Bailout or Bust

My brother called me last week to ask me if I wanted to go to the Seattle Auto Show. He's looking for a new car, and though he said he doesn't really want one off of the showroom floor, he figures the dealers might be about ready to make a deal.

We arrived at Qwest Field Event Center expecting a low level of attendance, but in fact, the parking lot was filling up fast for a Friday evening and inside the first part of the concourse, the crowd began to build like normal.

As we rounded the corner on the upper level, the first visible motor vehicles were the Ferarris and Lamborghinis. Talk about spoiling the show, I was hoping to enjoy this show like a meal and start out with an appetizer, say, a Volkswagen Morsel or a Chevy Brochette.

The over-glamorous Italian sex-machines sort of drained me of enthusiasm for the other, lesser offerings, but we soldiered on and found some vintage examples of good old Detroit iron.

An absolutely outstanding 1953 Buick Roadmaster Convertible sat by itself, a reminder of how good design transcends time.

Back in the 50's Americans enjoyed a "golden decade" in the design and manufacture of domestic automobiles.

It was heavy on flash, fins and fun, with carmakers responding to the car buying public's desires for some relief from the stodgy post-war utilitarian Fords and Chevys.

And as the economy grew, and the nation's gross national product rose from about $200,000 million in 1940 to more than $500,000 million in 1960.

Big business dominated the domestic economy during this time.

In 1962 the five largest industrial corporations accounted for over 12 percent of all assets in manufacturing.

By 1965 General Motors, Standard Oil of New Jersey and Ford had larger incomes than all the farms in the United States.

Any sign of a sales crisis in the automotive community was not evident here.

The 1973 Arab Oil embargo, and resulting oil price shock caused only a momentary lapse for the Detroit 3 and they just kept making big cars, focusing on the pickup truck and luxury car markets with only a few token efforts to advance fuel efficiency.

In 1978, motor vehicle production reached an all-time high of 12.9 million units, including about 9.2 million cars. But in 1982, a full on recession hit and car production sloughed off to levels not seen since the late fifties.

From 1990 to 1992, the industry suffered another recession and manufacturers didn't show signs of a recovery until the mid nineties.

But the industry was still the dominant employer in the country. In 1990 the U.S. auto industry and related industries employed about one of every 13 workers in the nation.

It became the largest single consumer of steel, plastics, glass, and rubber, to name four key supporting industries.

But by 1992, Japan had become the leading importer of automobiles to the U.S. with 2.9 million sales of cars and trucks annually.

Just announced this week, a bailout proposed by House Reps Barney Frank, Harry Reid and Nancy Pelosi, Congress' auto bailout Big Three, would provide the Detroit Big Three as much as 25 billion dollars of the recently finagled 700 billion Treasury fund. Frank's plan would throw a TARP (Troubled Assets Relief Program) over the auto industries sad balance sheets because, with car sales down 27 percent last month ending the year off 15 percent and October being the industry's worst sales month in 25 years, this is the only way to save the country.

Proponents of the plan often cite the 1979 bailout of Chrysler and how then Chairman Lee Iacocca saved that company with help from the government.

It's important to remember that Iacocca also restructured the entire company, axing whole divisions and laying off hundreds of workers.

But the plan worked and the 1.5 billion dollars was paid back as much as seven years before it was due.

Whether or not a new bailout will have the same result is arguable.

Back at the Auto Show, we arrived at a display of a super slick, new Camaro. My brother gravitated toward it, and it didn't dawn on me until I had taken a picture of him that this was the same model car he had owned when he was a teenager, right down to the paint scheme with the black racing stripes.

Because it was only a mock-up we could only gaze at it, and my brother said nothing, moving on to check out more realistic prospects.

But I wondered whether our fascination with cars, and more importantly, whether our tendencies to bind our own egos with a shiny and expensive piece of equipment is enough to condone the actions of congress.

It may be time to throw out the old methodologies and establish a more global business model. A business model that allows American automakers to compete with Japan, Korea, and the European carmakers.

Can we continue to build heavy fuel burning passenger vehicles assembled by the highest paid workers in the world? How can you bailout GM, when they are suffering a cash burn rate of one billion a month?

I think it's simple: If you build cars consumers want, you'll make money. If you don't, you won't. The Big 3 had 30 years to figure it out.

The better solution is a simple one: Allow automakers to declare bankruptcy.