My Plan for the Automaker’s Buyout

by Kevin on December 9, 2008

(Photo by Ford Motor Company)

It seems more and more likely that the big three automakers in Detroit will receive a bailout. The last I heard on the news the government was talking somewhere in the $15 billion range.

I personally think these bailouts are a significant waste of taxpayer money, but there isn’t much I can do as a single person. The last time I checked we lived in a capitalist society. The big three have been making undesirable, non-innovative crap for the last 30 years. They made the decision to switch to a heavy SUV and truck lineup. Those businesses are now failing. Welcome to capitalism — your business is going to go under. I think we should use the above diagram by Ford to help us scrap the industry and start over.

But the rules have apparently changed in capitalism, and now if my business is failing the government swoops in and props me right back up. How convenient!

If I were put in charge of the car manufacturing bailout, these would be my requirements:

  • Total executive compensation would be slashed from millions to the low six figures. I’m thinking $200,000 maximum. (I think they have all agreed to take salaries of $1, but their stock options are still worth millions.) Additional bonus compensation would be tied to extraordinary performance. (Real performance, not something any corporate board would approve.)
  • Wages would be cut to normal, capitalism based levels. I’m sorry for the pro-union folks, but paying someone $50 or $75 per hour to work in a car factory is insanity. That’s $100,000 to $150,000 per year. “Regular” factory workers not in the auto industry make anywhere from $12-25/hour.
  • Figure out a way to meet retirees’ retirement and healthcare needs as promised by the companies. I think this is also ridiculous (“Work for us and we’ll pay for 100% of everything when you’re old!”), but the obligation is there. I understand this is a complex issue and would love to offer a solution, but I’m not qualified to fix this specific issue. I would not keep this offer on the table for the younger generation. Sorry, welcome to the real world. You’ve been drastically overpaid ever since you joined the union model — hope you’ve been saving your money.
  • All product lines would be revamped to some sort of energy efficient model. When the SUV commercial boasts “Best in Class Miles per Gallon” and in the tiny print at the bottom of the commercial it lists “15mpg city/22mpg highway”… that’s pathetic. Let’s invest the billions of dollars they are receiving in vehicles that get 40+ average miles per gallon. It can’t be done you say? How about electric cars like the Chevy Volt? What about the Prius? Let’s get those smart engineer types together and fix the issue.

Some of these ideas may seem heartless. I can see that argument, but it’s capitalism. Personally I think bankruptcy would be a great option for the firms, allow them to restructure (perhaps with government assistance at that point), and move to a more energy and fuel efficient models. And note, too, that I recently read Honda and Toyota have never had massive layoffs in the way the domestic producers have. Capitalism at its finest.

The “same old, same old” mentality has to go. Innovation must strike deep into the automaker’s decisions. Only then can we move forward in a positive manner.

What do you think? If you were in charge, what would you dictate?

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