Several people have asked me my thoughts on the potential government (meaning taxpayer) bailout of Big Three auto. While I don't claim to be an expert on businesses of this scale (I focus on early stage, growth companies), I do have some strong feelings on this topic.
How do I feel about the proposed bailout? I'm pissed off about it, actually. I'm pissed off that these dopey, mismanaged companies have driven themselves to the point where they need to beg for taxpayer money to survive. It's embarrassing for America. And here are the four major groups of people that I'm most pissed/disappointed with:
- The union leaders: For their short-sighted view of the world and competition. Over the years, their cumulative demands have created a cost structure that have made it very difficult for our companies to compete on the world stage. Cutting off your nose to spite your face and all that.
- The American government: For creating the concept of "too big to fail." Too big to fail?!?! As someone who supports and believes in the competitive advantage this country has developed via its entrepreneurial energy and enterprises, I find the idea of "too big to fail" to be insulting and just plain ridiculous. Too big to succeed is more like it. Too big, too slow, too arrogant, too rich...Shame on Congress for bowing to the silly lobbies of these major, "too big to fail" corporations for as many years as they have. This has created an environment which allowed these companies to get fat, lazy and stupid. Why? Because they could. After all, they're "too big to fail"!! Come on...
The American public: For driving the "Buy American" movement. This point is a bit difficult for me because I was a supporter of this movement for years. I drove Fords/Lincolns for a long time -- even through I was constantly in the shop and knew that the Japanese cars were better and more reliable. Last year, I woke up and bought a Honda (a brand which I now LOVE). I realized that I was doing myself a disservice by sticking with the "Buy American" club. I also realized that I was doing the country a disservice. If consumers support a brand just because they are Made in America, regardless of quality and value, then, like Congress, they create an environment which allow these companies to get fat, lazy and just plain mediocre.
- Big 3 Management: More than anyone, I blame the management of the Big Three for being short-sighted, stubborn, change-resistant, and downright lazy. My god -- it takes 5-years for one of these companies to develop a car. 5-years?!?! Give me a break. They fought for years to bury the electric car and/or alternative fuel vehicles to further promote their higher margin, gas guzzling SUVs. They buried themselves in debt, allowed the unions to strengthen, vastly overbuilt their dealer networks, and have consistently lagged foreign car makers in quality and innovation. In my mind, the mismanagement of these domestic car companies is inexcusable. These management teams teams lack vision, leadership and, most importantly, the fire to win. If anyone deserve to fail, its these guys. I've been pleased with the grilling they've received in Congress. They deserve every bit of it and more (actually seeing the executives in Congress reminded me of the Seven
Dwarfs from the Tobacco companies in the 90's).
I'm pissed that the we have to even consider using a significant chunk of the $700B bailout fund, not to secure home prices and keep Americans in their homes or to loosen up the credit markets (as promised), but to bailout these broken businesses.
But what pisses me off the most is --- that we have to do it. Yes, we have to do something to bail out the Big Three. At any other time, I would say let them burn and get what they deserve. However, it's clear that we have to use taxpayer money to solve this issue in the short term. There are just too may Americans who depend on these companies. With everything else going on right now, I don't think the country could handle another major blow. So, let's do it. Let's throw them a bone and avoid a major disaster. With that said, I want to see a plan for the taxpayer money which provides a return and ensures that the management of these companies doesn't see a DIME unless they successfully deliver this return to shareholders (taxpayers).
While I don't have any concrete suggestions for the structure of this bailout, I can't help but agree with my man, Jack who suggests that the government support the bankruptcy and merger of GM and Chrysler and backs all consumer warranties during the restructuring to help give consumers the security they need to continue to buy these mediocre cars.
Ugh...this one is a mess. One that has been years in the making.
DS
