24 minutes ago
Friday, December 19, 2008
The Great American Bailout
You may not be able to tell in the grocery store, where people routinely shun the off brands for their advertised brethren, but even if a lot of Americans don't truly understand a good value, they'll all agree that they appreciate one. Nowhere is this more apparent than in the auto industry.
Why are there so many foreign cars on the road? Because they offer value. Instead of text-messaging someone at your next red light, compare the ratio of domestic to imported cars at the intersection. I've been doing it a lot lately (then text-messaging), and the results show us why the auto industry is crying for a bailout.
The problem is, what will the bailout accomplish?
President Bush approved $17.4 billion in rescue loans to the automotive industry this morning, tipping the domino that led Treasure Secretary Henry Paulson to request that Congress release the second half of October's $700 billion bailout for financial institutions, claiming that the auto rescue exhausts the first half of those funds.
President-elect Barack Obama, only a month away from claiming the office, praised the move. "Today's actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers," he said. "With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together — including labor, dealers, creditors and suppliers — to make the hard choices necessary to achieve long-term viability."
It took me longer than most to jump the Obama bandwagon, and I'm still not completely sold, but I am cautiously optimistic, and the living embodiment of his mantra of "hope." That hope glistens when I read things like, "...the hard choices necessary to achieve long-term viability." The candor and bluntness of his tone reminds me of New York City's great Mayor Rudy Giuliani more than a decade ago, when he had the fire to make change, and that fire was largely untempered by popular politics. Maybe a bailout is necessary, but neither President Obama or President Bush are so blind as to hail it as the answer.
Because when you boil it all down, the only real question is this: How will the bailout result in my purchasing of an American automobile when my current lease expires? I know I'm buying this next go-round, and I know I want an SUV. It is no secret that, by and large, foreign cars are longer lasting, get better mileage, and all things considered, offer far better value. I've done my research and rented many different makes and models as a manner of on-the-road research, and it's going to take more than my patriotism to get me to buy American.
The bailout will inject money into the coffers of American automobile manufactures, but unless they change the way they approach their engineering and sales, it's only going to put a band-aid on the hole in the damn that is their current dilemma. People want as much from their car as they can afford (if not more), not an ad campaign that pays $20 million to license a Led Zeppelin song.
If I can get a fully-loaded Hyundai for $10,000 less than any of it's lesser-stocked American counterparts, and along with that purchase get better MPG, a longer warranty, and more bang for my proverbial buck, why shouldn't I? Because GM has better television commercials? Because my patriotism will be called into question? Talk to me about patriotism when you can tell me where your television, cell phone, stereo and DVR were made.
America is changing, and we see it in all walks of life. The medical field is upside down. Retail is fading so fast, we need to add more pegs to the bottom of the limbo bar. People don't know where, or how, to invest their meager savings. And where we spend our hard-earned dollar has become even more important.
For this bailout to be anything more than temporary, the American automobile industry needs to change the way they approach business. They need to create a product that can compete with the imports, and they need to market the value of that product, not sugar-coat something less with bells and whistles and a bow on top.
Plants are closing because cars aren't selling. Period. End of story. This bailout needs to address that simple fact. Instead, I'm afraid that it will do little more than guarantee that fat-cats at the top of the automotive food chain maintain their inflated salaries for at least a little while longer, safely tucking their savings away as they make the "hard decisions" necessary to reduce operating costs in these trying economic times. Yes, that means more starch for the white collar, and more wear and tear to blue collar overalls.
When that doesn't work? As a provision of this bailout, the government has the option of becoming a shareholder in the automotive industry, as was the case with the major banks. That's right, a nationalized automotive industry... Why not, that's what democratic capitalism is all about, right?