Jeff Bell Blog

As we get closer to an agreement for supporting General Motors, Chrysler and Ford, I continue to press for structural reforms. What concerns me is the lack of discussion around several issues: 1. Rationalization of brands and dealer networks: whoever becomes the Car Czar will rue the error of not being granted sweeping powers to supersede state franchise laws. GM had to pay millions to dealers when they retired Oldsmobile. This cannot be the case going forward. Furthermore, continued consolidation of GM, Chrysler and Ford dealer networks is required -- and speed and low cost is the key. 2. We need to incentivize consumers to "Buy American." I am perplexed by the failure to address this requirement. It should be a hallmark of the Obama- Biden stimulus program. I favor tax credits, like those for hybrid vehicles. 3. There are two meta-goals above this issue. President-elect Obama should use the U.S. auto industry crisis as a "laboratory" for fixing Medicaid/Medicar...

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: 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 am hopeful that my proposal for government-guaranteed loans and credit lines for the Big Three, in exchange for the meaningful structural changes, will soon become reality. Without knowing it, I was in some ways recounting what happened under President Jimmy Carter in 1979 with Chrysler. Check out this wonderful article from Time Magazine’s archives: http://www.time.com/time/magazine/article/0,9171,947356-1,00.html To summarize, The government guaranteed loans to Chrysler totaling up to $1.5 billion Chrysler had to secure another $1.43 billion in private financing at reduced rates from banks Chrysler had to gain concessions from suppliers on cost and financing Chrysler committed to $462.5 million in concessions from the company’s union employees, plus another $125 million from salaried workers. Chrysler shed unattractive assets (wholly owned parts and components factories), cut the workforce. The US government also extended the deadline by two years for Chrysler to meet C.A.F.E. req...

Well, because I spent 17 years in the auto industry, I am getting a great number of inquiries about "what should we do with the Big 3?" What I share here are my own opinions. I do not suffer from naivete about how hard this will be. But I do wish for a sustainable resolution, and not just another short-term fix, which inevitably leads to more pain and hardship in the near future. Here are my thoughts for beginning to truly address the Big 3 issues. I believe that there should be no "free lunch." I do not support a "no strings attached" plan for the Big 3. They need support and encouragement to make the changes they have discussed for decades. If our government supports the domestic-owned industry with loans or grants, then in exchange, it must seek to create a viable business for employees, and a return for investors. The only way to guarantee employment is to create an ongoing and viable business model that can compete and win. To survive, and in the futu...