I'm going to leave it up to Andrew (here and here) to discuss the economics of an auto bailout. I have strong feelings on the subject but when you've got an outstanding economic mind like his working on the issue there's no reason to duplicate what's being done. (For the record, I agree with some, but only some of his points).
But there is one aspect of this situation that neither Andrew nor Pete have addressed yet: the failure of anyone involved in the fight for the auto bailout to close the sale, that is, to communicate convincingly why this was a good thing for anyone but the auto companies and their workers. To me, that's why the legislation failed.
Back on September 30, I said the equivalent about the financial services bailout:
From a communications perspective, this has been done about as wrong as is possible. There have been no credible spokespeople, the messages about the plan have been wrong or incomplete, the plan's supporters failed to understand the different audiences that had to be reached, and few people validated the claim that the plan was needed.
A few days after my initial post on the failure of the House to pass the financial services bailout, I noted that the business groups that had been silent the first time around were getting involved and that others from outside the industry with public credibility were starting to call for its adoption and were warning about the dangers of not doing so.
You would think that the auto companies and the UAW would have taken a page from this playbook by not doing all of the talking themselves, by getting others from outside the auto industry to agree the legislation was needed, etc. Instead, they relied on the BIG 3 CEOs, who had low approval and veracity ratings, and the very lame duck Bush administration, which had virtually no influence with congressional Republicans and even less afterwards, to carry the day. Under these circumstances, is anyone really surprised the legislation failed?
And, as I've also said before, the Big 3 were asking for support from people who previously and and in some cases repeatedly decided not to support the companies when they bought vehicles made by foreign manufacturers. They needed to address this question directly -- Why should you support the bailout even if you're not driving a Big 3-made vehicle? -- but didn't.
From a political and communications standpoint, here's what's (still) needed:
- A very convincing explanation of why the bailout is important to anyone besides the auto companies and its workers. For example, how many jobs will be at risk in each state other than Michigan if one or more of these companies goes under? What local businesses will be hurt in each community if this happens.
- Someone besides the Big 3 CEOs, UAW president, and George Bush saying this is needed. This person or people need to have Warren Buffet-like credibility.
- Leaders from other industries getting on the auto bailout bandwagon.
- As commentor "Nathan" said earlier today, some solid statistics provided by a credible source on where the auto industry will go with or without a bailout.
- Something that makes it acceptable for you to support a bailout. The Warren Buffet-like credibile person will help, but someone down the block in your neighborhood would be better. This seems to cry out for social marketing groups on Facebook or other similar social marketing sites.
As I said on September 30, it will be interesting to watch and see if those pushing (in this case) the auto industry bailout start to communicate differently in the next week or so. That may well be the best indication of what's to come.
The problem with the bailout
The problem with the bailout is even if the UAW takes the wage and benefit concessions, it does not address the root of the problem which are the present work rules. Most of Toyota’s success is due to their high performance work system and Lean thinking. Both these are the antithesis of the union environment. To fix Detroit requires the complete elimination of the union and union rules. I was in Poland on a project a year ago. On the way back to the hotel one night, I asked the driver, “Why didn’t Communism work? I have a crew; as good as I have ever worked with; good skills, hard workers, interested, and cooperative. What’s the story?” He shrugged, “They didn’t work like that under Communism. They thought they owned the factory.” Do what you want but Detroit is dead. The Big 3 are dead. As my driver said, ”If they were smart enough to run the factory, you and the Germans(?) would be working for them, not them working for you.” Good Luck.
Root problem isn't the union workers
The root problems are lack of demand (buying) and poor vision on the part of management (the nonunion workers). All car sales (domestic and foreign made) are down.
Management at the big 3 were pinning their fortunes on SUVs. Meanwhile the competition got ahead of them on hybrids and smaller, higher mpg cars that consumers want right now. The union line workers have nothing to do with bad management decisions. They just assemble the cars, they don't design or market the product. The people who perform those functions aren't union employees, and that didn't innoculate them against running the company poorly.
It's easy to point the finger at the unions, but the root causes of the big 3 problems are elsewhere . . . it was politically convenient (and especially for the auto execs) to direct anger at the union . . . anything to keep the public from focusing on the bad management. Ask yourself why was the UAW president sitting at the table with the big 3 CEOs at the hearings? He's not asking for the money, he's not running the company . . . they are. Politics. It was expedient to have him there from a number of perspectives, and one reason was to manipulate perception . . . it was a very clever play to diffuse blame and give Republicans an opening to bounce on the union issue. There was something for both sides in it . . . think about it.
Hello MM, You speak with the
Hello MM, You speak with the clarity and wisdom of a 20 year, St. Paul Ford, bargaining unit employee. I am not saying that management has not made many bad decisions, what I am saying is that the bargaining unit drove many of those decisions. Have you ever seen a Toyota Highlander or Tundra? How about the Honda Pilot or Ridgeline? You don’t consider them SUV’s? It is not about the product mix it is about productivity. Toyota is close to being the largest automotive manufacturer in the world and it is not crying for help. Having worked in union environments for forty years, I can write a thesis on the toxicity of the union-management relations and the horrors that result. Stan or Andy should have their grad students write one. Why do you think GM would rather have its employees sitting in the job bank, at 95% of their pay, than working on the production floor? Why do you think that someone else makes 75% of the parts? I know you, as a loyal UAW member would work fifty or sixty hours a week for 37-½ hours pay. You would work holidays and weekends for comp time off which you never took. That when the XR-3 went down, you were the first to ask “What can I do to help?” During breaks, few as there were, you would study the X bar and R charts to determine the process control limits. You, of course, would never say, “ Its not my f’en job, can’t you see I am reading the f’en master agreement, do I look like a f’en millwright, I’m going on f’en break, I’m filing a GD f’en grievance, get out of my f’en way, who the f’en do you think you are?” I own literally thousands of shares of General Motors stock and I would sacrifice them all to see the UAW destroyed. I would sacrifice the management, the shareholders and bondholders, the suppliers, and customers, all in a second, if that were what it took to get to the UAW. I don’t think you understand the degree of animosity that exists in this country, and its only going to get worse. Btw: GM are crap cars because the UAW, as you say, just assembles them. Hondas and Toyotas are built well because their workers do NOT “just” assemble them.
Nope, I don't work for Ford
but I do drive a Toyota Prius. Those are selling like crazy here.
Too bad the big 3 management didn't have the vision to develop a car like that . . .
MM, you are doing good work. Keep it up. Down with Detroit.
You must have forgot to tell Toyota about the Prius sales. Check out http://www.suntimes.com/business/1332115,toyota-prius-mississippi-plant1... In November, sales of the Prius dropped 48.3 percent in the United States While my automobile fleet is dominated by GM products, since 1999, I have bought nothing but BMW’s (OK, a BMW). Even if Gm had developed a Prius, you wouldn't have bought it, which is good. All of us should do what we can to bankrupt the Devils of Detroit (THE UAW); the first step is to say NO to the bailout. What do you think about the –18 below tonight? Hope you have your Prius in the garage.
All car sales are down
Domestic and foreign alike. Which cars will sell better as the economy improves again?
If GM had developed the Prius I would have purchased it for the mpg characteristic . . . but the fact is GM didn't develop it, didn't have the R&D effort in that area, so it's ridiculous to speculate . . . if GM had developed the Prius they would also be developing great cars along all lines because the entire R&D culture would have been putting out similar quality and design products. It's a silly conjecture, but GM would be a very different company in such a scenario -- one that responds to consumer needs and listens to customers -- if they had developed the Prius. And that would mean they'd be selling a lot more cars and wouldn't be in their present condition.
I've had the Prius two years, not once have I had a problem starting in cold weather -- starts right up. I can't say the same thing about American cars I've owned.
Bankruptcy
It is the suppliers, dealers and unions that want to prevent bankruptcy. Bankruptcy allows the companies to rewrite their contracts so it offers some advantages to GM and Ford.
Cerberus is an investment company looking to make a buck that knows nothing about making or producing cars. Cerberus deserves to fail and Chrysler reorganized.