Should We Save the Big 3?

Letting Detroit go might be a DLE (Depression Level Event); but sustaining this broken business model is a solution to what? And if it is not broken, then please tell me why this industry has been losing so much money for so long, and why bailing it / them out will solve forever the cancer infecting our automotive industry. The Japanese and Koreans manufacturing here have done just fine.

They are not unionized, and have done inspired things like set up charter schools for the children of automotive workers and have made their employees more partners than adversaries. "Detroit" has had plenty of time to fix their problems and more than enough advanced warning that business could not continue as usual. So where are "they" in this predicament? Pan-handling on the Hill? How ennobling.

Is it possible that the auto makers and their UAW "remoras" are living in the twilight of the 20th century? That Daimler Benz's investment in Chrysler turned out to be a disaster, and that they "...essentially paid Cerberus a few billion dollars (by agreeing to retain pension liabilities) to take Chrysler off its hands in 2007."* was an ominous sign. Permit me this digression: At first John D. Rockefeller sold his "snake oil" as an alternative to "whale oil" for lighting lamps.

The invention of the incandescent light bulb all but shattered his business model; that is, until the fortuitous invention of the internal combustion engine. Times had changed. Rockefeller was quick to see the potential of the automotive industry. He survived and prospered because he saw things changing and adapted. So why cannot we expect this kind of vision, resourcefulness and capacity to improvise from our "captains" of the auto industry?

One reason is that they are beholden to their UAW masters; the other is because these so-called "captains" are 5th generation, or "hired hands" at best. They are more custodians than innovators and cosseted as they are with boardroom perks and lavish compensation packages are not obsessed with succeeding in this "brave new world", as well they should be. In fact they are utterly compromised by executive "perks", stock options, golden parachutes, poisoned pills, country club privileges and their "Faustian" concessions to the UAW.

I read an interesting quotation from an auto industry insider recently that went something like this, though I am paraphrasing: "Ever since the introduction of the first Japanese car to the USA we have been trying to figure out what the Japanese are doing right and what we are doing wrong....and we are still trying to work that out." Well I would say 35 years is enough. If Detroit doesn't get it now "they" never will; at least not in "their" current state. Bailing the Big 3 out is buying time.

It is postponing the inevitable; "throwing good money after bad." in the parlance of our day. If oil sinks back below $25 a barrel (fat chance) then you just know Detroit will simply gear back up again and start selling $8 a gallon monstrosities, largely because that is what the average American Neanderthal wants to buy. These are the same "Homers" that smoke, eat nothing but crap, never exercise and would never think of going for an annual physical, but ask if it's too late to mend their ways as they're being read the "Last Rites".

Mayor Bloomberg took the lead in prohibiting the use of trans fats in restaurants in NYC because he could see that we are facing an obesity epidemic in this country; someone saw the wisdom of confronting entrenched interests and exiling smokers to the streets, since it is now incontrovertible that second hand smoke causes cancer. If Detroit wants to maintain its place as the secular shrine of the American automobile, "they" should submit to the following: either "toss" the mongo-fuel inefficient vehicles, make 60 mpg cars, make union workers shareholders / partners and cut costs massively or face punitive taxes- and no bailout.

Take it, or leave it. Tough love. This is not compassionate, but this is capitalism. Call it "economic Darwinism". So if you want "the state" involved, be prepared for draconian measures. And if you are a consumer that just cannot part with your 15 mpg HUMV; go for it! To the tune of $25,000 a year in luxury tax or more. I would like to think that some of the "facts" I have read about the UAW and the Big 3 are apocryphal, but I fear they are just that- facts. Can it be true that UAW workers enjoy health benefits that require no co-pay and have no deductibles?

Wow. That is a "perk" many if not most Americans would love to have. I recall reading something about other "benefits" that UAW workers enjoy, that seem so inconsistent with economic reality I am flabbergasted there is even a debate over the causes of the current plight of the auto makers. Is it true that certain UAW workers are actually paid NOT to work? Please. Anyone! Tell me this isn't so!!! Remember the recent labor action by the stagehands in NYC?

This happened about 6 - 12 months ago. I confess to being naive. Is it true that, even though a theater company may only need 23 stage hands to do the work, the union can dictate that- whether you need them or not, you are getting 28; even if the extra 5 "guys" just sit around talking, drinking coffee and taking cigarette breaks? Gee. That seems like a great business model. Sort of reminds me of Al Capone or the film "On the Waterfront".

It's a fair bet that every card carrying member of the UAW was against any kind of a "bailout" of "Wall Street", an industry in dire need of reform, but one that has been vastly more productive than "Detroit" has been these past 25 years. As an inflammatory footnote, I leave you with this: could it be possible that the problems Detroit is confronting have something in common with those we face in our national public school system? (hint: unions) Or is that yet another elephant in the room?

*"Just Say No to Detroit", David Yermack, Wall Street Journal