Wednesday, November 12, 2008

Bailout II - The Wrath of Big Auto

Big Auto. The Big Three, Ford, General Motors and Chrysler, are bona-fide American icons. Icons that inspired such devotion that it if you bought one brand, it was assumed you hated the other two. An unlicensed decal of Bill Watterson’s “Calvin” urinating on the desired automaker is a common sight on the road. Pride in the American auto industry could best be summarized in a Ford commercial starring country star Toby Keith, who sings in the usual country-rock bravado, “I’m a Ford Truck Man! That’s all I drive!” Try contrasting this with heavy-metal icons Metallica rocking to their favorite HD TV manufacturer. The difference, obviously, is one is real and the other I just made up. Despite their continual assertion that the Big Three is an icon that cannot be allowed to fail, the future is burning a different trail in the road.

Several major commercial icons failed in the latter part of the 20th century. MaBell, Joe Camel, the Hamm’s Beer Bear, the Merrill Lynch Bull and Michael Jackson. We survived, moved on and accepted change. Jobs were lost but it is understood that any good worker picks themselves up and finds another line of work. Persistence, determination and the desire to better one’s self are qualities admired in any worker - or individual. These attributes are sorely lacking in the boardrooms of the Big Three. There is an argument out there, which states, in summary, that nobody forced Americans to buy these SUVs, ramblers and other mini monster trucks. The monopoly of Big Auto gave car buyers little choice; kinda like choosing between Marlboro and Camel cigarettes or Budweiser and Miller beer. They’re basically the same but different in their logo wear and what the consumer chooses to identify with.

Big Auto wants big money and it’s a big joke. My dreaded “Adam Koeppe Simple Math” proves this. The first 25 billion dollars dolled out to Big Auto is designated for transitional purposes only. This money is to be used for research and development, plant conversion and general preparation for the public’s desire for fuel-efficient vehicles. The second bailout request, however, is for general operating expenses; the day-to-day business activities that Big Auto says they no longer can afford which could range from CEO compensation all the way down to keeping car dealerships afloat. It will take 1-3 years for most of the manufacturing plants to convert to production of different models. Until that time, Big Auto wants to use government money (our money) to produce the same vehicles Americans no longer want to buy. This money would be spent in a vicious circle, with the corporate hand landing right back on the government bank.

This second bailout request could be utilized much more efficiently. Wouldn’t it be better for the bailout money to pay autoworkers to stay home until the retooling is done? I’m proposing a fully-paid layoff for up to two years with the incentive of a tax credit for individuals who find another job. This certainly has to be more viable that operating a pet rock factory. This could help the middle class whom this affects the most and also hold Big Auto accountable for redesigning their products.

Thus far, Big Auto has said big little about how exactly they will use any of the bailout money they already have. They have offered no comprehensive plan, no timetable and generally no direction. Sound familiar? These companies have given no reason why they should be trusted with this money. Further proof of this can be found in the film “Who Killed the Electric Car?” I could spoil the story but I’ll leave that up to Ed Begley Jr.

The downfall of the Big Three has been anticipated for some time. Consider the dealership ads claiming “No money? No credit? No problem!” Actually, no money and no credit is a big problem, which has directly contributed to our current credit crisis. The dealerships policy for defaulted car loans is to call up Emilio Estevez, have the vehicle repossessed and put it back on the car lot for sale. The “Repo Man” concept only works if anybody wants to buy these vehicles. Otherwise, they’re just stocking their stores with videotapes.

Big Auto has failed to realize Americans’ purchasing preferences have changed. People are far more interested in buying a gigantic flat screen TV than a truck with a kick-ass HEMI. The tradition of a family going to a dealership to pick out a new car has eroded; a 20th century relic. More people are turning to internet sites such as Carsoup and Vehix to make their decisions. This could be the end of corporate dealerships but – so what? Small dealers will easily replace these over time. Sometimes we have to accept change, whether we like it or not.

Big Auto’s big begging represents a comprehensive failure on the administrative level and they should be held accountable. Putting tens of thousands of American workers out of work is not acceptable but neither is funding a video store. Unless the Big Three state a comprehensive restructuring plan, our tax dollars will be spent on an aging giant that refuses to modernize, preferring to watch old videos of the 1970’s car crash classic “Gone in 60 Seconds.” Maybe they’ll learn before it’s too late.

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