Thursday, December 11, 2008

Bailout blues

What the auto industry bailout lacks that it rescues not people or jobs, but stupid business plans. With my money. And so far they are a disaster. The auto industry is ready to take big subsidies to keep on building cars whose basic principle of design (and gas mileage) haven't changed substantially since the 50's.

The problem with both bailouts is they short-circuit the "creative destruction" inherent in capitalism. Usually when well-off CEO's invoke creative destruction, they mean people losing their jobs is good. I think people whose business plans got us here should enjoy a little of the old creative destruction, while protecting working people.

So here's an alternate plan:

1. GM has been described as a health care company that happens to make cars, ~$6B/yr for 1.1 million people, less than half of whom are current employees. The big 3 have substantial liabilities in health care and retirement, which the government should assume and guarantee to assure that peoples' *existing* benefits are not compromised by what is to come.

2. A "job bailout" should be instituted that extends substantial relocation and pay extension to jobless workers. 100% benefits for some number of years capped at $100K/yr.

3. The remaining parts of the company should be sold off at a substantial discount to someone who will present a credible plan to make cars. Maybe not as many cars, but probably not the stupid gas guzzlers they've been making since the Glen Miller era.

Would Tesla motors present a plan to build a million electric family sedans per year in three years with part of the infrastructure, labor and capital freed up? Who knows? I'd like to find out. It boils my blood that the auto industry CEO's have their hands out for welfare for *them* to build more crap.

1 comment:

Anonymous said...

agreed. when a major company makes low quality material to sell, it starts to see dropping profit. GM never fixed this. they made their products gimmicky and relied on advertising but never improved quality. that is how companies fail. we should not support a company that makes bad cars. they'll just continue.

now selling a few major plants (worker systems intact) to a company like Tesla might be a solution. the issue with Tesla is that they are so small and have very little to bring to the table other than what seems to be a dependable power cell storage system. will it be enough to sell family sedans in a country hell bent on road tripping (especially with the declining economy and the price of flights) and commuting? or rather, will they sell enough in the US to be able to pay for their new plants and new workers? i don't want to make the workers dependent on an unverifiable company.

i say we take their bailout and hand it to the workers earning less than $100K/yr in the form of a severance package of for up to 3 years. they can only collect if they are not getting paid by GM. they must be off the payroll.

this does a few things. 1. it makes sure that the money does not get put into a sinking ship. GM is going down and rightly so. CEOs should not be getting paid if a company is dying. 2. it doesn't place the worker burden on any other companies. if Tesla wants into the American Market as a family sedan company they need to earn their way in. that's the only way to verify that we won't have a repeat. it also won't crush Tesla by putting them (wholesale) into an unknown market 3. it forces the higher earning people to either ride GM down or move and go find jobs elsewhere. we'll be cutting the flailing company off at the knees while still supporting the lower level workers. 4. it will subsidize the workers who will have more difficulty finding new jobs. people over $100K/yr will most likely have college education. ie. Engineers and Designers and Business managers. They won't need help paying their mortgage like the little guy will. the housing crisis shouldn't be allowed to get worse. waves of foreclosures will do that to a country.

in conclusion i think GM is a company that should be allowed to fail... just like all other companies that suck. workers that decide to stay with a crappy company need to understand that they may not have jobs down the road. we must encourage them to leave and give them the support to do so. we won't help the higher up's which will also encourage them to leave. this whole problem came from a huge amount of people relying on corrupt and failing systems. we can't just throw some duck tape on them. we also can't build a new one on the ruins of the old.

we need to build a robust system on a new foundation and with better material. GM should be allowed to fail.