Tad Gage

A Radical Solution for U.S. Automakers

Perhaps we could all do with a few choruses of Kumbaya. Better than the wet blanket dirges I'm sick to death of hearing. What good does this "realistic" thinking do for these companies or our economy? I absolutely agree with Repper's comment that Detroit has turned out many quality, good looking products. Which is exactly my point. Whatever value remains in the plant, property and equipment, the intelligence and design capabilities, the people and skilled workforce, etc. can and should be focused on creating something new and world class. Over the years, I've consulted with so many companies at such crossroads, and the best way to throw bad money after good is to continue funding and pursuing a flawed business model that offers no hope of being competitive. In any case, the outcome is uncertain. But as I noted, for your consideration, applying established capabilities to a new business model (and who wouldn't want to produce an attractively styled, well-built vehicle that doesn't use fossil fuel) certainly offers more opportunity than the alternative. The Big Three don't need to entirely cease producing fossil fuel vehicles. But rather than firing talented, energetic people and closing down facilities (which will happen as it always does in cost-cutting mode), why not consolidate dinosaur vehicle production in certain key facilities and dedicate the facilities and people that would otherwise be shut and fired to producing desirable alternative vehicles? This would be the best use of working capital. If the long-term ROIC can't be justified in any way, then any government bailout would be a terrible idea because there would be no quantifable return on investment. Better to let the whole thing collapse and let the PBGC cover the legacy commitments (yet another bailout). A viable strategy and a realistic business plan is necessary. Whether current Big Three management is up to the task, or it requires better and more creative minds to develop this, I haven't a clue. Capital turns, asset utilization and so forth will be very ugly in the beginning. But since they're already ugly now, what harm is there in developing a model that might offer attractive long-term returns and a plan that's better than simply propping up a losing proposition?


On Nov 12 09:44 AM Repper wrote:

> Nationalizing the industry is a radical idea, but the idea about
> a bailout being designed to bridge the US automakers into developing
> alternative fuel vehicles is the reality. They are already heading
> in that direction. No, the infrastructure is not there yet for dropping
> the traditional combustion engine completely, but things are going
> in that direction.
> The problem has been the American consumers' collective misconception
> that these are poorly run companies with shoddy products. They have
> made a huge turnaround in the last decade+ in quality, productivity,
> and management, but the American consumers and so many people writing
> article love to keep punishing them for past sins.
> Before blindly bashing, please give a real look at the products that
> are being produced today and educate yourself with the facts. Try
> visiting gmfactsandfiction.com/.../ . Yes, it is compiled
> by GM, but all the facts included are from third-party sources to
> which links are provided. Dispel your misinformed misconceptions
> about GM and the other domestic auto makers.
>
> Maybe you're right in saying that American companies won't be able
> to compete in the traditional market, but that's not because they
> can't produce quality, stylish, economic vehicles; it'll be because
> consumers will continue to ignore the facts about those products
> and continue the trend toward buying more foriegn vehicles.
> Yes, legacy costs, and past labor agreements have hurt the financial
> situation of the Big 3, but recent renegotiations were a big strp
> in the right direction toward bringing operating costs down for the
> future.