Is There a Winner In An Auto Industry Bailout?

This week the question has come before Americans, asking them if we felt that the Big Three American automakers deserve to receive similar bailouts from the government that the financial industries are seeing. They’ve all made their treks to Capital Hill, first using private planes and then, after being chastised for their earlier modes of transportation, via automobile. They’ve pitched their plans, which now will cost $9 billion, yeah with a “B”, more than they did just a week prior. Now they’ve taken their sob stories to the public.

So should taxpayer dollars be used to fix what they broke?

The answer doesn’t seem as easy as it should be. The easy answer should say that they aren’t deserving of any such rescue package. Since they couldn’t run an efficient business to begin with, why should we have the faith that they can restructure in a way that we aren’t simply throwing money on the fire? What would make them see the light now when they’ve been ignoring the big picture for years?

However, the biggest concern in all of this mess is the matter of the hundreds of thousands of jobs that are at stake should one or all of them crumble before our eyes. The economic impact of those wages not filtering into an already weakened economy could be devastating. Coupled with the already enormous amounts of unemployed citizens that have already lost their jobs in other industries, and a picture similar to the Great Depression is painted right before our eyes. Then again, in reading through the restructuring plans laid out by all three companies, each and every one of them details layoffs and plant closures in order to get each of them under more strict operating costs. And that doesn’t even include the trickle down to dealerships and suppliers that will either fold or have to make similar concessions.

So where does that leave us? Basically it becomes a damned if you do or damned if you don’t situation. But is there an answer to fixing the problem? Certainly the concessions made today by the United Auto Workers union will help to amend some of these issues. Its obvious that they had themselves a pretty sweet ride for some time and its time to put them back in line with the rest of the American working public. That being said, the trick is keeping as many of these people at work as possible as these concessions were made to keep their jobs, not show them the door.

With the discussion of plant closures, why not bring the American auto industry back to America? The easiest way to get this whole fiasco to benefit the American economy is to try and keep the money filtering inside the American economy. Closing plants in Mexico and South America are an easy answer to that. Sure, the cost of operating in the United States may be higher due to the wage differentials, but then again, you’ve already received concessions to make your work force more cost affective by restructuring your union agreements. With the plethora of unemployed Americans beating the sidewalks looking for jobs this very minute, it is understandable to think that all three could field cost affective labor forces in a short manner.

Then we have the issues of paring down product lines. The quick and easy answer to generating fast cash flow is to sell off assets, namely foreign car lines. Stakes in Mazda, Volvo, Saab, etc looked great on paper years ago when the industry was booming and assets were as good as cash. However, in a time when almost all the major auto producers are reporting sales that are in thirty percent or more declines, then maybe the answer should be to line up supply more realistically with demand. Offer basic product lines, with certain standard features in stock and ready to be driven off the lot. Otherwise, put a premium on custom made vehicles, applying proper lead-time expectations to customers that demand such a luxury. Its feasible to assume that even with plant closures, a custom vehicle can still be produced within an acceptable time line that a customer demanding such service wouldn’t necessarily expect to be able to look over a lot full with every single configuration in multiple color schemes. Having that much overhead has to be killing each of them, not to mention the burden it puts on the dealers as well.

And if none of these options work, maybe the answer is a merger. Not just of Chrysler and whoever would be willing to buy them, but of all three into one super conglomerate. They could easily assess the top selling models under each flag and then concentrate on making them fall more in line with actual customer demands, rather than scratching and clawing for the rapidly dwindling consumer dollar.

Regardless of what is chosen, the ramifications of any such maneuver would be tremendous, both on a weak economy and on a weak industry in general. Making such a decision isn’t an easy one, especially in light of the dire need conveyed by both Chrysler and General Motors. But whether its easy or not, it nonetheless needs to be made, and it needs to be done quickly. The American public deserves to know where this issue stands and they deserve to be prepared for whatever happens because of it, if there is any way to prepare them.