If We’re Going to Bail Out the Big 3, It Must be Done Right…

The concept of an auto industry bailout is a tough one. My first instinct is to bail the Big Three automakers
out, in order to curtail the possible employment ramifications if they're
allowed to go under. Somewhere around three million workers depend on the US
automakers for jobs, and at this point in the economy, losing all of those jobs
could deal a spectacular blow to our economy; one that may take years to
recover from.


But another part
of me says, "let them fail." It's not like they'll actually immediately
disappear. They'll have to go into bankruptcy, and a bankruptcy trustee can
work with the companies to cut costs and make them solvent again. It's not like the three companies have no value; Americans will still have to buy cars, and a lot of people still want to buy American.


Then there is the fact that at
least two of the companies, Ford and GM, have actually shown signs of awakening
in the last couple of years, and they have been retooling for the future, which is very. very green. The current problems they're experiencing aren't
entirely of their making. They've been hurt largely by the economy, high gas
prices, the credit crunch, and the rising cost of health care.


There's another
aspect to this, as well. One of the reasons our auto industry sucks so badly,
and has sucked for so many years, is because there are the "Big
Three." There has essentially been little or no real domestic competition
in the industry for at least 25 years. Look more closely at the market; the
foreign companies made mostly cars and a few trucks and SUVs, while the
domestic car companies have sold mostly trucks and SUVs, but only a few
cars.  When gasoline prices spiked —
which everyone knew would happen, and which will continue to happen repeatedly for the
foreseeable future — foreign automakers were prepared, and domestic automakers
weren't, primarily because the foreign companies staked out one part of the market, and domestic companies staked out another. 


Our car companies
have simply become too big, to unmanageable, and they have lost the edge that
they once had – the edge that once made them nimble; able to change as needed,
just as the market changed. Do you realize that, when World War II broke out,
Ford was able to retool one of its plants to manufacture helicopters for the
war effort within six weeks? Can you even begin to picture such a thing these
days? Nowadays, to retool to produce a new model of vehicle, or to remake a model, seems to take
years. Why is that? And why do they keep closing plants, rather than
retool them to compete?

They know damned well that the way to make more money is to make and
sell more vehicles, yet they always seem content to make fewer vehicles and
sell them for more.Instead of making better vehicles, and creating greater value, they keep adding "features" and jacking up the price. It's not enough to have a station wagon to jam the kids into; now, we apparently need a tank, with a dozen seats, a DVD player, MP3 player, CD player, GPS, heating coils under the seats, and an air conditioner so strong, you could store meat for a month. Of course, when GM or Ford adds one of these features, it costs them $50, and they charge you $500.

Only, they apparently don't sell very many vehicles with all of these features, especially with gas around $3-4 per gallon. (Yes, I know; it's closing in on $2 now, but we all know it'll go back up again.) If they did sell them, there would be no problem with a temporary sales lull.


And that's the
problem. They need competition, and the entire industry needs to retool, to
make it in a world that has little choice but to cut its addiction to oil. This
is about to become a green world, no matter what George W. Bush and his ilk
think, and there is a lot of money in that green. And if the current car
companies can't make it in such a world, then what would be the point of a


Therefore, here's
what I propose as a solution.

  • Lend the car companies the
    money they say they need, but put conditions on it that make sense in a
    green economy, as well as the economic realities of today. The executives
    in these companies should agree to a salary cap, until such time as
    they've paid the money back. In addition, everything possible should be
    done to preserve as many jobs as possible, and any job cuts should have to
    be reviewed by an independent body.
  • Since the oil companies have played the auto companies like a cheap fiddle for many years, perhaps we should put a tax on oil company profits, and use that to supply the bailout money. It could be said that the oil companies owe them.
  • Build in incentives to build
    more fuel efficient vehicles, and assist them in keeping the prices
    reasonable for the average car buyer.
  • Institute a tax on high
    mileage passenger vehicles, and use the money to develop technologies
    designed to reduce the use of fossil fuels, and to eventually replace
    them. For every dollar we commit to an auto company bailout, two dollars
    should go to creating green technologies.
  • Encourage greater competition
    in the auto industry. If we can bail out a General Motors to the tune of
    $25 billion, we surely can encourage new entrepreneurs to make vehicles
    and sell them, or retrofit older vehicles to the new green economy. In
    fact, doesn't it make more sense to stop treating old cars as scrap, and
    to recycle as many as possible? We should be supporting entrepreneurs, not
    just handing over cash to large companies who simply have the advantage of
    having been around a while.  I'm
    even thinking it might be a good idea to break up the companies who need a
    bailout, and allow the parts to be taken over by people who might be able
    to make cars that make sense in the new environment.
  • Since the goal will be to
    work toward making cars that run on electricity, investments must be made
    in battery and power technologies on the vehicles themselves, as well as
    in the generation of power for 
    future needs. Development of solar, wind, geothermal and tidal
    power, to the extent that they're possible and practical, are absolute
    necessities, and should be considered when considering a bailout of an
    auto industry that has been mired in the oil culture.


I'm still not sure
if an auto bailout is a great idea, but if we are to engage in one, we have to
wait until Bush is out of office.; he and Paulson have proven they couldn't handle a bailout with conditions, anyway. And any bailout should be a series of loans, and part of a grand schema, to wean us from oil once and for all, and prepare
our automobile industry  for the future, which cannot include a continued addiction to oil. 


Every other car
company in the world receives some sort of help from the government. If our car
companies are to compete, we have to help them occasionally. Of course, one of
the keys to all of this working will have to be a national, universal health care
plan. No other car maker on earth has to pay for its employees' health
insurance. But that's another column for another day…

Stay tuned…

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