Congress just announced that if the automobile industry comes up with a restructuring plan by December 2nd, it could discuss an industry bailout in December. For now this means, no bailout until next month at the earliest. In the last three months, the industry has burned through $18 billion in cash. And Congress does not want to provide taxpayer money to the industry unless it can figure out how to transform itself.
I guess the CEOs will need to work over the Thanksgiving vacation if they have any hope of getting taxpayer money. But as I posted, there's a way that General Motors Corp. (NYSE: GM) could follow a six step restructuring plan to save $16 billion. If its two smaller competitors could come up with a similar plan, there's a good chance that the industry could cut itself back to a profitable core.
I am relieved that Congress has reached this decision because I do not like the idea of throwing taxpayer money into an industry that will not change the way it operates and thus will keep coming back to Congress asking for more money every time it gets close to running out. By putting the pressure on the industry to reach its own restructuring plan fast -- Congress can test the mettle of industry leaders. This will help determine whether the industry is capable of saving itself.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in GM securities.
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Reader Comments (Page 1 of 1)
11-20-2008 @ 4:26PM
Michael A. Grand said...
An Evolutionary Auto Industrial Plan
The Big Three USA North American Operations (NAO) Auto Industry, General Motors Corporation, Ford Motor Company and Chrysler Company have reached the end of its Incubation stage of Industrialization. They will merge, retool and successfully give birth to a new industry. This industry will exceed the development of both The Manhattan Project and The NASA Moon Landing.
The World is about to see how American Know-How in the USA can pull together to create a better World. The NAO Automobile Industry will continue to work under a bankruptcy clause. It will be allowed to make parts for previously built vehicles. The industry will begin to merge and eliminate product lines. This will allow the old way of doing business to fade away. It will emerge from bankruptcy with a new intent for humanity’s success. NAO Auto Industry will go for the works or it will be oblivion.
Homes, not cars will be built for Global distribution and retrieval. Eco-technical homes and Tri-Townhouse Omni–Inclusive Cities will be created to raise the living standards of all humanity.
The USA NAO Auto Industry will pull us out of our Global Economic Crisis and create a sustainable economy for centuries to come.
Michael A. Grand, Futurist / Visionary
Boynton Beach, Florida USA
11-20-2008 @ 4:18PM
Jason said...
I'm also relieved to see this plan so far. The auto execs may have to start flying commercial...
www.eeinvesting.com
11-20-2008 @ 4:37PM
Keith Hawksley said...
Michael A. Grand
I love your idealism but please put the crack pipe down and walk away
11-20-2008 @ 11:26PM
adam hartung said...
Congress would be imprudent to take action without commitment for serious change from the auto companies. Remember Lee Iacocca and his promises 29 years ago when asking for Chrysler's loan guarantees? He not only flew commercial aircraft, he promised to take no salary - and have a bonus approved by Congress. He also put the UAW's leader on the Board at Chrysler! He was ready to changed processes, and the kinds of cars sold in America. We need that kind of leadership change if we're to bail out Ford and GM. Read more at http://www.ThePhoenixPrinciple.com
11-21-2008 @ 11:20PM
Rich Harpster said...
There is a saying. Those who can do. Those who can't teach. Mr. Cohan has probably never run anything in is life nor had the experience in trying to turn an operation arround under good times let alone times when one cannot borrow money to facilitate the turn arround.
As someone who was in the automotive industry and made a automotive facility profitable, the automotive companies are nothing like they were years ago. They have made tremendous strides. Their quality is equal to or better than their foriegn competitors. If you don't believe me check the latest quality ratings on the vehicles.
I am now working in many different industries teaching advanced design and manufacturing techniques. It is interesting to note that many of these techniques were invented in the automotive industry and are now being implemented in other industries such as medical. I have helped many non-automotive companies become much better with automotive invented technologies.
Unfortunately, it is very difficult to change a perception of poor quality which was a reality years ago but is not now. It was interesting that Toyota had a major recall and it was placed on page 4 of the newspaper. When an american automotive company has a recall it is placed on the first page. It is going to take years to change this perception.
I have heard how great the automotive transplants are and how low their costs are. These transplants have no retirees and consequently no retiree costs. Consequently, their costs will not be as high as american automotive company costs for several years. The american automotive companies cannot just desert their retirees.
Having said this, the automotive companies are not perfect. I disagree with the 'Jobs bank' and I believe it must go. Hourly workers will have to pick up more of their health care costs. Although I think the executives were dumb to fly in company jets to the meetings in Washington, I am sure the bankers did the same and nobody said anything.
Finally, I hear the call for allowing the automotive companies to go bankrupt like the airlines. What people are forgetting is that you don't get a 3-10 year warranty when you buy an airline ticket. Who in their right mind would purchase a vehicle if they believed the company who sold it to them will not be arround to support it? All this 'let them die' talk is killing the american automotive industry's sales.
If you don't think you will be severely hurt if the american automotive companies die, just look at the stock market after they announced the vote on helping the automotive will be delayed till December. Whether you like it or not, the american automotive industry is crucial to the turn arround of the economy.
11-20-2008 @ 6:12PM
Albert said...
What about us?, the regular folks with small business strugling to make ends meet, can't afford to take a vacations, much less fly coach with the family.
Is the goverment willing to help us out also??????
11-20-2008 @ 9:54PM
beachpaul said...
Stand by the door. The government will help you out ,too.
11-21-2008 @ 2:30AM
Edward said...
Maybe this is the time that the auto industry in the USA has to get its act together and stop making fuel inefficiant cars as well as autoworkers collecting pay while idle. Its time to wake up. Those past days are over. The company executives should slash their salaries and perks and sacrifice for the good of our contry..not hold it hostage!
11-21-2008 @ 2:30PM
Pat said...
Mr. GRAND, like your name your ideas are grand and a lot of this will happen.
There is no shortage of such visions, actually if I remember right I read there are people at GM who get paid to "day dream".
Problem is, you do not know (as most writers) exactly what needs to be done to pull these companies out of the hole.....and execute ideas that you dream up...The how alludes most, mainly the people who ran these companies to ground.
The managers in the Auto Industry were always brought up on " we are Christ Incarnated" in that they were all knowing and the masses , mainly the worker bees know nothing. Add to this a super size dose of ARROGANCE and head in the sand and you have the soup we are in !
Yes , Wagoner said repeatedly that he does not feel arrogant nor does his team....simple question : Out of the hundreds of thousands laid off (voluntary and involuntary) how many exactly were what they call , I believe , "Super Unclassified Bands" of salary levels !
They just forced out a lot of lower level employees ...how many of them were from the General or Executive Directors and above levels?
So , Wagoner may not be an arrogant person himself, but decades of nepotism and corporate incest have bred an arrogant mangerial team that is so insulated in self denials that they do not believe in what is happening and strongly believe how WRONG everyone else is !
If Congress cleans house, we need more than the CEOs gone or you will be back where you were in short order. GUARANTEED.
Mr. Wagoner and other CEOs, it is time to swallow pride, fire the correct inviduals, perhaps call in some great retitrees who had to quit early because they did not fit the mold! Add some other Consumer Oriented, Performance Oriented (a la GE?) managers, and you can recover.
Otherwise, we know you and your cronies are fat and happy when the dhip goes dow, it is us poor millions caught below decks who will die a rat's death !!!
10 DAYS to save us Mr. Wagoner. PLEASE PAY ATTENTION .