportunity to come up with new ideas and possibly build businesses around those ideas. Their ideas could lead to better parts for you to buy. New ideas for the cars you design and maybe even breakthrough technologies that could make you more competitive.

    In addition, there may be new businesses outside the automotive industry created as well. In the long run, “the value of social networks” could make your products and supply chain better and end up creating the greatest return to taxpayers. earn in exchange for guarantees.

    And as far as foreign ownership and national security …come on. thats a stretch.
    As far as disruption of the supply chain and its impact on businesses. Businesses get disrupted every day. In fact disruption usually leads to better productivity. Protectionism on the other hand usually leads to the opposite.

    Scott, business as usual is not going to rescue the Big 3 in a slump of this magnitude. Cost cutting and borrowing money are not game changers in the least bit. Ford taking the initiative to Open Source their IP and asking the others who get loans to do the same thing would send a huge message that its no longer business as usual.

    Comment by scottmonty -

  21. Mark, Mark, Mark…I agree with your common sense opinions about many issues of the day but your ideas’s are far off the mark….as are most so called “experts” on the issue. OK lets start with all the issues everyone wants to talk about:
    1. GM doesn’t make cars the public wants to buy.
    2. GM isn’t cost competative.
    3. Labor costs are too high
    4. Legecy costs have killed the industry.

    General Motors has been both the US leader and the world leader for more than 60 Years including 2008. Someone wants their cars and trucks…9.3 million people last year. I would also like to point out that Toyota employees 64,000 more people than GM and sell less car’s each and every year.
    Labor cost of a vehicle is in the 8%-10% range. The contract signed last year closes the direct labor cost gap with the transplants…its no longer an issue. The pension’s GM employees EARNED for 30 years of hard labor have been and are currently fully funded…end of issue. The post retirement medical benefits for one million retire’s has been funded to the $ 20 Billion level…and with a little more will be fully funded in the next couple of years. OUR NATION OWES THIS TO THE PEOPLE WHO WORKED FOR THIS BENEFIT FOR 30+ YEARS. I would tax the transplants $ 500/Vehicle to make up any shortfall.
    Turning our most successfuly manufacturing industry over to the transplants on a silver platter is the most outragious, diasterious policy I have ever heard of in my life..meanwhile the Russians are buying up our steel plants and the Chinese steal our knowledge, property and money. We are well on our way to being a Banana republic…..owning nothing…having nothing…and begging our new mastersto maintain a sememblence of an economic life.

    Why should be allow the transplants dictate our standard of living? In my opinion we should require the transplants to pay comparable wages, provide a decent retirement plant and fully cover medical benefits or all its workers. The Big 3 managers had to endure ridicule on capital hill this week because their great American corporations provided the way forward for the middle class that allowed this nation to attain the highest standard of living IN THE WORLD. Mr. Cuban would you want to live in Detroit Michigan…or any other place in America on $ 14/hr…little or no benefits and no pension ? I don’t think so. The next generation of Americans will be living in tent cities because that is EXACTLY where we are headed…THANK YOU JAPAN.

    IF I were the Chairman of GM….it is crunch time….it is time to stand up and be counted….It is time to take the gloves off and tell the truth to the American people…The Japanese have manipulated their currencly for decades in order to maintain a $ 4,000/Vehicle cost advantage…they still import millions of cars every year that are made in plants and in countries that cover medcal costs and pensions….for every car they sell America losses 44 jobs verses the number that would be employed in America. We should expose them for what they are cheaters.

    What is really coming home to roost to the American people is the profound cost and destruction of American industry that we have allowed to happen by purchaseing Japanese cars….again If I were Chairman of GM I would spend my last $ 100 Million with a communication plan on national TV that puts the real issues on the table….starkly on the table. The Japanses have cost this nation millions of jobs….our money is going overseas to new owners and in the end we face the choice of having our way of life dictated to us….paying Billions of dollars of Government money to keep the Big 3 alive…..or your solution…laying down in the street and letting the world take us over for NOTHING……

    lISTEN MY GOOD INDIANA FRIEND…..(MY SON JUST GRADUATED FROM KELLY)…YOU NEED TO THINK ABOUT THIS SUBJECT IN MORE DETAIL……AND LIKE EVERYONE ELSE THAT DISCUSSES THIS FIND OUT ALL THE FACTS………

    Thanks for listening

    Etson Hougland, CPA
    Fort Wayne, Indiana
    Etson1@aol.com

    Comment by etson1 -

  22. Pingback: MarshalSandler.com » Quick Solution to a Detroit Auto Bailout « blog maverick

  23. What makes you think Toyota or Honda want anything to do with this? It’s not like the Big 3 have been completely oblivious… they’ve tried for years to mimic what the foreign manufacturers have done in the U.S., with limited success.

    Buying out an organization like GM and then attempting to change legacy operations/culture is very difficult. What incentive is there for them to purchase cost-burdened factories and invest in re-tooling them? Or to fight wars to reduce wage costs while also radically shifting employee culture. If Toyota/Honda wanted to expand, why not start from scratch they way they know best, and let workers from the dying manufacturers self-select into the organization on Toyota/Honda’s terms?

    Comment by amishshah -

  24. There are two major challenges the Big Three face – management girth, ineptitude, and lack of vision, and their commitments/contracts to with their Unions. The former is what really damns their potential to be successful. But the latter is what makes their game unwinnable – in 2005 GM’s pension and healthcare obligation alone was $5.6 billion.

    I can’t imagine how it’s possible for any of the Big Three to to overcome an anchor like this without a drastic change to the relationship between these companies and their Unions. One approach to solving this could be to allow the three to go into bankruptcy: http://interacc.typepad.com/synthesis/2008/12/a-gift-horse.html.

    I had proposed an alternative approach to the automotive crisis as well: http://interacc.typepad.com/synthesis/2008/11/bailout-madness.html.

    Comment by Shafeen Charania -

  25. It’s not enough to simply keep the companies afloat, because people aren’t buying cars due to the economy, and who knows how long that will last? What’s needed is an incentive program, and one that could potentially kill two or three birds with one stone.

    So here it is: f the big three aren’t selling enough cars, then why not offer the TAXPAYER a $5,000 tax credit on any Ford, GM, or Chrysler purchased within the next 90 days (or six months, or whenever). That’s $5,000 off ANY new car.

    Add an extra $2,500 for any card with an average MPG over 30 or 35.

    Maybe no one will buy and something else will be needed. But maybe they will, and we get to do more than simply hand cash over to the automotive industry. Detroit gets to sell cars, keep the money, build new cars, and generally stay in business. People get newer, more efficient cars. States get sales and excise tax revenue. Local dealerships stay in business.

    We could pass that law TODAY. Then we might have a little breathing room in which to renegotiate labor contracts, dealership agreements, and so on.

    Anyone want a new car?

    Comment by whmlco -

  26. “Plants that create jobs, sure, but overpaid and underskilled jobs that can not survive the realities of globalization. ”

    Not to turn this into an economic discussion, but the outsourcing of manufacturing and costs is a race to the bottom.

    Now back to the post.

    The break down of more than the big 3, and from what I see not in the post, is the suppliers that have credit lines tied to contracts with the big three. These future revenues are lost if one goes down. Which hinders that supplier’s ability so supply the other 2. (Most make parts for all manufacturers, not just one.)

    So they are having credit problems from the other credit issues, then this is another financial limitation of which, many won’t survive.

    Comment by forestvillian -

  27. I agree with you more or less Mark, but I don’t think continuing to put resources into manufacturing jobs is the way to go. Instead of asking what will happen to all of the auto industry jobs, ask yourself why there are still so many auto industry jobs in the first place. The U.S. began transitioning to a postindustrial economy in the late 1950s, but government has attempted to halt the transition from the start and continues to. State and local governments give auto manufacturers millions of dollars in incentives to build plants. Plants that create jobs, sure, but overpaid and underskilled jobs that can not survive the realities of globalization. Instead of spending tax payer money to encourage auto manufacturers to build plants, state governments should put the resources into education so that high tech companies (the ones from which the skill needed from its workforce is in agreement with the types of salaries Americans expect) will expand into their states.

    This is the fundamental problem; the government attempting to hold the country back in the industrial age.

    Comment by mateo2 -

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