Friday, December 5, 2008

How stupid are we? No, this is not a game

No Plan
While other countries have jumped to help their auto industries Congress has dragged its feet and played coy with the possibility of help. In the end the automakers have no real plan and neither does Congress beyond making a public spectacle of the automakers and their dilemma.

More bad advice
I especially like automakers being urged by Congress to make more 'green' cars. When Ford started it all founder Henry Ford said you can have any color car you want as long as its black. Now the mandated color is green. But the kicker is that environmentally friendly cars are more expensive and they are currently being sold at a loss. So Congress wants them to make more of those..Oh that will save them, won't it?

The reason we are here...
This is unfortunate. The automakers have improved their product. Their current dilemma is the result of a spike in oil prices that came so quickly there was no rolling with that punch, but then oil prices fell back. And just as fast a financial tsunami swept across the land - all lands- and that has left potential auto purchasers without credit resulting in a sharp drop in the demand for cars. Congress treats the automakers like all this was all their fault. The Detroit guys are not perfect. They have made mistakes and they have had help making some of them - like when CONGRESS rolled back the CAFE mileage standards for them.

The real issue
The automakers are not stupid. But they are caught in a sort of time-space warp. They are locked up in industrial agreements from years ago in an age when others are not so encumbered. They are at a disadvantage and they have not been able to negotiate their way out. GM is burdened by legacy health care costs, dealer agreements it cannot unilaterally break and a still expensive and restrictive union contract. These are among the arrangements the US automakers need to renegotiate. By declaring bankruptcy they could be unilaterally get relief from a bankruptcy court judge. But the automakers say that the bankruptcy route is too dangerous. So why not have the government offer MONETARY help only if the automakers can restructure their various arrangements with dealers and with the unions. Force them to streamline by reducing the number of nameplates- that will involve a new deal with their dealers. If these things are not done then throwing money at the automakers does not solve their longer term problem. So tell them to make these changes OR IT WILL BE BANKRUPTCY. And maker Chrysler's 80% cash rich owner Cerberus kick in some more money before it gets ANY taxpayer funds at all. Everybody needs to get real.

Time is of the essence so Congress may have to give the automakers some money upfront without strings. But to get what they say they really need, any further dispersal of funds would require changes of the sort mentioned above.

Decision time
The point is that the automakers are not a group of naughty boys. They deserve funds more than the banks that have gotten some despite making clear missteps that WERE their fault. Auto are suffering form the fallout of the banks' mistakes and getting blamed for it. This is farce. The auto industrial is important and it has been making strides. Describing the automakers as dealing with the legal framework in an environment where its counterparties have milked it for all they can and continue to dig their heels in expecting a public bail outs for political reasons gives a very different view of GM's and the other automakers' plight. It's time to empower the auto companies with a real ticking time bomb. Cut deals or go bankrupt. Don't just give them money.

Do the right thing.

1 comment:


To the wall street banksters its a game.