Sunday, November 16, 2008

The Auto industry bailout. Just say NO!

Ford had been dying a painful death for years now. It's time to firesale the assets of the company and let the name, the brand, and everything associated with Ford either die off or be sacrificed to people who want to buy a name brand.

Parts will be needed for years to come, but like any obsolete vehicle, they will die off and adapt to other automakers needs.

As for Ford assets, the ones they haven't completely messed up with their Anti-midas touch, can be sold off. Land Rover still has a strong name, even if Ford turned them into crap trucks with their mix and match brand overtake. Volvo also was a once glimmering company that may be salvagable.

Chrysler should part ways with Daimler and firesale the majority of their car making operations. Some brands, such as Jeep, may still be salvagable. I don't think it should be up to the government to ressurrect these companies, but for the free market to let them fail and pick up the pieces.

As for GM and Chrysler. GM has the best chance. If they can weather the storm and make a comeback with their Chevy Volt, then they might have a chance in the future.

What North American governments can do.

Let the companies know, that gradually gasoline prices will be raised, through taxes, to double or triple what they are now. The revenues will be used to offer incentives for fuel efficient vehicles.
The government should also make deals with VW, Toyota, Honda, Hyundai, and any other successful automaker to ressurrect what they can of the flailing auto sector. The sell off shouldn't be held off as long as possible, but rather used as an opportunity to gradually have America's failed auto industry be taken over by companies who build better cars.

I'm not bothered if 100,000 manufacturing jobs with GM, Ford, and Chrysler are lost in the next five years if 95,000 jobs are created through more sustainable car companies. The pride associated with the American auto sector has been their downfall. They've focused on survival while other companies focused on market needs and quality.

Toyota, Honda, Nissan, and other companies have been hit by the economic downturn, but they're not bleeding red ink like a severed elephant artery.

Bailing out the North American auto industry with huge cash injections is the wrong long term decision. It is a quick fix and does not solve the underlying problem that they don't make very good cars and can't adapt to changing markets.

GM, rather than slim down and focus on selling fewer cars at better margins, tried too hard to out pace Japanese automaker Toyota. It's the marathon runners big mistake, trying to keep ahead of the leader when you're just an average runner. You burn out your reserves and end up crashing badly.
In GM's case, instead of making just enough cars really well, they made too many cars too poorly and slashed prices into losing territory to make up for the difference.
Ford, more than Chrysler and GM, simply got too big and couldn't adapt to the increased competition making better and better cars.

It's a downward spiral that the banking and economic crisis should serve as a chance to cut and run. Put the broken horse out of its misery with a bullet and cremate the remains. Meanwhile, create a pleasant economic climate for the resurrection of the auto industry. Something better will emerge.

1 comment:

media boy said...

In the case of the auto-makers' bailout, it's a relief to have a national issue that is so straightforward: American cars tend to break down and fall apart therefore people have stopped buying them. If GM and Ford don't want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.