The latest news is a buzz about the ‘Big 3′ (GM, Ford & Chrysler) wanting a government bail-out similar to what the banks recently received. Since my husband is currently a Chrysler employee, and my father retired from Chrysler – this issue obviously resonates with me and my family. It’s near and dear to our hearts – and our livelihood. I want to share mine and my husband’s thoughts on this, but first…
GM recently released a video on the need for a bail-out. Here is that video:
While I believe that the majority of this video to be fact, in regard to their numbers quoted and the overall impact the Big 3 would have on the economy, if they should all fail: I do not agree that they will all fail, nor that the government should give them a bail-out.
From the time I was two years old on, my dad worked at Chrysler. I’ve witnessed the ups and downs in the auto industry. Thankfully my dad had enough seniority to never experience a lay-off, but many of my dad’s friends were not so fortunate. Some were laid off for three years, before they were finally called back to work.
Chicken Little Syndrome
I believe that while GM’s video was compelling, I think it’s a bit presumptuous and premature to say that all three of the big automakers will fail next year. They are implying that without a bail-out, all of them would fold at essentially the same time (in 2009). I seriously doubt that would happen; and Chapter 11 bankruptcy should be considered as a viable option for any or all of these companies. They see trouble looming (and it has been for a long time) and they start crying the sky is falling! Hello – the sky has been falling, and it’s your own doing, wake up!
I personally believe that these companies should first go through Chapter 11 and restructure before even thinking of asking for a bail-out. While the demise of any of these companies would cause a catastrophic ripple effect; neither the fault (nor the guilt) lies with the American people, or the government: it is the fault of the corporate decision-making executives and no one else. They have made poor decisions and mismanaged how funds were spent (million dollar bonuses for executives to stay with the company¹ – is gross mismanagement in my opinion!) and should have been focusing on fuel economy vehicles and/or hybrids years ago.
Chrysler has received a government bail-out once before, when Lee Iaccoca took over. He brought the company from the brink of bankruptcy to flourishing. ²,³ My father worked at Chrysler during that time, and yes, people were laid off and plants closed. Major restructuring took place to keep the company going and to keep at least some jobs, and the ripple effect on the economy, to a minimum. However, I see no moves to bring in someone with Lee Iaccoca’s leadership abilities to help save the big three. They need to bring in better leaders and executives who can make the hard decisions and choices these companies need to turn things around.
If they can not recognize the how and why they got into this position: then throwing good money after bad will not help. Blaming the economy isn’t going to help. They knew the economy was bad and they should have known years ago they needed to change what vehicles they were building. They are in this industry – they should have known and anticipated. This is what good management does. Poor management and planning has gotten these companies in the position they are in – not the wages paid the employees, not the union, not President Bush or anyone else. Tossing around excuses and playing the ‘blame game’ is childish and irresponsible. The ‘Big Three’ have been living large and ignoring good business practice. If they fail – they have no one to blame but themselves.
Should Chrysler fail: it would personally impact my household, as my husband would lose his job. To say that’s not of a concern to us is an understatement, and one would probably expect us to be rooting for a bail-out as quickly as possible. But in all good conscience, we can not. It’s looking very likely that my husband will be taking one of the company’s ‘early out’ offers and doing a voluntary quit. He will accept what pension he had earned for his years of vested service and will begin a new career in another field. Not easy for a man his age; but we would rather be in control of how and when his employment abruptly changes. At least this way, we can plan for it.
So until his last day at Chrysler, we watch the news like everyone else – wondering what the future holds for us, and the Big Three.
¹ Chrysler paying big bonuses to execs who stay
³ Chrysler
Interesting that you stand to be directly impacted by this, and you are against the bail-out. I have no connection to the auto industry, and I support a bailout. We both agree that they don’t “deserve” it, but I believe the claims that one or more of the Three closing would severely hurt the economy. But as you say… we can only watch and wait.
-smarmoofus
I’m not connected to the auto industry, but in looking at the ripple effects, the big 3 are really to big to fail, and that would include chapter 11.
I was 100% against bailing out the financial sector, as that industry can rebuilt in a flash, should there be a demand, and there will be some demand for it. Manufacturing otoh, once shut down can take years to recover, and in some cases, may not be able to. Granted neither is optimum, but it galled me to no end, that Citi gets $300 billion of free money and virtually no downside, all the while, the auto industry is on its way to collapse.
As far as ripples go…
1. Its not just chapter 11 for the big 3, its also chapter 11 for the thousands of suppliers, and their suppliers, and likely that means mainstreet banks, and utilities as well, all across the US, not just in MI. All of those bankrupticies would need to be coordinated, and thats going to take a long time…
2. Once chapter 11 ensues, pensions get sent to PBGC, where is likely many will get 10-30% on the dollar, thus putting most retirees in pretty dire straights. Not only would they loose their healthcare, but getting a 70-90% cut in their pension as well, will be a very sad day.
3, KERPS will kick in per the bankruptcy courts. If folks were outraged at exec compensation before, having the bankruptcy judges award huge bonuses way beyond what was previously granted to execs, all the while millions of average joes are rapidly descending towards poverty is likely to cause huge civil unrest. That does not bode well at all.
I think the thing is, few see how tightly and integrally manufacturing is connected all across the US, and even fewer can relate to the tremendous value of hidden IP, that once gone, is likely to never return. Most of govt has about zero manufacturing connections, instead being typically based in law and finance, thus the bailout the buddies type scenarios as we have been seeing. I dont think they realize that if the finance world collapses, life will continue, and it will rebuild in short order. (barter and commerce always work, and will morph back towards finance for convenience) where as manufacturing, once the IP is upended, may well never return, or at least not on any of the scales and modicums of efficiency previously held.