I have been asked recently by coworkers and friends: what do I think about bailing out the auto industry?
As I heard someone else recently say: they don’t deserve it…but we should do it anyway. There really are two separate issues here. First, do they deserve it? No…they have mismanaged their companies, failed to innovate, failed to even improve their cars, overly invested in legacy equipment and processes, and they have put out too many models (many of them uninspiring). While they were focused on adding seat warmers and other gadgets, their foreign competition was producing better vehicles. Period.
However, some estimates state that the collapse of the industry would cost 2.5 million jobs. A vast array of small businesses that are related to the industry (dealerships, parts makers, other suppliers) would go down with them. Even in Chapter 11, they would likely be unable to attain the loans they need to survive, and few consumers would be willing to take the chance on buying cars from an organization in bankruptcy…fearing their service and warranties could be rendered useless at at any time.
So most agree that loans should be given…and with serious “strings attached.” But what are the specifics?
-Pelosi and the House Democrats indicate that aid is soon to come, that the money (perhaps as much as the $28 billion requested) will come out of the $700 billion already set aside for bailouts. They indicate that there will be stringent requirements, but past saying that the companies will be “restructured” and will have to meet new gas mileage standards…few details have been provided.
-The White House, and most Republican legislators currently stand opposed to the bailing out the Big Three. They claim that “throwing money at the problem” will do nothing to solve it…nor should we try to solve it, because the car companies are to blame for their own downfall through their failure to provide good products. I will reserve comment past saying that this is no different from bailing out their banking friends, WHO ALSO were to blame for their OWN DOWNFALL through bad lending practices. Again, whether or not they “deserve it” is a separate consideration from whether or not “the economy needs it.”
-The United Auto Workers (UWA) has said that they will entertain NO concessions, such as wage and benefit cuts. Ron Gettelfinger, union president said in a press conference, “We’re here not because of what the auto industry has done. We’re here because of what has happened to the economy.” He went on to clarify that the way to solve the industry’s ills is to get the rest of the economy going strong again. Mr. Gettelfinger is clearly mistaken. “What the auto industry has done” is indisputably part of what has led them to this precipice.
I’ve read more than a few columnists’ ideas about how to solve the problem. Unfortunately, most of them say little more than the Democrats: reorganization, followed by lower mileage. Surprisingly, the only detailed plan I have seen…comes in a column on HuffPo written by rocker Neil Young. His proposals appear to be clear and well thought through:
1) Find a new ownership group. It’s time to find some people looking towards the future in terms of technology, process, and design. People not stuck in “Detroit traditional thinking.”
2) Reduce the number of models. Each company should produce only ONE truck, ONE SUV, ONE family sedan, ONE economy sedan, and ONE sports car. This way they can focus on improving one model at a time, without saturating the market with weak lines.
3) Build “Transition Rollers.” Use existing workers and factories to build these vehicles WITHOUT ENGINES. That way, the workforce and legacy equipment can still be put to use.
4) Create “re-power kits.” Another portion of the workforce can be used to create kits to “retrofit” the Transition Rollers with new engines as SCEV’s…that’s Self Charging Electric Vehicles. As Young points out, the tech is already available to make these engines and he provides this link with examples for those with doubts, and he points out that the Progressive Insurance Automotive X prize serves to confirm the feasibility of these engines.
5) Repurpose and re-power. The companies must convert some existing factories to retrofit the new SCEV engines into the Transition Rollers. Now you have it…one of your current model vehicles with a new generation of engine…no need to reinvent the entire wheel at once.
6) Incentives. Tax breaks for consumers that buy the vehicles. I’m not even sure this is necessary. If American car makers put out an SCEV tomorrow…I’d line up to buy one and I think a lot of others would, too, even without the tax break. Even if the vehicles cost considerably more that a traditional gas burning vehicle…I’d still see it as more than worth the investment.
I think Young left one thing out. Loans and new technology are great…but the unions have to play ball, too. Most experts agree that labor costs are causing the auto industry to hemorrhage money to pay high salary and benefit costs…some concessions by UWA and the other unions should be included, or no loans.
New, green vehicles could save the industry within a remarkably short period of time, and while the big three car companies have shown a failure to look forward and innovate, I’ve often said that there is not much that the American scientific community can’t accomplish if properly funded and organized. And there is no reason, with the current oil and economic issues we face, that the “next generation” of American cars can’t be made for the benefit of “this generation.“