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COMMENT: The Big 3 Go To Washington - Was That the Best They Could Do?

.iTown Staff

Don't get me wrong - I feel the Detroit automakers are justified in seeking help to recover from the calamitous series of events that have them fighting to survive.  But as polls have shown, we feel differently around here than in most other areas of the country, and these guys made it too easy for the politicians to send them back to Detroit on their private jets without so much as a whiff of aid.  Worse, on the heels of their coming home on an empty tank, the government immediately turned around and pledged 20 billion in aid to one company, Citigroup, which is far more to blame for its own difficulties than any of the automakers.  

So what went wrong?

First, Bob Nardelli showed up.  In spite of the case being made that Chrysler is as much in need of help as the other two, it has to be hard for politicians to bail out a private equity firm barely one year after it makes a high-profile investment.  Would Bobby and the boys have been as interested in sharing their windfall if they bought Chrysler, dressed it up, and sold it at a huge profit instead?  No - and that's why there isn't much of a warm spot for this company on Capitol Hill.

Next up - Richard Wa(goner) at GM.  The collective belief had to have been that he should have seen this coming.  As a long-time leader of this company, he should have. Instead, GM was buying and making Hummers, building Suburbans, and paying lip-service to hybrids and more fuel efficient vehicles.  And, what was GM doing supposedly in negotiations with Chrysler to merge just weeks before going to Washington begging for cash to survive?  Does a consumer that can't afford their mortgage payments seek more money to buy a fixer-upper second home up north?

Last, poor Alan Mulally at Ford, who most certainly must know what it is like to be Rod Marinelli in an organization controlled by the Fords.  Unlike Rod M however, he's done a good job.  He came in. assessed the situation at Ford, and took action.  Although still in need of help, they are probably in the best shape.  But he has to regret having to show up in Washington with the other two, because they did nothing to help his cause.

A lot of the criticism leveled at the automakers is unfair.  They could not have forseen the financial crisis that made financing a car impossible for many potential buyers.  With a car as the second biggest investment of most people, the government has decided to help the home lenders recover from the same crisis they have thus far turned a cold shoulder to the automakers on.

The automakers could not have foreseen having to eat billions of dollars of off-lease SUV's that now have little market value, which is again very much like the crisis the government was willing  to help the home-lenders out of. 

They have improved quality.  They have improved fuel efficiency.  They are offering more of the types of cars that people want to buy - IF people could buy them. 

But it sure seems to me the automakers went to the hill expecting a handout.  They did not appear to have a plan for what they would do with the money, or even, as a result of one line of questioning, provide confidence that they wouldn't be back for more.

A domestic auto industry is important.  One can argue it is a national security interest.  But it is not unfair for Congress and the next President to ask for a plan.  To ask how the companies will reorganize; how they will cooperate with each other to develop future technologies; how they will compensate executives; and how labor will cooperate with them.  This last point, for many, will be a tough pill to swallow.  The Not-so-big 3 cannot survive long term without being competitive in the world market.  To do so, labor contracts will need to be re-written.  Labor costs on a per-vehicle basis will have to come down.  In Michigan, our ideas of a middle class will likely be redefined. 

Many won't like it, and it will hit our area hard.

And, Washington will expect auto executives to personally share in the pain.

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