The big news this week is the potential government bail-out of the "Big Three" Detroit car manufacturers (General Motors, Ford, Chrysler). In complete opposition to my blog mantra, I don't think I take a very moderate viewpoint towards this entire debacle. I disagreed with the $700 billion bail-out dealt out for the sinking financial markets, but I will also admit that my understanding of the situation doesn't warrant me adding my voice to the din. When it comes to the Detroit automakers, I can understand the situation from living in Michigan for a long time and from the fact that understanding the financial mumbo-jumbo with AIG, Fannie Mae, Freddie Mac, etc. is impossible for the layman.
At the most basic level, the "Big Three" do not deserve a bail-out of any form. These companies having been hemorrhaging money for years and have clearly lost their ability to innovate at a competitive pace. For the past decade, these automakers have fattened themselves on truck sales while barely paying lip service to the market for fuel-efficient vehicles. For every published success of a Detroit car company, they gloated. Whenever Toyota or Honda was mentioned in a positive story, they patted themselves on the back and tried to figure out how to do it better.
I honestly doubt that a bail-out of the "Big Three" will ignite innovation or even save them from bankruptcy. In fact, if the government decides to prop-up these industrial dinosaurs, they will be stifling innovation from competitors like Toyota, Honda or even Tesla Motors. Today, many of the airlines that declared bankruptcy in the post-9/11 airline bloodletting are in better shape than they were before. Perhaps the same will happen for the "Big Three," if not, I won't shed a tear for the companies.
However, the real danger from letting these companies hit rock bottom is the effect on the massive supply infrastructure. If the "Big Three" bottom-out, then auto parts suppliers, machining shops, dealerships, mechanics, employees and pensioners will suffer. This chain of companies and people that rely on the success of the "Big Three" are not the ones responsible for a sagging industry. A government bail-out should protect the chain while the car manufacturers stumble, not the other way around.
Amidst all the noise generated over the Detroit automakers, we can easily lose sight of the fact that this economic downturn does not merely damage U.S. companies, but foreign brands as well. Toyota employs over 36,000 people in 13 facilities in the U.S. and Honda employs more than 25,000 people across 25 facilities. The recession within the automotive industry is not limited to the "Big Three," they are just being hit harder because the management has lost the ability to run a business. If Toyota or Honda fell on hard times, I somehow doubt they would get the attention that GM, Ford and Chrysler are getting.
What upsets me the most about this situation is that these stagnant car companies are going to get their money. A truly epic political lobby is fighting for the bail-out and anyone with a sane perspective can't get a word in. Governor Granholm, the United Auto Workers union and nearly every major representative of Michigan in Washington, D.C. lobbies heavily in favor of "Big Three" bailouts and limp fuel mileage restrictions. I really like Senator Carl Levin when it comes to foreign affairs and matters of state, but I wish he would shut-up when it comes to dealing with the "Big Three." Former Republican Presidential candidate Mitt Romney came into Michigan during the nomination campaign and spouted lofty rhetoric pandering to the auto companies and workers. John McCain came to Michigan and offered some of his "straight-talk" (back when he was still "straight-talking") and lost the Michigan primary by a mile. I think President-elect Obama made a mistake in inviting Governor Granholm to his provisional economic committee and he would make a huge mistake in giving her a cabinet position. In my eyes, she has done very little to improve the economy in Michigan and holds no credibility whatsoever in economic matters.
The Detroit car manufacturers and their lobby are well overdue for a rude awakening.
A few months ago, I visited the Ford Rouge plant in Detroit. The facility is really amazing. Ford has gone to great lengths to create an eco-friendly building, and, hopefully, it becomes a model for all future industrial sites. Then the great ironic tragedy of Ford appears. The Rouge plant is used to make the popular, gas-guzzling F-150 pick-up truck. Even worse, the facility was shutdown (it was not the weekend) and the tour guides said that the shutdown was on indefinite terms.
If the bail-out is inevitable, then what can be done to strong-arm the "Big Three" to innovate? Three things: strict gas mileage restrictions, purge the management and protect the aforementioned chain. Again, I want to reiterate that American-flavored innovation has rarely been done through governmental strong-arm tactics. Great American innovators like Henry Ford, Orville and Wilbur Wright, and Thomas Edison created new ideas and things without governmental interference. What would Henry Ford say if he were still around today? Hopefully, he would tell his descendant to sell the Lions to an owner that actually cared about the franchise.
For those of you seeking another, parallel perspective: Thomas Friedman to the rescue!!!
With all this silly talk of bailing out sinking motor vehicle companies, I felt the need for a more uplifting message to close this out.
In the face of all this doom and gloom, remember that happiness is just one Yakety Sax video away.
