2008-11-27 / This Week's Attitude

This Week's Attitude

Big Three Auto Company Beggars Can't Be Choosers
By Neil S. Friedman

This Week's Attitude

 
This is the time of year when we're traditionally thankful for what we have; yet it may also be an occasion to ponder what we won't have if Detroit's auto manufacturers aren't rescued — albeit with a practical strategy for the future.

It's a damn shame the nation's once thriving corporate triumvirate has to be bailed out at all. A chief motive for Congress to dole out the financial aid is that a healthy auto industry is crucial to the nation's industrial base. Opponents maintain that Congress would just be throwing good money after bad because Big Three car sales hit a 25-year low in October and have been steadily declining for years.

Just twenty years ago, Detroit's Big Three ruled the market with about a 70 percent share. But in the last two decades that number has fallen to less than 50 percent, as Japanese car manufacturers established a solid foothold with quality vehicles.

However, a sound economy may hinge on the survival of one or all of the Big Three. If all or any of those corporations fail, particularly General Motors — once the world's preeminent firm — not only will there be millions out of work, but the wave of fear and uncertainty in the wake would cause a ripple in the plummeting economy that could take years to revive.

For two days last week, the CEOs of GM, Ford and Chrysler pleaded to Congress for a substantial infusion of cash to avoid layoffs and bankruptcy. But since the government bailout of other companies last month seemed to have no affect on the economic slump, legislators are loath to once again dole out funds to businesses that seemed to have lost the capacity to be prosper.

Detroit's three top executives came with no strategy to persuade legislators how they would save their companies if the money was appropriated. Did they really think Congress was so irresponsible it would just hand them $25 billion?

At last week's stalemate, lawmakers gave automakers another chance. The CEOs were advised to submit a practical plan by next Tuesday that specifically demonstrates how the aid will be spent wisely. Congress acted appropriately and apparently wants the Big Three to make a list and check it twice before they get any gifts this holiday season.

House Speaker Nancy Pelosi said it bluntly: "Until they show us a plan, we cannot show them the money."

Nevertheless, why does Congress have reservations about bailing out Main Street's blue-collar autoworkers when they barely hesitated to throw a lifeline to Wall Street's white-collar banks and financial institutions, which paved the way for the home mortgage crisis that precipitated the troubled economy? If you don't think that sizeable campaign contributions have something to do with their motive, than I've got a bridge — to nowhere and beyond — to sell you.

As they were begging for bucks, the Chutzpah (capital C is intentional) of the Big Three CEOs became apparent when it was discovered they traveled separately to the nation's Capitol in the lap of luxury — on private corporate jets. Couldn't they jetpool for the hearing? Auto company spokesmen said that private jet-travel is standard and primarily for safety. (Yeah, it'd be a real loss if all three went down in a plane crash!)

It's common knowledge that corporate honchos live more extravagantly than the rest of us. But, they've earned those perks, which are endorsed by stockholders. But the three Detroit stooges are living the high life while their companies are floundering. You'd think executives, who've reached the top of their game, would have more common sense than flaunt their excesses when they're asking for billions in public handouts.

Two years ago, when General Motors' customary sales supremacy was about to be surpassed by Toyota, I wrote a column pointing out how a lack of vision about the Japanese auto industry, which had steadily been inundating the market for decades with better quality, more fuel-efficient vehicles to satisfy consumers, was not being addressed.

Detroit fiddled, producing gas-guzzling SUVs and Hummers, while their Asian counterparts — Toyota, Honda, Nissan, Hyundai and Suzuki — introduced safe, reliable, economical vehicles that consumers eagerly sampled.

Long before Asian cars made a dent in U.S. sales, the Big Three were lax in introducing safety features, detailed by consumer advocate Ralph Nader in his 1965 book, "Unsafe At Any Speed." Citing evidence from industry insiders, the book outlines the resistance of American car manufacturers to install innovative safeguards, like seat belts, but also their unwillingness to explore vehicle safety because it wasn't fundamentally cost-effective.

Regardless of Detroit's faults over the years, American consumers share some responsibility for the development of larger vehicles with poor fuel efficiency. When the oil crisis of the seventies abated, some consumers thought nothing of purchasing family-friendly SUVs. Naturally, Detroit saw an opportunity to fulfill the cravings of free-spending baby boomers, who put the objectives of Earth Day behind them as they earnestly purchased pricey vehicles with lousy gas mileage.

Nevertheless, now that they're pleading for taxpayer money to keep their respective companies afloat, the Big Three honchos should be forced to adhere to strict guidelines on how to use that money and bear in mind that beggars can't be choosers .

 

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