Drive (Electric), She Said: Big 3 Auto Bailout, Cont'd

Later on today we'll be chatting in Meebo about various proposals to help the Big 3 American automakers. According to some estimates, GM could be out of oxygen by the end of this quarter.

I won't be able to do an in-depth post on the pros and cons of various approaches, but I thought I could at least put an annotated list of interesting articles out there in case you want to do a little quick reading up before we chat. Or even follow up on interesting reading after we're done.

I personally have three main reasons why GM's executives get no love from me:

• Roger and Me, dir. by Michael Moore
• Who Killed the Electric Car? dir. by Chris Paine
• Failure to "jetpool"--Rep. Gary Ackerman (D-NY), on GM, Ford, and Chrysler CEOs taking individual private jets to ask Congress for $25 bn in bailout money

Poor corporate citizenship, developing and then sandbagging their own ass-saving future product line, and mind-boggling executive cluelessness.

Warren Buffett has a great suggestion: these CEOs should be booted out by the boards of the respective Big 3 corporations. They've not served the auto industry well, nor their own workers (what few remain in the U.S.), we U.S. consumers, nor the shareholders of the companies they run. Responsible for epic frickin' FAIL? Leave, and you get the same 'lead'--not 'golden'--parachute that everyone else who gets pinkslipped does: clear out of your office with 30 minutes notice and a security guard escort to your parked car.

I would suggest leaving stock options and other unliquidated non-cash compensation at the door too, but then again I'm a vindictive biatch that way. I hate to see incompetence rewarded.

Here's something else which has arisen as a third option to bankruptcy or a bailout: the Chinese want to buy one or maybe all of the Big 3 automakers. I would be for China lending GM money under very structured conditions, and LICENSING for a large fee some of the electric vehicle technology developed by the Big 3 so we don't have 1.5 billion people driving all over China with gas-guzzling, polluting cars. Hell = China paved over and overrun with Humvees. Um, NO. And I would very much support some sort of U.S. government loan concurrent with any Chinese involvement, so that those idiot CEOs can have someone smart from the Obama administration tracking their progress a la Chrysler's bailout of 1979. (For more on that highly structured bailout with goal-setting, a calendar for improvement, and accountability, check out this NPR story.)

If you are such a loser for-profit corporation that you can't make a decent product and you have to rely on taxpayers to save your behind (Chrysler! Ford! GM!), then you deserve to have every last little improvement scrutinized and second-guessed by your lender. I think if I favor a "bailout" it's because the government needs to impose on the Big 3 the final embrace of CAFE and other fuel efficiency standards, emissions, and hybrid/electric/sustainable fuel sources that this industry has been making half-hearted steps toward. And the way they can make those impositions is to attach much-needed strings to any taxpayer money they lend. Nancy Pelosi said it well: "No plan, no money."

I fully blame the CEOs and their lobbyists for obstructing engineering and other arms of the auto makers who HAVE been trying to move in the right direction.

And when it comes to China, I just want to underscore the lingering racism that this suggestion has been met with. Did anyone shriek with outrage when Germany, via Daimler, bought Chrysler? You know, all those pale Germanic German people at Daimler?

No?

Ok, then STFU about China. (Somehow, when the Japanese buy NYC real estate, it's "unAmerican," but when Canadians and the Brits buy similar Manhattan real estate, it's not "unAmerican.")

Because China has money. It has a market. What is lacks is technology--CLEAN technology. Our American auto industry doesn't have to give away the cow when it sells the milk, but it should sell milk to people who want it and need it.

Instead of a lot of knee-jerk racist whinging about China wanting to buy an industry we consider "all-American," we should stop and look at the terms. Negotiate ones that help the Big 3, and help U.S. workers who can make those cars. Maybe consider giving China some access to our factories, our workers, our technology, but on terms that are good for Americans in ways that keep our work, know-how, and products benefiting American companies and their employees. Could such a thing be possible?

Maybe if government has a finger in the pie of the Big 3's rescue, it can add the leverage of diplomacy to that of capitalism to help the American auto industry.

Wouldn't it be incredible to make and ship something to China for a change?

In China, they don't know they need electric cars yet. Let's help them realize this. And sell them our electric cars.

And here at home, let's start realizing it too. Looks like forward-thinking San Francisco has already declared itself a market for electric cars.

Come on Los Angeles, you're next: Drive (Electric), She Said.

Cynematic blogs at P i l l o w b o o k. She could easily run your Fortune 500 corporation into the ground without the assistance of Harvard MBAs or other consultants for the bargain-priced small fee of $20 million. She is available to start now.

Comments

[Donna]

Disclosure: GM has been actively courting the mom blogger market -- I have had the opportunity to test drive some of their hybrid SUV and hydrogen fuel cell vehicles AND took part in an "intimate dinner" (six bloggers) last year with GM Vice Chairman Bob Lutz.

I don't know about CEO Rick Waggoner, but from the meeting I had with GM last year, their product people DO seem to get it. Eight of their current models get 30 mpg highway or more. The GM folks told me that they understand that they cannot survive without turning to alternate fuel, which is why they have put so much into research for hydrogen fuel cells, flex fuel (hybrid cars that can switch between gasoline and ethanol to power their engines), traditional hybrids and the upcoming plug-in Volt -- all of which, according to the engineer who took us on a tour of these models, "carry the EV1's DNA."

That said, they do make an awful lot of boneheaded decisions that should be questioned (the corporate jets being the most recent example, but the way they killed the EV1 was probably the most egregious).

Both Ford and GM are putting out better product now, even beating out Japanese auto makers in JD Powers quality assessments on some models. But we've all been burned so much in the past on American lemons, it's going to take some time to move us back to "home grown." That is, if the automakers live long enough for it to happen. I just think it would be a shame to let our industry die just as they are starting to get their act together. Maybe it's what they deserve -- but I do fear the ripple effect through our already fragile economy.

[Julie Pippert]

Donna, 30 mpg is nothing to brag about. That should be the MINIMUM. But I take your point.

American automanufacturers could increase consumer confidence with one simple move: a guarantee like Acura.

I understand fears, but think they are being flamed out of proportion. Telling me "ooh this might be bad and hurt" needs to backed up by better proof than I've seen and to get a bridge (bailout) needs to have a better plan that jetting in with hands outstretched saying the credit crisis hurt them too.

Cyn, interesting point about racial fears.

I fully agree with you about the CEOs and lobbyists.

[cynematic]

Donna,
Good to hear from you as you've actually met with people in positions of power at GM, like QueenofSpain and her visit with Ford.

My feeling is that all along, the heads of the Big 3 have been at odds with other sections within their own companies. It seems a lot of undermining has actually come from the top, and from previous CEO regimes which I fantasize about punishing, but they're probably long gone to their mansion retreats in Antigua.

On the EV1, here's an interesting timeline from a GM engineer who worked on the prototypes for the project up to 1993: http://www.evworld.com/article.cfm?storyid=1053

And it was Rick Wagoner, CEO of GM, who scuttled the EV1:
2006, upon release of the "Who Killed the Electric Car?" documentary: http://gristmill.grist.org/story/2006/6/28/174247/184

2006: http://www.autoblog.com/2006/11/29/la-auto-show-rick-wagoner-announces-development-of-plug-in-hybr/

2008: http://www.freep.com/article/20081120/COL06/311200025

Remains to be seen if the Volt is as good or better than the EV1. I'd be interested in what sort of ride it is for $30,000--much more than a Prius.

[The Daft Dem]

The racist issue (for some) may be real, but in politics and business, I believe it is a bit of a red herring. Japan, China, India and some other places get the reputation they do, not because of racism, but because of how they do business. Or more specifically to the point, how the relationship is (or in some cases "was" as some places have improved over the years) quite one sided.

Why are people more leery of doing business with China as opposed to those Germans? Because the money flows both ways. We buy from Germany, and Germany buys from us. We buy from China, and China does NOT buy from us. Though Japan has gotten better with this over the years, it is still not an even relationship.

And if you believe that the Big 3 is a good enough business that you honestly think and expect China to invest in it and make the loan, why wouldn't you have that money stay here? Or do you think they are gonna fail, and that the Chinese would just be "stupid enough" (for lack of a better term), to invest in a failing business just for the heck of it?

I think your racism complaints is really off the mark. There is certainly a certain amount of Xenophobia that is pervasive in some industries, auto being one of them. Remember Daimler is a private corporation, not a "nationalized business." Chrysler was sold to a company, not a country. Another problem (in perception at least) is China's history as well as the financial clout that they already hold over us is staggering. But that is a whole other argument of how we put ourselves in that position.

[Sam]

The US automakers fell asleep at the wheel and allowed the Japanese companies to slide in to the market with higher quality, better looking vehicles. All-the-while, they sat in their offices thinking that American's would buy Ford because it was "Made-in-America" but that doesn't quite have the same meaning as it once did. America does not necessarily equal quality.

They again had a great opportunity to establish themselves as innovators in the market place by being the front runners in the "green" movement - again they failed to respond to the growing concerns around the environment. In fact, GM continued to roll Hummer's off the line. The only thing that stalled production were rising gas prices, not their commitment to bettering the planet.

I imagine our new gov't will bail them out but they probably shouldn't - where is the accountability in that?

[cynematic]

Daft Dem,
IANAL, corporate acquisitions or mergers specialist, or an economist, so I can only respond by saying I have no idea how a joint venture of any kind could be structured in the particulars, only that I wouldn't rule it out simply because of the source. But I don't think you were addressing any of the particulars either. And I think we're both leery of an outright purchase of any Big 3 company, but not on xenophobic grounds.

And yes, I realize there are trade imbalances and delicate geopolitical imbalances. Yet there are now joint ventures between Japanese carmakers and American ones and Japanese carmakers years ago were also accused of having "state-run or -subsidized" structures that somehow made them impermissibly & impurely capitalistic to work with then. That smacks of some weird "red-scare"-tinted filter to me. We seem to have grown out of this with the Japanese, to some extent.

Why do I think if an Australian or Swedish auto manufacturer made the same offer that there would be a totally different response?

I mean, if Big 3 automakers are in such dire straits due to their own ineptitude (and bad timing) and can't even make it another six months without a cash infusion from somewhere, can they really be all that picky about what the source of the cash is? It's in this context I view any proposed bailout by the government, or a purchase or joint venture offer.

Is this trial balloon by China necessarily a hostile overture? Companies buy bits of other companies or do deals to create joint ventures or at the very least, license patented technology to other companies...happens all the time in the normal course of business, right?

Public opinion is one thing, what the Big 3 will do ultimately is another. But I have noticed a lot of xenophobia from the public (in the comments to Hamsher's post, for example) upon simply *hearing* that China's interested in acquiring the Big 3, or one of them. Of course racism and xenophobia play a role in business and politics. To believe otherwise is to say "emotion plays no role in the workings of the stock market." No role? Um, right.

I've been trying to drill down a little deeper and understand the implications of government support of Big 3 car manufacturers.

Emptywheel has some informed-sounding speculations on what A Chinese company's outright purchase of say, GM would be: http://emptywheel.firedoglake.com/2008/11/16/we-are-all-flint-mi-now/

I think this puts a different spin on bankruptcy versus bailout discussions.

[John J.]

I think the geopolitical and economic issues are more the negatives with China than just simple xenophobia. Part of it Cynematic you were on the mark with your red scare reference. The biggest thing though I think is our recent economic history with China. Australia or Sweden haven't been sending us poisonous toothpaste or dog food. We haven't been getting boatloads of lead painted toys from Japan.

Most of the main arguments against the bail out that I've seen have been of two varieties: why throw good money after bad (which the Ford rep. responded to) and that the executives and share holders who made these bad decisions need to be punished. But I don't see bankruptcy as really being a punishment for the top brass. Wagoner and Nardelli are going to walk out with their multi-billion golden parachutes before the company goes under and most of the share holders that made the bad decisions sold their stock, which is why it's down to $1-3 per share. The people bankruptcy will hurt most are the floor workers who will lose their jobs and all the people who depend on those people having jobs.

I completely agree that the executives need to face consequences for their actions, but it needs to be targeted.

[Catherine]

America is the greatest procrastinator to ever be. I don't want to drag this comment out...we have made all of the cars we are talking about already. We have been seeing then in auto shows for years. But...America, who chose to be in a comfort zone, overpriced these automobiles. They made them and sold them to collectors, who placed them in fancy garages and never drove them. Smart?, NOT!!

It cannot be said that it takes massive money to create the average car. We learned that in the 80's, when someone outside of the major 3 made an independent product.I think it was called "You Drive".That is probably not the correct name, but I know somebody out there knows what I am talking about. It was an ugly little car...but it drove and it only cost a couple hundred dollars. The Big 3, crushed them as fast as they could! Just imagine what that car would look like today!

I will not surrender. They must quit fiddling around and create a car that is applicable to our needs today. Think of it this way. When you were younger you were smaller. Suppose the clothing manufacturers continued to sell you the same sized clothes now. You would be forced to be pencil thin just to dress! That would be crazy because you have different needs now. You should not have to be made to fit the product, the product should be made to fit you.

Why on God's earth would you just give billions of dollars to a company who is not making the products you want? You may rest assured that all the little "You Drive" people are at work trying to make it happen. Some people already have businesses converting cars to electric, and this time they will survive.. The Big 3 needs to bring a plan that excites the industry. They should not be bailed out (Neither should citi-group, who would watch you die before they gave you a loan) Oh well...I reckon I did drag this out..sorry about that!

[Catherine]

America is the greatest procrastinator to ever be. I don't want to drag this comment out...we have made all of the cars we are talking about already. We have been seeing then in auto shows for years. But...America, who chose to be in a comfort zone, overpriced these automobiles. They made them and sold them to collectors, who placed them in fancy garages and never drove them. Smart?, NOT!!

It cannot be said that it takes massive money to create the average car. We learned that in the 80's, when someone outside of the major 3 made an independent product.I think it was called "You Drive".That is probably not the correct name, but I know somebody out there knows what I am talking about. It was an ugly little car...but it drove and it only cost a couple hundred dollars. The Big 3, crushed them as fast as they could! Just imagine what that car would look like today!

I will not surrender. They must quit fiddling around and create a car that is applicable to our needs today. Think of it this way. When you were younger you were smaller. Suppose the clothing manufacturers continued to sell you the same sized clothes now. You would be forced to be pencil thin just to dress! That would be crazy because you have different needs now. You should not have to be made to fit the product, the product should be made to fit you.

Why on God's earth would you just give billions of dollars to a company who is not making the products you want? You may rest assured that all the little "You Drive" people are at work trying to make it happen. Some people already have businesses converting cars to electric, and this time they will survive.. The Big 3 needs to bring a plan that excites the industry. They should not be bailed out (Neither should citi-group, who would watch you die before they gave you a loan) Oh well...I reckon I did drag this out..sorry about that!

[Sharon]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Sharon

http://www.autoloans101.info

[Sharon]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Sharon

http://www.autoloans101.info

[sohbet]

Thank you. Nice post