Saving General Motors
It is in the national interest of the United States to preserve what is left of our manufacturing capacity. Accordingly, it is a proper use of the public purse to help save our automakers from dissolution. They are not beyond redemption; however a few key steps need to be taken for the infusion of public funds to make these companies viable in the long run.
Our politicians say as much, however there has been a lack of understanding of the root cause of Detroit’s problems as well as a lack of a comprehensive plan to turn the Big Three around. Below is a brief outline on how this can be achieved.
Above all, the Big 3 have a perception problem. American cars are now excellent, however they remain haunted by blunders made in decades past. Admittedly, current perception has been shaped over decades during which Detroit’s products looked bland and were of generally inferior quality to foreign competition. The second of these considerations was more important in the seventies and eighties, however by the nineties quality had largely caught, but then design stayed poor. Someone who bought an expensive Cadillac or a Buick, for example, in the early ’80’s was bound to be highly disappointed to the point that they might never have gone domestic again. However, today, Buick, and to some extent Cadillac, has a wonderful lineup of vehicles, but almost no one under sixty would consider buying a one. American car brands too frequently have as much sex appeal as an overweight accountant.The past cannot be undone, so we must focus on what can be done now to save the Big Three from their self inflicted state of near-ruin.So, here’s an outline of a plan that would comprehensively save Detroit: 1) Establish a National Automotive Task Force. America can once again dominate the world’s roads with our cars if we put our minds to it. Clearly current management of these companies has been uninspired at best; we need to bring in our best and brightest to help build cars for the coming generations. Young people today do not dream of owning a Pontiac or a Ford or a Chrysler. This can be change. How? Lets gets our best creative business minds, Steve Jobs of Apple, the founders of Google and Facebook for example, people who understand what consumers are going to want in their products, to help fashion a product and marketing plan to make these companies sexy again. Detroit knows how to make great cars, they are just boring to most young consumers. We need to people who “get it” in guiding long term policy otherwise these companies will go broke in the end. For that matter, the master of reinvention herself, Madonna, should be brought in to help advise the bean counters on how to remake themselves to appeal to another generation. The Task Force should function as the Board of the Big Three. 2) File for Bankruptcy with a government guarantee for car warranties of all cars sold for the next few years. By guaranteeing the warranties, the biggest stated concern of Detroit that people will not buy from companies in bankruptcy is removed. As long as the cars are backed by a solid and generous warranty - people will buy. Why Bankruptcy? Detroit has too much baggage, accumulated during times when they were much bigger, healthier companies. Pension and healthcare liabilities, union contracts which place them at a considerable disadvantage to foreign car companies manufacturing in the United States, and a dealer network that is far too large and costly to administer and supply, need to be renegotiated. This needs to be remedied and any commitment of public funds needs to be contingent on establishing the Big Three up as entities with competitive cost structures to their foreign rivals.3) Get Hollywood and the Media Engaged. Our President elect has a lot of clout here, and Unites States government should use its growing power to push those who help shape popular culture to help give a boost to public perception of American cars. On this matter, Hollywood and the media already try plenty hard already to shape public opinion; and saving our manufacturing base is surely of greater importance for the future of this country than, say, gay marriage - an issue that they their influence mightily to support. In conclusion, we need comprehensive out-of-the-box solutions to save our automotive industry. America is the country of ingenuity. It is what made Detroit, and the lack thereof has led to its sad state today. We can do this, and, if the money is well spent and properly deployed, GM, Ford and Chrysler can once again rule the roads, but anything less than a meaningful deployment of the great creative genius of this country will not work.For those concerned that this is not the place of government: that bell has already been rung. Furthermore, our government has traditionally been an active participant in the creation of our industrial might - from Alexander Hamiliton’s trade and economic policies in the 18th century, to the railroads which girded our country in the 19th century and of the superhighways of the 20th century. The key now is for the money to be well spent and contingent on a change in the way Detroit has been doing business. This is a great challenge to any government, but we the people must demand that our money be invested well. We should establish a properly grand vision befitting this great country for the future of the American automobile - That American cars once again be the envy of the world!
Nice writing style. I look forward to reading more in the future.
Raj,
The approach that you mention above doesn’t cover some of the major issues that the Big 3 have. For example, the legacy labor contracts are a large hurdle to overcome, and can’t be overcome by marketing. neither can the cost structure of needing to support 8500 retail outlets when the “other 3″ have a similar market share with less than 2000 dealerships.
I have a far simpler plan. Let the Big 3 fail. This solution would give us the primary benefits of any of the other plans that are out there, without putting taxpayer dollars at risk and without rewarding the Big 3 for their decades of poor decisions. Follow me on this one for a little while.
1> It is possible to profitably produce cars using US workers. Toyota and BMW both build cars in America that they actually export to other markets.
2> There is a nearly static demand for automobiles that is unaffected by the number of car manufacturers that there are out there. If there were 1,000,000 cars to be sold in 2009, that number will likely be sold regardless of whether the Big 3 manufacturers are in business in their current forms or not.
3> If any or all of the Big 3 are no longer in the automobile market, that will not have a large impact on demand, the demand that they would have filled will simply be filled by another vendor. This means that the same total number of people who build cars will need to be employed, and also that parts suppliers will need to produce the same number of parts, no matter what happens to the Big 3.
4> A bankruptcy would allow the healthy pieces of the Big 3’s businesses be separated from the unhealthy parts. This would either allow the strong parts of the business to operate without being encumbered by the weak ones, or for the strong parts of the business to be acquired by a company that can operate it better than the Big 3 have shown that they can manage their businesses.
Justin:
I agree that bankrupcy is neccessary, however thing the gov needs to back the warranties so people don’t think they will be unprotected in thier investment. I agree that demand will be unaffected by the complete dissappearance of American carmakers.
I agree with most everything you said, however, the difference in our outlook is that I think it fundamentaly important to maintain a signifcant manufacturing base that is American owned.
I know this is agaist the mantra of complete free trade, however our competition coddle thier industries, especialy our Asian competitors, and we do not ours.
You could argue that this is a missallocation of thier resources, and I am OK buying underwear made in China, but cars are the backbone of what remains of our ability to make things.
Going to national security argument, we have to be able to make the goods of hard power. Clearly, having forieign compeition make thier cars here is better than importing them, but being the old fashioned guy that I am, it strikes me as very insecure position for America, with the various threats we face, to be, for example, without the ability to make steel.
I am not sure how I feel about the gov’t saying they will underwrite the car warranties. I could be for it, I have to let the idea settle in my brain for a little while. To me, it is not as important for the headquarters of automotive companies be in the US, as it is for the manufacturing capabilities to be here. If we “bail out” the Big 3, and they move more manufacturing to Mexico and Canada, we are worse off than if we don’t do it and the foreign companies buy up the excess US manufacturing capacity here.
Its a very complex issue, but we don’t lose the capability to do things on a national security kind of basis just because the company that owns the manufacturing capabilities is located overseas.
I want cars to be manufactured here, I just don’t think I want the car companies to be managed by the people who have repeatedly run them into the ground.
In terms of marketing, General Motors must look back to the genius of Zora Duntov, father of the Corvette, in his work: “THOUGHTS PERTAINING TO YOUTH, HOT RODDERS, AND CHEVROLET” dated: 12/16/53. Although Duntov passed away in 1996 his passion for cars and his vision for the future should be retained and celebrated in future generations of Corvettes.
We must remember all of the other industries that have been laid off as well. Why should Government play savor and save certain companies. Government should not bail out certain industries. Yes without a bail out the economy is going to continue to spiral, but it must hit a bottom and start the recovery. And the Government is not God they do not have the right to choose whose job stays and which companies are saved. Those laid off in other industries are at a disadvantage the government is not helping them. Instead of the Government bailing out some how about it starts putting a plan in place to help those already out of work and creat jobs in other industries. Your website is 1 sided, I would like to see both sides discussed instead of greedy corporate republicans spewing about what would help them make more money.
Also Chrissy all you can respond is about corvettes? How about a real thought…..there is more to life than fancy cars.
The govt must save the big three mostly for National security. I WWII the car companies built the tanks. We can not afford to not have access to an auto assembly line. So what if we become South Canada, the country is already going down hill, just look at who we put as the commander.
Bull Crap.
Your article states :
“It is in the national interest of the United States to preserve what is left of our manufacturing capacity. Accordingly, it is a proper use of the public purse to help save our automakers from dissolution. ”
The use of taxpayers money to “bail out” the auto industry is unconstitutional and certainly exceeds the limit of what I want my government doing, especially when it comes to the peoples tax dollars.
The public purse? The average employed American works 7.9 hours a day and to propose taking money out of their pocket and putting into the “public purse” so that the failure of the Auto Industry can taste the fruit of the American laborer is absurd.
Let the auto industry fail and with it will rise a new age in American ingenuity, a age where men and women alike see the American dream and build, work and repine for the greatness of it all, the success of living and dreaming and the realization that in America anything is possible.
Nevertheless thanks for sharing! Keep it up,
Jesse