NorCalSavant

As expected, President Bush has come out with a rescue plan for the auto industry. It pretty much mirrors the Senate plan. The auto companies taking the government money have to have a plan by March 31 to be a viable business. They have to ink agreements with their debtors and UAW to swap their debt with equity. UAW has to agree to eliminate job banks and have work rules and wages competitive with the transplant (foreign auto companies with manufacturing plants in America) autoworkers by the end of 2009.

However, there is one major difference between the White House plan and the earlier Senate plan. The Bush plan has no mechanism for recovering any lost taxpayer money from Cerberus Corporation, the owners of Chrysler. If Chrysler really folded, and did not have any way to return anything, the owners would not be held liable. Cerberus lobbied for it with the White House and got its way. It smells, and I wish things were not done this way in Washington.

The other thing I am still disappointed with is that the company management in these failing auto companies is going to be intact. I don’t know of any other company where the management gets to keep the job after such a poor performance.

Meanwhile, some interesting things are happening. All the auto companies including transplants like Toyota are feeling the pinch. Their truck and SUV sales have gone down just like they have for the Big Three. In fact, total annual auto sales in the United States are expected to be about 12 million vehicles in 2009 from a recent high of 16 million vehicles.

Gas prices at the pump have come down drastically, removing the only, it seems like, impediment to large truck and SUV sales. In fact track and SUV sales overtook car sales in November for the first time after February. If the trend continues, the Big Three could recover much faster than anticipated.

It would be terrible to see things return to their old ways though. The blessing in disguise that this Big Three meltdown could have been in terms of fixing their business models and putting environment-friendly, fuel-efficient, green vehicles on American roads could be lost.

So my one holiday and new year wish is that no matter what happens to gas prices, we have the political and business acumen to seize this moment of crisis as an opportunity to fix our car companies and our environment.

No related posts.