By now most of us are tired of the Big 3 Automakers. If it weren’t for the fact that no one wants to put people on the unemployment line, most of us, I suspect, would actually relish seeing them fail, just because we are tired of the shenanigans.
But, we’ve been down this road before, with the government bailing out at various times the railroads, the airlines, even Chrysler less than 30 years ago. What have we learned in all this?
First, bailouts have rarely been unmitigated successes. While the government intention – that the corporation not collapse and put tens of thousands out of work and cause huge ripples through the rest of the economy – have more or less come to pass, it has rarely been without some pain. And eventually all these companies have been restructured or broken up or merged or whatever.
Second, bailouts almost always delay inevitable – and often beneficial – actions. The fact is that the majority of these firms have such extensive problems that only through drastic measures can anything be saved for the long term.
Third, bailouts protect the incompetent. Lee Iacocca is an exception. More often, the heads of corporations that lead a company through a bailout are both to blame for it and incapable of exploiting the opportunity presented by the government. And this is the key point: these corporations aren’t suffering from ‘bad luck,’ as if, somehow everything was proceeding smoothly, with a productive, efficient work force working on modern production lines with a product line in high demand when en evil genie showed up and wrecked everything.
It has been a fact of every day life for forty years that US automakers needed to pursue some dramatic change. Every day. That mean the chairman and president of each Chrysler and GM could have woken up more than 14,000 times each and said ‘Today, we start to change things.’
They didn’t. They didn’t narrow their product lines, shedding redundant or unprofitable models. They didn’t shed brands that didn’t fit in. They didn’t place enough emphasis on quality so that US cars were competing across the boards with imports on reliability and performance. Nor did they shed the perception of relatively poor performance even when some began to make cars better than their competitors. They didn’t address a long-term solution to pay, health care and retirement for their workers, a problem that was identified what seems like a generation ago, and has now turned into a monster.
So, what are we in for? And it is ‘we’ as we all now ‘own’ those companies, with $25 billion already headed their way, and more possibly en route over the next months, the US taxpayer is well invested in the auto industry.
Answer: Probably more of the same. They will receive our billions, they will avoid the opportunity to act, the economy will begin its recovery some time in the next 12 months (there are already signs it has started – suggesting that the recession wasn’t as bad as we thought – thankfully – and that the credit bailout begun in November has had the desired effect), and they may well stumble through it, only to face this same problem again within a few years.
What should happen?
We should insist that GM and Chrysler file for bankruptcy, allowing each company to renegotiate pay, health care and retirement benefits; renegotiate contracts with auto dealers around the country that keep certain product lines open; terminate non-profitable product lines and allowing GM in particular to simply end production of certain brands whose major competition is other GM models. Certain brands might best be sold off to operate as smaller, independent companies (one can easily imagine Cadillac surviving on it’s own, for example).
Finally, and perhaps most importantly, let the market clean out the front offices. The board members need to go and the executive suites need to go. Despite the fact that you own large amounts of stock, your decisions have been awful. You failed. Go home and clip what few dividends you are getting. The Presidents and Vice Presidents, the CEOs, CFOs, CIOs, etc., you all need to go. For those who say this is too radical, some are doing a great job and some are needed for continuity, my answer is BUNK. None have shown the vision or leadership to move these companies in the right direction. Continuity with a failed past isn’t a benefit. It’s too late to play nice guy. (And don’t show up on a morning financial news channel in a year as ‘an industry expert’ or a ‘management consultant;’ if you had anything worthwhile to say you wouldn’t have let this happen. Go away and stay away. Take up fishing.)
And finally, to the UAW, you leadership is part of the problem. It needs to go, too. Insisting on pay and benefits packages that help to push your companies over the edge isn’t a good idea, it’s a bad idea. You need to go as well – all of your leadership.
The companies (and the union) need to dramatically streamline their upper management while they streamline their production, develop a new vision of where there respective companies are going and begin the rebuilding. That vision is essential, and will not come from anyone already found within your organizations. Your current leadership is incapable of creating or even recognizing any new vision. You need a new vision that will only come from the outside. You will only get there through the ‘rebirth’ that a bankruptcy and new leadership would provide.
But, we’ve been down this road before, with the government bailing out at various times the railroads, the airlines, even Chrysler less than 30 years ago. What have we learned in all this?
First, bailouts have rarely been unmitigated successes. While the government intention – that the corporation not collapse and put tens of thousands out of work and cause huge ripples through the rest of the economy – have more or less come to pass, it has rarely been without some pain. And eventually all these companies have been restructured or broken up or merged or whatever.
Second, bailouts almost always delay inevitable – and often beneficial – actions. The fact is that the majority of these firms have such extensive problems that only through drastic measures can anything be saved for the long term.
Third, bailouts protect the incompetent. Lee Iacocca is an exception. More often, the heads of corporations that lead a company through a bailout are both to blame for it and incapable of exploiting the opportunity presented by the government. And this is the key point: these corporations aren’t suffering from ‘bad luck,’ as if, somehow everything was proceeding smoothly, with a productive, efficient work force working on modern production lines with a product line in high demand when en evil genie showed up and wrecked everything.
It has been a fact of every day life for forty years that US automakers needed to pursue some dramatic change. Every day. That mean the chairman and president of each Chrysler and GM could have woken up more than 14,000 times each and said ‘Today, we start to change things.’
They didn’t. They didn’t narrow their product lines, shedding redundant or unprofitable models. They didn’t shed brands that didn’t fit in. They didn’t place enough emphasis on quality so that US cars were competing across the boards with imports on reliability and performance. Nor did they shed the perception of relatively poor performance even when some began to make cars better than their competitors. They didn’t address a long-term solution to pay, health care and retirement for their workers, a problem that was identified what seems like a generation ago, and has now turned into a monster.
So, what are we in for? And it is ‘we’ as we all now ‘own’ those companies, with $25 billion already headed their way, and more possibly en route over the next months, the US taxpayer is well invested in the auto industry.
Answer: Probably more of the same. They will receive our billions, they will avoid the opportunity to act, the economy will begin its recovery some time in the next 12 months (there are already signs it has started – suggesting that the recession wasn’t as bad as we thought – thankfully – and that the credit bailout begun in November has had the desired effect), and they may well stumble through it, only to face this same problem again within a few years.
What should happen?
We should insist that GM and Chrysler file for bankruptcy, allowing each company to renegotiate pay, health care and retirement benefits; renegotiate contracts with auto dealers around the country that keep certain product lines open; terminate non-profitable product lines and allowing GM in particular to simply end production of certain brands whose major competition is other GM models. Certain brands might best be sold off to operate as smaller, independent companies (one can easily imagine Cadillac surviving on it’s own, for example).
Finally, and perhaps most importantly, let the market clean out the front offices. The board members need to go and the executive suites need to go. Despite the fact that you own large amounts of stock, your decisions have been awful. You failed. Go home and clip what few dividends you are getting. The Presidents and Vice Presidents, the CEOs, CFOs, CIOs, etc., you all need to go. For those who say this is too radical, some are doing a great job and some are needed for continuity, my answer is BUNK. None have shown the vision or leadership to move these companies in the right direction. Continuity with a failed past isn’t a benefit. It’s too late to play nice guy. (And don’t show up on a morning financial news channel in a year as ‘an industry expert’ or a ‘management consultant;’ if you had anything worthwhile to say you wouldn’t have let this happen. Go away and stay away. Take up fishing.)
And finally, to the UAW, you leadership is part of the problem. It needs to go, too. Insisting on pay and benefits packages that help to push your companies over the edge isn’t a good idea, it’s a bad idea. You need to go as well – all of your leadership.
The companies (and the union) need to dramatically streamline their upper management while they streamline their production, develop a new vision of where there respective companies are going and begin the rebuilding. That vision is essential, and will not come from anyone already found within your organizations. Your current leadership is incapable of creating or even recognizing any new vision. You need a new vision that will only come from the outside. You will only get there through the ‘rebirth’ that a bankruptcy and new leadership would provide.
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