Posted by: goalpath | March 31, 2009

Baby Boomers Guide to Fixing the Auto Industry

President Obama – it’s time to take the Wheel

The headlines this week are all about American Automakers being led by the Administration to create more sustainable and profitable business plans before they all go out of business. You might have thought that the auto industry leaders could have cracked the code on how to do this before their companies were faced with extinction. Especially GM’s CEO, who managed his company while it lost 85% of shareholder value, yet he still managed to walk away with a $20M severance package. But the big three automakers have all failed miserably.

So how will President Obama and Congress save the auto industry? First of all, most pundits don’t think the government should be involved in saving the industry. They believe that capitalism without bankruptcy is like religion without hell. They believe it will only encourage bad management in the future. Unfortunately we have come to the point of no return. Granted the automakers have all fostered inept management, top heavy bureaucracy, poor decision making with no forward thinking. And now they are faced with a downward spiraling economy.

So how can the government address the automakers dilemma? There are a number of ideas on how the US could repair the American auto industry. Some experts think that the government should put a flexible federal tax on gasoline so that the price never goes below $4 a gallon. This has been done in other parts of the world and led consumers to purchase only the more fuel efficient cars. Automakers would have to focus on producing more fuel efficient cars, but at least they could plan for the long term. And it could help reduce our dependence on foreign oil.

Some experts say that auto companies are unfunded benefit administrators who also make cars. If the administration were to nationalize health care, American car makers would be free to compete on a more level playing field. Under such a scenario, the government would also need to take over the pension plans in exchange for additional equity in the companies.

Bankruptcy is another alternative being bandied about Detroit and Washington. A legal bankruptcy would be long and messy, but a government sponsored bankruptcy could expedite the process and help the auto makers unload bad assets and unburden Detroit from some of the union workers’ more excessive contract provisions. Don’t get me wrong, the unions have done a lot of good for this country, but some of the auto workers’ contract provisions are excessive.

General Motors, Ford, and Chrysler could mount a technological counterattack, past history not withstanding. More fuel efficient vehicles don’t have to be golf cart sized vehicles that won’t exceed 40mph. There is a fellow by the name of Johnathan Goodwin, who has taken a 5,000 pound Hummer H3 and modified it to accelerate from 0-60 in 5 seconds and get 60 miles to the gallon on bio-diesel. Goodwin’s accomplishments have been the subject of magazine articles and television shows like Pimp my Ride. The Governor of California has commissioned Goodwin to retrofit a Hummer for his own personal ride. Goodwin has had discussions with engineers at GM, but the only result up this point was that GM decided to convert some of the mammoth vehicles to run on ethanol.

Bottom line is that we don’t have to go to electric or hydrogen to get the performance and economy required for Detroit to make a comeback. The technology is there for the taking. I believe it is about time for the folks in Detroit to get their stuff together, unburdened themselves from the old ways of doing business, and started building the cars of the future…today. Yes, the government will have to intervene with bailout money, cut the cost of healthcare programs, and maybe even help the companies through bankruptcy. I am not necessarily in favor of $4 a gallon fuel, but OPEC might provide that stimulus for us in the near future without provocation.

One last point. Mike Rowe, the executive producer of Dirty Jobs, told Fast Company magazine, that he believes the majority of Americans are disconnected from the Americans who still make a lot of our stuff. “Forty years ago it was easy to buy American. Not just because our stuff was better than theirs. We bought American goods because we actually knew the people who were making them. It was a powerful and personal connection that tied us to the products we bought.” I hope in the future that Americans will once again have that connection, whether it is computers, solar panels, automobiles, or whatever goods and services we will need in the future.

Don’t you think it is about time to get American manufacturing moving once again in a positive direction. Tell me what you think. Visit my web site at http://www.Boomer-Insight.com and participate in polls, surveys and discussions on the most pressing issues facing America today.

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