It’s amazing to watch the financial antics in Washington DC and to realize how similar if not identical the plight of the Automakers is to that of the United States of America. The classic slogan of the past seems to ring true today but in ways that would make our grandparents drop their heads in shame: “What’s good for General Motors is good for America!” This was once a slogan of pride in the innovation and industriousness of the “American Way” and of the soundness and independence of our people and our thinking.
Today it’s a recognition of just how far we’ve fallen from our values and how radical the changes that would save both the USA and General Motors. There was a time when people would know what had to happen and let it happen believing that we’ll rise from the ashes and regain our edge. Perhaps that simple faith in “us” and our traditional values is what’s really absent from people today.
So what is it that’s so good for General Motors and the USA that will save us from the fate we arguably deserve and toward which we slide evermore each day? What’s the answer? What’s best for the Automakers and this nation?
Bankruptcy, and a fundamental restructuring that emphasizes fundamentals over greed, identity politics and that recognizes the real threats of the world as it exists today. Consider the similarities in the plights of the United States of America and the hapless Automakers who are begging congress for your money and your children’s future right now as we speak:
Tell the Truth: both the USA and the Auto makers are flat busted broke.
There’s a myth that pervades Washington DC that deficit spending is not a real problem and that the government can ignore it at will. Nothing could be farther from the truth for the Automakers, the Government or your family or mine. It is a law of life that we all have to live within our means. There are limits to borrowing and there are limits to spending and you need an emergency fund for rainy days. Spending is out of control for the automakers and their labor contracts, the pension contracts the dealerships and a host of outmoded sacred cows that have made the industry non competitive with other car companies. Washington DC has spent all the money in the social security trust fund, its bankrupted Medicare, it spends money for the pork barrel projects of members of congress and tax dollars have long been used to buy votes of various “victim” groups. Couple this with the disastrous looting of American Wealth done by the Federal Reserve and you have insanity that’s indistinguishable in stupidity and breadth from the Automakers that Congressmen are busy condemning.
Tell the Truth: Labor costs are making us uncompetitive in the Auto industry while the second highest corporate tax rates are outsourcing all our jobs!
You can’t pay a big three autoworker $80/hour in compensation when one for Toyota gets $35/ hour and produces a better car. You can’t do all the exorbitant pensions and Union goodies that have been added on over the years and expect to stay competitive with a company who has half your labor costs. By the same token you can’t tell American companies that you’re going to tax them at the highest or second highest corporate tax rates in the world and not expect them to outsource their production to more tax friendly locations. Most of the money the government gets is wasted anyway and corporations have a duty to their shareholders to operate in the most efficient way possible so as to maximize shareholder investment. Corporations work for their Shareholders. Government works for the people of the USA. We’re in an age where government thinks that Corporations and the people work for them and that must change or the America we knew is dead.
Tell the Truth: Pension costs and entitlements are killing us and our financial viability long term.
It sure would be nice to live in a world where you work for one company all your life and get this amazing pension that keeps up with inflation and never dries up. That’s not the world we live in or that we ever have lived in and it’s abundantly clear that pension funds not under a person’s individual control will either be looted by the government or eventually defaulted on by a company that can’t support such elaborate structures anymore. Either the Automakers get out of the pension business or they are destined to be destroyed by their inability to sustain them. Either the person retains control or a politician will steal the money to save baby polar bears and produce social justice programs that never solve the problem. Unions can’t solve and should not be involved in pensions, politics, or in half the stuff they have their fingers into. Unions that don’t understand that as the company goes, so goes the union, are like cancer in the workforce: they destroy the company and the workers who they started out trying to protect. The Government is in the same boat because soon the entire federal budget is projected to be spent on entitlements. No military, no roads, nothing except Social Security and Medicare. Something has to change. Someone has to step up. That’s us because you can’t outsource your retirement to a union or a government, and then pretend to be amazed when retirement comes and the money’s gone. If you aren’t saving: you likely won’t retire, even if you’re an autoworker!
Tell the Truth: both the USA and Auto Makers are bound in a tangle of commitments that’s strangling us.
The Automakers have a crazy, costly and cumbersome relationship with dealers and such that are killing them. Did I mention costly? The dealership structure needs to be overhauled and they need standards and practices for the 21’st century. The same could be said of the government who still has substantial military forces all over the world; including Europe, NATO, South Korea, the Middle East and so on, that costs us a fortune. We need a government that is half the present size and that works smarter, not harder, and whose scope of operations has been limited to what is absolutely necessary. All the middlemen, the bureaucrats, the unproductive, obsolete jobs that should have been cut long ago; but for an out of control union or a self perpetuating bureaucrat with political connections, need to go. Unions need to be kicked out of government service and some kind of incentive system must take the place of perpetual 10% increases in spending each year to justify your existence as a department. The deficit teaches both the automakers and Washington the same lesson: Tame your entanglements and bureaucrats or they will destroy you.
Tell the Truth: No one wants to invest in something that may crash the next day.
I’m not going to buy an American Car until they satisfy me on price, performance and longevity, and that they’ll be around to service their warrantees! With what you have to spend on a new car today you better make sure your auto maker is going to last because it’s too much money to just throw away on a bankrupt company. The viability and the good name of the company is critical to a buying decision and if the reputation of the car company is that they go to congress twice a year to stay alive than you can forget me as a customer! If I want to invest in failure and stupidity I’ll by government bonds or AMTRAK stock!
The same holds true for government who’s flooding the world with dollars that will one day soon prove to be our death warrant. We’ve seen what happens when people lose faith in a bank: it fails. When people lose faith in all the dollars we’ve unleashed that we don’t have they lose faith in our currency and that will be a true disaster for the USA and the world. Without massive reform in Washington why will anyone ultimately buy into the ability of our government to manage a financial crisis if it can’t manage the currency?
Both USA and Auto Makers want to borrow in the hope that things will change
Without getting rid of the union contracts, the dealership contracts, the pensions and the insane union: only a fool would invest in the big three American Automakers right now. Money can’t solve what ails them, only truth, guts, restructuring and shooting lots of sacred cows can bring back our auto industry.
Borrowing massive amounts of dollars from China and the Arabs won’t work forever. Someday soon, in fact any day now, they’re going to figure out that we’re not good for all that debt and the party will be over. The currency and the government will fall and we all start over and that’s nature’s way of restructuring something that’s become a menace to its own existence. In the very best case the government is “solving” our problems by destroying the futures of generations of Americans. We should take our own medicine and not rely on our kids, grand kids, great grand kids, and their great grand kids to clean up our mess. They deserve better than that and it’s our duty not to go down that road.
Both the USA and the Auto Makers need a complete break with the insanity of past management and a fundamental restructuring of the social compact: The Real Deal is what we need. We can’t have everything we want. We must always remain competitive. Lean and mean is better than fat and lethargic. Unions that destroy their companies need to be broken up. Government is neither the lender nor the employer of last resort it is today, as is usually the case, the problem and not the solution.
Above all else both the government and the Automakers need to tell the truth, no matter how unpolliticaly correct it is and act on truth instead of ideology. NEITHER THE GOVERNMENT NOR DETROIT CAN RUN AN EFFECTIVE PENSION PLAN. NEITHER THE GOVERNMENT NOR DETROIT CAN BE ALL THINGS TO ALL PEOPLE. NEITHER THE GOVERNMENT NOR DETROIT CAN HIDE FROM THE FACT THAT THEY ARE WASTEFULL, BLOATED, OVERSTAFFED, OVERPAID, INEFFICENT, LACKING IN INTEGRITY, AND HEADING FOR THE DUSTBIN OF HISTORY UNLESS THEY RADICALY DOWNSIZE, AND GET OUT OF THE WAY OF THE PEOPLE.
AND WE THE PEOPLE HAVE TO FACE THE TRUTH THAT GOVERNMENT WON’T SAVE US. THEY SPENT OUR MEDICARE AND SOCIAL SECURITY ON SOCIAL PROGRAMS THAT FAILED. WE MUST HAVE SMALLER GOVERNMENT AND WE NEED TO GET COMFORTABLE MANNAGING OUR OWN RISK BECAUSE THAT’S WHATS GOING TO HAPPEN WEATHER WE LIKE IT OR NOT. BIG GOVERNMENT MEANS BIG CORRUPTION AND THAT SYSTEM ALWAYS CRASHES SOONER OR LATER. IT REALY IS THAT SIMPLE.
Ok, I’m calm now. Do yourself a big favor and read an Op ed in the Wall Street Journal that I found on Drudge today by Mitt Romney. He talks about the Auto workers and the article is great! Here are some clips and the URL:
IF General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won’t go overnight, but its demise will be virtually guaranteed.
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.
Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.
Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.
Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.