Southern Boy Sense vs. Automotive Industry and Congress

As most of you know by now, the United States House and Senate are working on some kind of bailout plan for the "Big 3" (GM, Chrysler, Ford) in the US automotive industry. Here we go again, our representatives are getting ready to give more of our money away and, I'm sure, trying to figure out how to line their pockets in the process. The CEO's of the "Big 3" have been in Washington DC all week basically begging for money to keep their businesses afloat. From what I understand, the cost per hour for the "Big 3" is over $70.00. For companies like Toyota, Honda, BMW, Mercedes, and Kia, all of which manufacture cars in the US, the cost per hour is a little over $40.00 and none of these manufacturers are looking for a bailout. Holy Cow!! No wonder the "Big 3" are in trouble. Why in world are the "Big 3's" costs so high? Did I hear someone say UNIONS!! Did I hear someone also say poor upper management with poor negotiating skills!! I'm not going to put myself in a negative place. I'm blogging here tonight because I have a Southern Boy Sense solution to this problem.

The basic problem is that the "Big 3's" cannot sell enough cars at a high enough price to cover their high production costs and make a profit, especially in a competitive and soft market. If this were any company that I work with in my business, the company would file for bankruptcy protection and reorganize. This is exactly what I think the "Big 3" should do. Once they file for bankruptcy protection they should segment their manufacturing plants by product (by car being manufactured). At this point they need to decide what cars they want to keep under the company umbrella. The segments that don't make the cut should be sold. I believe the plants would be sold to investment groups or entreprenuers that would use their enthusiasm, drive, spirit, and innovation to create new companies that would produce cars attractive to the market. It would also reduce the size of the "Big 3" to a more manageable level. Under the protection of bankruptcy, the "Big 3" would be able to renegotiate their contracts with the unions and hopefully do away with them. The segments that were sold would hopefully have ownership that is smart enough to keep the unions out. What about cars that are currently under warranty for the segments that are sold off? These warranty's could be negotiated into the sales price of the segment where the segment purchaser picks up the warranty or some portion of the warranty. For the segments that are sold, the "Big 3" would have to keep and sell the cars currently on the dealerships lots or this could also be negotiated in the segment sales price. The warranty's and the inventories are tangible assets that can be handled in negotiations. The retired worker pensions are another issue. The government should not pick these pensions up. This is a market matter that the government should stay out of. The "Big 3" will have to negotiate here to cover some percentage of what they were originally responsible for. The unions may be able to pick up some percentage also. These are difficult times that have been decades in the making. We will all be hurt in some fashion, but to maintain as many jobs as possible and to keep some part of the "Big 3" operational, competitive and profitable to be able to contribute something to their retired workers pensions and remain viable businesses difficult decisions will have to be made.

The plan summarized above would revolutionize the US automotive industry. New, smaller, more innovative car companies would be created. New companies would be established to fill needs required for the cars that are currently on the road or on sales lots. The important point in this is that government needs to stay out of it and let the market take care of itself. In the end the US automotive industry will be stronger, jobs will have been created, small businesses will have been created. Oh my gosh!! The American dream would be realized.

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OOO-Rah!!!



Southern Boy Sense