Thursday, November 13, 2008

Should the Auto Companies Be Saved?

I have been turning over in my head this whole issue about the auto manufacturers needing a financial bail out for days now. The fact that I’ve had a migraine that has been hanging on for days now too doesn’t seem to have helped me to think this matter through.

My first reaction is to bail them out. After all, there are millions of jobs directly on the line if Ford, GM, and/or Chrysler folded. That doesn’t even count the millions of jobs for people employed at companies that supply the auto manufacturers in order for them to build the cars, or the jobs affected by companies that rely on selling related products for those cars once they are in the hands of the consumer. The fact is that people still need to buy cars, and if there aren’t American made cars to be bought, it will drive the consumers to foreign made cars. And their dollars will go with them.

The flip side is that car manufacturers have been slow to innovate. They continued to spit out gas-guzzling behemoths because people want them. Or, it was just good marketing on the part of the car companies that made people think they wanted them. The other problem is that the auto manufacturers are up to their necks in unions, which may be choking them with expenses. Granted, the need for unions years and years ago helped to protect the employees from poor working conditions and helped people get a fair wage for the work for what they do, but now they seem to be too confining. Companies can’t control the massive costs that these unions carry when it comes to pensions, health care, and hourly wages. While I don’t want companies to have no checks and balances when it comes to compensation for its employees, I also think the unions are at fault for their sometimes exorbitant demands.

Something has to give.

Right now, I am leaning toward letting one of these car companies go bankrupt. It will force the company to reorganize and maybe even weaken its union, if not dismantle it all together. Sure, it will be painful and a lot of people will be affected by it. But something needs to happen to scare the living daylights out of the big car companies and the big unions. They need to change how they operate, and they need to provide higher quality products that last longer and don’t require financing over 5-6 years. They also need to start building more fuel efficient vehicles like those that we were promised in the 1970s with the last oil/gas crisis. So, let’s say that GM goes belly up. Maybe that would force Ford and Chrysler and their unions to make change quick so they aren’t next. The loss of money in one’s own pocket can sometimes be a great motivator.

The Fed could bail them out. But, let’s be honest here. The Fed is waffling now about how it will use the bail out money for the financial institutions. I think that the whole economic problems we are facing right now are so huge that the Fed honestly don’t know what to do. I can’t say that I blame them. But their indecisiveness isn’t helping matters. So, if they bail out the car companies, they better do it with some hard and fast rules about how the money is used and there better be some clear expectations for specific results. There should be controls in place to make sure the money doesn’t just fall into a black hole. There should be no bonuses for any executives - or anybody - until the money is repaid. In fact, there should be no RAISES for anybody until the money is repaid, and every employee should take a pay cut. Within 2 years I’d want a car that gets 50 miles to the gallon, or one that runs on renewable energy, or both. I would want something for my money. Is that too much to ask?

It’s no wonder I still have a migraine.

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Music Wench said...

I understand your dilemma. I am feeling the same thing. Basically I'm inclined to let them fail. If we give them money, what then? They're going to keep on making cars no one is going to buy?

I'm pissed at American auto makers and the way businesses in general operate and pay their CEO's. If they follow the Japanese model, they'd be much more successful. Get rid of those golden parachutes. How stupid is it to reward failed executives?

Anonymous said...

I definitely think that all three should declare bankruptcy, re-organize and they need to get real. Bush isn't going to move finger one for them, so Obama will have to lay down the law. He needs to make sure that if he's going to bail them out they have got to make more efficient, smaller cars. They need to stop bringing over foreign cars for a time or at least raise their tarriffs when they bring in cars. From what I have read, imports pay very little when they come in to the US. It's just so frustrating that the guys in the big three make all this money and they want a bailout? Geez must be great to be the king.

My husband just chimed in. He said that they're readying the release of a new Hummer. A Hummer? What the He**? These guys are hopeless and we are so doomed.

If you have more aspirins for my head, I'd really love some.