Sunday, November 23, 2008

So why not Chapter 11?

I agree with my good and respected friend, Don, who kindly left a comment. We need to accelerate the pace of de-consolidation or break-up of the parts of the Big 3 Automakers. How fast we can move is limited by socio-political structures. The key here is the UAW. Either they exist in a radically modified sense or they may not exist at all. Clearly the import manufacturers in the USA are not unionized, and they are much better off. I believe politics (especially for the Democrats) will necessitate that the UAW must exist, but with concessions and modifications. Hence, I think we evolve to Don's vision of a new approach to auto manufacturing through either Chapter 11, or a government guaranteed loan program with concessions.

Why do I favor a 1979-type of approach? The answer is two-fold:

  1. Chapter 11 will kill consumer demand. I was riding in a cab in San Franciso, and the driver, an African immigrant, said, "Hey, I'll ride in a plane of a company in bandruptcy, but I don't want a car with a warranty from a bankrupt auto maker." I think this is emotional, but real.
  2. Chapter 11 will take too long. I also think that Chapter 11 will take 2-3 years of NEGOTIATION before real work starts getting done. Yes, the companies still operate, but they will do so under "busness as usual" approaches. I want to get the radical restrucuring agreed to in the next 2-3 weeks!

Comments welcome. This is really important!

2 comments:

Taylor said...

Hi. This is slightly related - I've been wondering if due to the poor economy and all of this automotive activity in Washington if there will be a "Buy American Everything" movement. American cars, American gas, Obama wears American-made suits, etc...

I know in Michigan a "Buy Michigan Produce" movement has started. Possibly the people in California will never "get there" or believe in this. I am keeping an eye out, though. Sort of like how Peta has made it politically incorrect to wear real fur, maybe it will become politically correct to buy American.

I'm not saying that I think this is the answer, I'm just feeling this in the air. Any thoughts?

Jeff Bell said...

I think that there will be a natural desire to find pride in patriotism. The problem is that unlike the 1970's or 80's, there are some categories where ONLY foreign products exist (think flat panel TVs). In the case of autos, Toyota and Mercedes make cars in the USA. This is a tough one. My only suggestion has been tax credits for US car purchases...