Why My Pocketbook Won’t Save the Automakers

Isn’t it fun to be an owner of a bank? As an American I went to bed one night in November just an average worker and woke up the co-owner of not just one financial institution, but several – in addition to holding a hefty percentage of an international insurance company. While the price-tag for these bulk purchases might chafe my own monetary prudishness, I can say that I at least agree with the premise behind them.

Government policies contributed heavily to the economic demise of the financial industry. The current regulatory framework is outdated and skeletal at best. Even the Securities and Exchange Commission publicly admitted that self-regulation of investment banks contributed to the financial collapse. Both the current and past Administrations pressured the mortgage industry, including Fannie Mae and Freddie Mac, to lower lending standards, take on higher risks, and develop exotic loans to allow more Americans to become homeowners. In short, government played a major role in creating the problem, so it should play a major role in fixing it.

Not so with the auto industry. The proposed financial bailout of Detroit’s “Big Three” automakers - General Motors, Chrysler, and Ford – will only postpone what many within the industry have seen as the inevitable. The real problem isn’t that Detroit cars cost too much, or that they are poorly made – the problem is that their leaders opted to continue making SUV’s and Hummers and left the thrift auto market to foreign automakers. When the world was embracing the notion of fuel economy, these companies made the conscious decision to ignore the need for smaller, electric, hybrid, and bio-fuel run vehicles. Sure, they’re on board with these concepts now – but are years behind their foreign competitors. The Big Three chose to continue producing cars that Americans were not looking to buy – a choice made not by the government, and as such, should not be fixed by the government.

So if my pocketbook is forced to bear the brunt of their bad decisions would a bailout of the Big Three really solve the current predicament or merely delay the day of reckoning? Senate Republicans certainly seem believe that the later is true. In the late hours of Thursday night the Senate failed to pass the $14 billion dollar rescue package with Senate Republicans refusing to put up the needed votes. It may seem both heartless and reckless for these conservatives to let over 2 million jobs just disappear, but when one examines the facts of the automaker’s situation, the cautiousness of these leaders makes sense.

To begin, at the Big Three the hourly compensation cost for labor, including benefits and retirees' costs, is $73 per hour, compared with $44 per hour at a Toyota factory in the U.S. If McDonald’s paid all of its employees $20 per hour they too would see a huge decrease in profits and wouldn’t be able to compete with the Taco Bells of this world. The workers within these companies are going to have to face the fact that having a job is better than not having one – and take a pay cut.

Secondly, how can these companies expect to survive beyond the next quarter with no time to introduce greener cars? While it is true that the Big Three have made gradual steps towards more fuel efficient vehicles, they are not the flagships these companies produce. The hybrids and smaller cars made by these automakers are being snubbed by Americans for foreign-made models that are cheaper and better made.

Lastly, this isn’t the first time these companies have asked for a federal bailout check – nor will it be the last. Can we as citizens afford to fix their bad decisions indefinitely? If a business can’t compete, is it not madness to salvage the wreckage? The bailout for the financial industry bought the American people tangible assets in the form of bad mortgages. While poor investments now due to the current state of the market, in the future they will prove profitable. Can the same honestly be said of the auto-rescue? The product they produce is not being bought – not as a result of the financial crisis – but because Americans dislike their product. Without innovative cars that sell what are we as taxpayers buying? Market security? Job security? Or just another month with the Big Three?

Let them fail. We as a country need to make the changes the incoming Administration has been advocating for. It is time we embrace the technology and resources we've had for decades and force the auto manufacturing industry into mainstream thinking. Companies that survive this recession are going to be innovators who run lean and strong, not those whose business-models look to the past for guidance.

 

Comments 1 comment

ccdursina profile image

ccdursina 7 years ago from Spring Green WI

Hi Stephany,

This is a great hub, congratulations. You really put the time on it! I thinks the big shots need to get "DOWN TO EARTH" to see how it's to be bankrupts and might be like this they will put their brain to WORK!

Carolina

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