Carmakers Deserving of a Bailout? Taxpayers and Consumers Take Notice, it's Your Wallet

Implications: There are other mechanisms to achieve where GM, Ford, and Chrysler need to be in terms of technology and product. The loans will be little more than a taxpayer funded bailout. GM, Ford, and Chrylser have not learned from the ample lessons they have had in the past, what assurances are there that they will this time.

Analysis:   As a taxpayer and a veteran of the automotive industry, I will watch our government's reaction to the request of the Big Three with a keen sense of amusement and a little despair. 
   I wouldn't lend money to a relative or neighbor who had a history of spending their money on the wrong things. And I think the U.S. Government must recognize this about the American Big Three. They have a long history of making poor decisions.
    As their competitor's have been working for the last twenty to thirty years to develop truly global products, global manufacturing capabilities, create a sustainable product mix of light trucks, SUV's, sedans and small cars, the Big Three have been feasting like gluttons at the table of high margin SUV's and trucks for the US. market. They have focused on these segments, and had all but abandoned the small car and medium sized sedan market. Not only did they not attempt significant pushes into products for emerging markets and for developed foreign markets, they pretty much seceded the domestic market to Asian and European manufacturers producing in the U.S. That is prescisely why Toyota is Number One, and as of this week Volkswagen has surpassed Ford as Number Three based on the first six months of 2008. The Big Three let their quality standards and engineering innovation slip twenty years ago, and have haphazardly try to re-establish their quality and manufacturing competence. But at the same time, the Asian and European manufacturers were getting even better. And the global product focus had been largely dismissed until about ten years ago. But in typical Big Three fashion, the products delivered to those markets were and are "hit and miss", with mostly miss. And they were relatively OK with this, as long as trucks and SUV's delivered. And they did for many years. But there were signs a dozen years ago, with government concerns of fuel economy standards and emissions, that vehicles and manufacturers product mix would have to change to support the new requirements. But for the Big Three, the profits of the larger vehicles was too enticing to divert resources to smaller, fuel efficient, low emissions vehicles.
    The Big Three have also saddled themselves with a tremendous legacy based on their approach to labor. Rather than changing their approach to labor rates and benefits decades ago, they chose to negotiate lightly with the UAW. While their competitors, with facilities in the U.S. were developing wage and compensation models, benefit structures, and employee engagement cultures that have kept a more moderate approach to wages and benefits, while still insuring that their employees are some of the most well paid in their home communities and also assuring their factory jobs were some of the most sought after in those same communities. This legacy of wages, benefits, and approach to labor will continue to haunt the Big Three for decades to come, and will continue to be a strategic advantage of the foreign automotive companies that now call the U.S. home for an increasingly larger portion of their workforce.
    The Big Three, within the last 10 years, has only just begun to wake up to one of the facts of business life for many of the foreign OEM's, and that is collaboration. The European OEM's have particularly done an outstanding job of collaborating on the development of technology and materials used in the car. This collaboration not only exists among the OEM's, but also the Suppliers. the European OEM's work together on platforms, powertrains, safety technology, electronics, and many other components. GM, Ford, and Chrysler have all had the opportunities to truly exploit this collaboration over the last decade, but have fallen short in capitalizing on these relationships. Just a few examples are GM/Toyota with NUMMI, Chrysler and Mercedes-Benz, and Ford with Mazda and Volvo. So much potential to realize in shared development and design, and so little exploited. If these alliances had been properly nurtured and developed, then the Big Three would have minimal concern at this point in meeting emissions and fuel efficiency standards, and their capital expenditures would have been less.
    Also, the Big Three are not moving fast enough and deep enough. They are still holding onto the potential of significant volumes for light trucks and SUV's in the future. But in my opinion, the recent reaction of consumers to fuel prices, the housing market, increasing environmental awareness, and concerns of dependence on imported oil, signals a significant change in purchasing behavior for vehicles. But, even as outlined in this article, G.M. is still hanging on to the hope. Let go already, and right size the company and the product mix.
    The trump card that the Big Three have is nationalism. They will play upon the pride of an industry that has been an iconic part of American culture. But the reality is now that more Americans, at the OEM and Tier One level, draw a paycheck, send their kids to college, and buy their houses from funds drawn from Toyota, Honda, Nissan, BMW, Mercedes, Volkswagen, Kia, Hyundai employers at the factory, financial services, dealer sales and service, logistics, and service parts vocations. 
    As a taxpayer, a believer in a global market place, and corporate responsibility for corporate actions, I truly hope the U.S. government doesn't bailout these three drunken sailors.