Friday, December 12, 2008

Auto bailout fails: the blind leading the blind

Quick note: I'm still feeling like the precise opposite of a shiny, happy person. To those of you who've shared thoughts with me in Twitter and Facebook, thank you for your kindness. Our community has had a very difficult week, and it likely won't improve anytime soon. In the meantime, I've posted a politically charged rant - rare for me, I know - because, well, just because. We'll return to more typical Written Inc. fare over the weekend. For now, Thematic Photographic and Caption This continue to welome new participants.
I probably shouldn't be writing this today, as I'm already being followed around by ominously dark clouds, and this won't help my mood. But I can't let the latest auto industry boondoggle pass into history without at least saying my peace.

First, everyone's spilling a lot of ink over the U.S. Senate's refusal to back a congressional bailout package for the Big 3 American automakers, so I'll spare you the gory details over how we came to be here.

But when hundreds of thousands of direct and indirect jobs - and lives - hang in the balance, it's a discussion that has to happen. Here's how I see it - and as always, it's a multifaceted, likely overly idealistic perspective, so please buckle up:

1. It's the automakers' own damn fault

The U.S. automakers have no one to blame but themselves for their current predicament. For generations, they've produced products that have chased their bottom line instead of that of the customer. They've allowed bean counting management practices to fritter away customer loyalty and market share. All the while, they've arrogantly ignored impending, inevitable global economic shifts while they milked outdated business models for all they were worth.

To wit, they sold every last SUV they could in the 90s because consumers wanted them. Fair enough - any profit-seeking company would and should do the same thing. But at the same time, they fought tooth and nail against tightened federal fuel economy and environmental standards and failed to invest sufficiently in follow-on technologies that would have cushioned them when the end of cheap oil arrived.

Or to use a really lousy analogy: Little foreign ants had foresight and prepared for the inevitable change of season. Big domestic grasshoppers didn't. Their tough.

2. The unions share the blame, too

Once upon a time, unions served an important purpose in securing the rights of workers who would otherwise have been oppressed by capitalism-at-all-cost business owners. Those times are now over. The world has changed. Radically. Union compensation and benefits are totally out of whack with the value provided by the workers, and the economy can no longer sustain it.

The sense of entitlement that pervades today's unions is either laughably blind or pathetically sad - take your pick - but one thing's for sure: the concept of a middle-class or upper-middle-class lifestyle on a barely-high-school education is dead.

As we stand witness to this turning point in U.S. automotive history, I can't help but think that someone watching the dinosaur-era comet heading for the planet must have been thinking the same thing: change is gonna come, nothing's going to be the same when all the dust settles, and the dinosaurs who currently roam the earth will be nowhere to be seen. If the current crisis facing the industry is what it takes to finally bust the unions and force a little reality back into the industry, then so be it.

3. It's about ROI, stupid

If taxpayers are going to be on the hook for any bailout - financial services, automotive industry, small-animal-stuffing, choose your fave - then they should at least have the right to enter into the agreement with the same promise of potential afforded any business investor.

They have a right to ask whether this business is a viable investment, whether the business model will be flexible enough to accommodate tomorrow's needs. They have a right to shy away from investing in something that may die out regardless because it represents a model that no longer works. They have a right to ensure their investment is optimized, and that they stand a reasonable return. They have a right to veto anything that remotely smells like a blank check to continue operations as they've always been run.

Please park this old model vs. new model idea off to the side for a sec. We'll get back to it soon. Promise.

4. It's tempting to say, "Told ya so."

Many of us feel the automotive industry should rise and fall on its own merits. I'm one of them. Why should I be forced to fork over my hard-earned tax dollars to rescue a company that has repeatedly screwed itself into near-oblivion? Where's my bailout? Who's going to help me and my little company when I lose market share and run out of operating capital. Ooh, that's right: nobody. And worse, my pockets will be emptier thanks to this government sanctioned charity.

So, yes, I'd like to tell them to stuff it. But...

5. Any hard landing would really hurt

With that in mind, it's easy to smarmily wish them good riddance. But to do so without having some kind of strategy in place to soften the blow and set the stage for some sort of future-focused transition will cause untold misery across the economy - and by extension, in living rooms across the continent. You don't have to be an automotive employee to appreciate this, as the cascading effect of a sudden collapse would take down businesses, individuals and communities seemingly distant from any assembly plant.

6. So let's get back to that old model vs. new model thing:
  1. We can't afford to invest in the old model. It's like paying to repair an old clunker that will never be reliable. It needs to be pitched, and soon.
  2. At the same time, we can't afford to have nothing to drive. We need to get the new model off the ground as soon as possible. We need to shoot for a target state that leads and does not follow - i.e. don't build another Prius. Leapfrog it. And if you dare build another V8-powered Ford Explorer for the suburbanite set, I'm coming after you with pitchforks and chains.
Instead of investing untold billions in sustaining the same old, invest those same billions - or even more (heck, if financial services can balloon its payout from $700 billion to a trillion with nary a peep, why are we quibbling over $14 billion? What's a billion here or a billion there? But I digress) in radically new technology that changes the underlying basis of North America's mobility industry.

Allocate a portion of the assistance to keep the Big 2.8 afloat until such time that the market is ready to transition to new said technologies. Pull any assistance if any of them ever dares to defy government regulation to encourage cleaner, more advanced mobility technologies. Make them change. Really change. And pull the plug if they don't.

(I know GM's got its Volt project and Ford's going great guns with hybrids. These are great starts. But to really succeed, solutions like this must be mainstreamed - yes, I turned it into a verb - quickly, and they need to be supported by an R&D community that's free to create and push to production completely out-there technologies that make even a Volt look obsolete.)

This transition-the-industry-based approach - which differs from the write-a-big-check-with-no-strings approach - avoids the hard landing and prepares a little better for the future. Oh, and it opens the door to busting the unions in the process. Because they suck, and any player that isn't fully bought into radical change for a better tomorrow has no place in the game any more.

Oh, and if anyone up on either hill - Capitol in Washington or Parliament in Ottawa - is reading this (yeah, right...but I can always dream), please remember this: You were elected to lead. So please lead.

Your turn: Thoughts?


mo.stoneskin said...

I don't have many thoughts, but I think you're right, it is the automaker's fault. Plus cheap competition I guess from Japan and such like.

Anonymous said...

There isn't really much to say, because I personally don't know what's going on. I agree to some extent, but I still value your opinion. Very well stated. Grrrrrrrrrreat blog!!!
When was the last time you looked at government grants? With the bailout, there is more money than ever. Don't miss out.

My Grant Blog

awareness said...

I am in 100% agreement with you Carmi. Well stated.

And believe it or not, the approach and practice you are promoting here is the same philosophy implemented in my line of work. You don't fork out a cheque and walk away. It doesn't help anyone. It doesn't work and it's a waste of taxpayer's dollars and everyone's time and energy. It's all about supporting the transitioning with the right level of intervention (a whole lot at the beginning and then ease off when the changes are being implemented......) It's all based on promoting self-sufficiency. Why it works is that it promotes a respectful partnership on a level playing field, and not some parent/child partnership where someone is responsible and another can just remain dependent.

Ah, the psychology of both people and industry.... :)

Lucy Filet said...

Yeah, I'm with everybody else. I think it's their fault because they fought against any change. It still sucks for the little guy though, but big corporate will still be doing just fine. That's where the problem comes in.

bobbie said...

Amen to all you said. I don't see any of the three biggest individuals putting any of their millions back into the business either. I'd just like to smack their smirking faces.

But you are even more right (if that is possible) about the unions. They have outlived their time in many ways, and their continued demands for more, more, more are counter-productive. I am now retired, but worked for local government. I watched the police department make ridiculous demands each year, and receive it without question. The police ALWAYS got what the asked. No one appreciates what policemen do for us more than I do, but their demands are outrageous. I'm sure that other unions are doing the same thing. There is a vast difference between what workers want and what they really need. In many cases, the benefits achieved by unions are won at the expense of thousands of non-union workers. If the autoworkers had given a little, it could have meant a lot. - And if the top brass had given up some of theirs, the union might have been more reasonable.

Sorry. I'll get off the soap box now.

Dianne - Bunny Trails said...

Very well said, Carmi. Sadly, there are a lot of us common folk who get it, but not those who will make the decisions.

A friend of mine is quite angry because she doesn't want to be forced, as a taxpayer, to subsidize companies whom she will not and does not do business. Goes right along with your ROI point.

Nice way you slipped in the word "smarmily." That one put a big grin on my face. :D

Michael K. Althouse said...

What you said... All of it.

PillowNaut said...

Artfully put, bravo. This is the emotion that has been swirling about in my brain, and it's as if you finally put it to music with the proper beat. Give a man a fish, or teach a man to fish, I'm watching closely to see the message the government sends on this one...

Anonymous said...

Amen. And don't forget, elected to serve, not to become my slave master.

Anonymous said...

And also, for the unions. Let's see the choice is take a $7/hour cut or look for a $7 an hour job. Hmmm. Really tough one there!