The battle lines are being drawn and the factions are jockeying for position.
- The UAW is standing firm that they are not contributing anything more (but the taxpayers should)
- Rick Wagoner, CEO of GM, says they are not even planning for bankruptcy (but recently news has come out that the board is now considering it, if they can’t get the taxpayers to step up)
- Congress wants a plan from the automakers before showing the money (they want to make sure that the auto companies adopt a green agenda and build a lot more cars that they can’t sell at a profit, and palm it off on the taxpayers)
- Some pundits are claiming that 3 million jobs will be lost if we don’t bail them out (but fail to finish the thought and tell us who is going to build the cars that the market demands but GM, Ford, and Chrysler won’t be building if they completely shut down as some predict)
The louder the hue and cry against bankruptcy and the need to empty my wallet, the more confident I feel that bankruptcy is the right thing to do. Without fundamental management change, union change, and structural change, no amount of taxpayer funding and bailout upon bailout, will enable the Big Three to crawl off their death bed and once again be giants of American Industry. Bankruptcy is bitter medicine, but without wrenching change that bankruptcy protection can provide, with a trustee making hard decisions and getting concessions from all sides, this patient on life support will die.
A Sad but True Parody
I came across this excellent joke on Evolving Excellence that was making the rounds a few years ago, but seems sadly relevant today. As I said it is a few years old, so don’t look too closely at the financials:
A Modern Parable.
A Japanese company ( Toyota ) and an American company (Ford Motors) decided to have a canoe race on the Missouri River Both teams practiced long and hard to reach their peak performance before the race.
On the big day, the Japanese won by a mile.
The Americans, very discouraged and depressed, decided to investigate the reason for the crushing defeat. A management team made up of senior management was formed to investigate and recommend appropriate action.
Their conclusion was the Japanese had 8 people rowing and 1 person steering, while the American team had 7 people steering and 2 people rowing.
Feeling a deeper study was in order; American management hired a consulting company and paid them a large amount of money for a second opinion.
They advised, of course, that too many people were steering the boat, while not enough people were rowing.
Not sure of how to utilize that information, but wanting to prevent another loss to the Japanese, the rowing team’s management structure was totally reorganized to 4 steering supervisors, 2 area steering superintendents and 1 assistant superintendent steering manager.
They also implemented a new performance system that would give the 2 people rowing the boat greater incentive to work harder. It was called the ‘Rowing Team Quality First Program,’ with meetings, dinners and free pens for the rowers. There was discussion of getting new paddles, canoes and other equipment, extra vacation days for practices and bonuses. The pension program was trimmed to ‘equal the competition’ and some of the resultant savings were channeled into morale boosting programs and teamwork posters.
The next year the Japanese won by two miles.
Humiliated, the American management laid-off one rower, halted development of a new canoe, sold all the paddles, and canceled all capital investments for new equipment. The money saved was distributed to the Senior Executives as bonuses.
The next year, try as he might, the lone designated rower was unable to even finish the race (having no paddles,) so he was laid off for unacceptable performance, all canoe equipment was sold and the next year’s racing team was out-sourced to India.
Sadly, the End.
Here’s something else to think about: Ford has spent the last thirty years moving all its factories out of the US , claiming they can’t make money paying American wages. TOYOTA has spent the last thirty years building more than a dozen plants inside the US. The last quarter’s results:
TOYOTA makes 4 billion in profits while Ford racked up 9 billion in losses.
Ford folks are still scratching their heads, and collecting bonuses…
IF THIS WEREN’T SO TRUE IT MIGHT BE FUNNY
It will be interesting to see when the auto executives go back to Washington, will they fly in three separate corporate jets? will they “jetpool”? will they fly first class? will they fly coach? or will they drive one of their excellent products to ask for a bailout? How much trunk space do you need to carry $25 billion? Remember that’s 25,000 million.
A Modest Proposal
About every three years when the labor contracts between the unions and the auto companies come up for renewal, a target company, Ford, GM or Chrysler is typically chosen. The purpose is to threaten a strike on that company while allowing UAW members to keep working at the other two (and still pay union dues), rather than striking against all three.
Here’s my proposal. Since GM seems to be in the worst shape, they should go Chapter 11 right away. Let Ford and Chrysler stand back and watch the result. If it works and GM successfully restructures, you can bet Ford and Chrysler will be scrambling to go Chapter 11 to get their houses in order. If it is a bust, then one of three things can happen. One, they can learn what GM did wrong in the process and perhaps craft a better and maybe even “prepackaged” Chapter 11 filing. Two, they can go back to Washington and try again, but at least they would have a stronger case for why bankruptcy is a bad idea. Three, they can wake up and get all the parties together including management, unions, retirees, suppliers, banks, bondholders, local governments, Congress and make the changes voluntarily that would otherwise be made under a bankruptcy.
What do you think?
