Today, President Bush decided to go ahead with a $17.4 million bailout package for the auto industry.  The money will come from the pot of cash approved by the Congress a few weeks ago to help rescue the financial markets.
http://online..wsj.com/article/SB122969367595121563.html

In announcing the decision, the president said the loans available to the automakers will have two conditions:

“First, they will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success — and gives consumers confidence that they can continue to buy American cars.”

In other words, the automakers get the money now.  They just have to get back to us later on how they will re-structure.  In negotiating, this is called losing your leverage.  The time to ask for concessions is before the money is offered, not after. This plan has too much carrot and too little stick.

While I believe America needs a viable domestic car industry, I believe it we can only achieve this if we have major reforms of both management and labor.  Unfortunately, today’s bailout does neither.

- Randy

For years, the American car industry has been on the road to failure. It now appears the industry has reached its destination.
http://apnews.myway.com/article/20081212/D95106M80.html

With the collapse of the goverment bailout negotiations, it seems unlikely that the Big Three will be rescued from their collapse any time soon.  That leads to two questions: Who is to blame?  And what can be done now?

Who destroyed this once mighty American industry?  Politicians in Washington are debating this with Democrats blaming management and Republicans blaming labor.  I take a different view: I blame both management and labor.

Want proof that management is out of touch?  What other industry flies its executives in private jets to Washington so that the executives can beg for a handout from the government?  This symbolizes the misjudgment and mismanagement that have defined the reign of these car executives.

But the union bosses are equally to blame. In the 1950s, General Motors signed the first union agreement that guaranteed cost-of-living increases.  This was the beginning of the American auto industry’s self-destructive path as its labor costs grew to unsustainable levels.  Today, workers at American car companies get paid $71 an hour, while their competitors at foreign car companies make $42 an hour. Is it any wonder that our domestic car industry can’t compete?

Now we find that the president might intervene with previously authorized money.
http://www.politico.com/news/stories/1208/16523.html

If he does, he should insist on changes from the top floor to the shop floor.  Management and labor got us in this mess together.  They must both sacrifice to get us out.

- Randy Hill