AUTO LOAN DECISION RESTS WITH POOR DECISION MAKERS

Considering the current unfortunate state of the nation from education, health care, infrastructure and most especially the economy, it is evident that our politicians have made exceptionally poor and misguided decisions in recent years.  If bridge loans to U.S. automakers are not approved now, decision makers will yet again have made a bad choice for the long-term health of this nation.

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It should be unthinkable to allow the collapse of a U.S.-based auto manufacturing industry.  Already the manufacturing revenue base in this country has eroded to a point where only 12% of GDP is derived from manufacturing.  In fact, Manufacturing is the primary generator of a nation’s wealth and as such, U.S. based manufacturers must be nurtured rather than eradicated. 

While some foreign automakers assemble autos in this country, we should not be willing to accept the loss of industrial engineering, development and research related to autos.  Technology transfer and outsourcing is resulting in an America where our workers do the grunt labor while the rest of the world takes care of the intellectual occupation.

PLACING BLAME

Politicians accuse auto CEOs of having made bad decisions that got them to where they are now, yet it is exceptionally bad decision making by politicians that has the economy teetering on the brink of collapse and ultimately undermining auto sales and industry revenue.

For example, the decline in automobile sales in November was shared by all manufactures, American and foreign alike.  Economic mismanagement, rather than erroneous auto executive decision-making, is ultimately to blame for reduced auto revenue.

None of the auto executives has a crystal ball into future economic events.  Who could have forecasted the run-up in oil prices to over $147 a barrel in July, only to dramatically fall below $50 a barrel four months later?  High oil prices were expected to be permanent and as a result, many of the auto execs changed future production plans to include more small cars and smaller displacement engines.

Furthermore, two or three years ago not many in the political circuit were talking about the mortgage/credit pyramid scheme possibly collapsing, and in fact most rhetoric coming from Washington was denial that anything was wrong.  So how is it an auto executive should have been expected to prepare for a 50% drop in revenue due to financial credit market disintegration?          

MISPLACED PRIORITIES

It could well be argued that political leaders too easily pour money outside the country while not putting enough emphasis right here at home.

For example, the money automakers need to borrow to survive the economic downturn is argued to be too expensive, yet funding an Iraq war to the tune of $577.6 billion isn’t too much to ask American taxpayers.   The war effort in Iraq consumes 341.4 million taxpayer dollars a day and has a total cost of $1,721 per American, and counting.

ECONOMIC TRACK RECORD

Is it not mismanagement when the nation’s debt nearly doubles just since president Bush took office?  National debt has in fact gone from $5.7 trillion when Bush took office to $10.7 trillion in 2009.  It is lousy management like this, which results in Bush’s approval rating being at best, 29%.

U.S. national debt now equates to nearly $35,000 in debt for every American, young and old.  The result of this economic mismanagement means that the U.S. government may face debt rolling over into higher interest rates on bonds.  Higher interest payments will lead to higher taxes and cuts in basic social services.

American’s are even less enthusiastic with legislators.  Congress’ approval rating has been a mere half that of president Bush.  Approval hit an all-time low of 14% on November17, 2008 and according to a recent Gallup poll, “As the 110th Congress returns for its final lame-duck session Monday, new Gallup polling shows that only 19% of Americans approve of the job Congress is doing, while about three-quarters disapprove.” 

POLITICIANS DO NOT KNOW HOW TO RUN A CAR COMPANY

Congressional and Senate demands on changes the auto companies must make to qualify for loans should not even be part of the discussion.  Politicians are going to legislate into production automobiles that most consumers do not want to buy.

Gasoline has been historically inexpensive in the U.S. and as a result, Americans have desired larger cars and trucks, while at the same time choosing models with greater horsepower.  Link onto any auto blog and auto comparisons almost always criticize those vehicles that offer less horsepower.

“Brilliant” politicians with their demands on automakers and the kind of cars they produce will be forcing the American auto companies to manufacture small, underpowered, or worse yet, electric cars, while foreign manufacturers will gain more market share producing the V-8 powered cars that Americans really desire.  According to a Detroit News article, legislators are saying “Everything - from the companies’ attitude toward emission lawsuits, their ownership and corporate structures to just how they will go about making the cars and trucks of the future – may be on the table…”

Lindsey Graham himself even admitted to not understanding the auto business when he said, “I think they need to consolidate, go into bankruptcy, come out stronger, but at the end of the day, what do I know about running a car company?”

Senate Banking Committee Chairman Chris Dodd is demanding General Motor’s CEO Rick Wagoner should have to step down and that Chrysler should merge with another automaker.    “Chrysler, is, I think, basically gone, probably ought to be merged,” he said.  

Some of these points may or may not be true, but management within the companies themselves better serves decisions related to the auto companies.  For example, the timing may not be right to change leadership when the lead-time to understand what is needed may take longer than the time required to act upon what is needed. 

Or worse yet, to say that Chrysler is “gone” and should be “merged” basically runs off any possible suitors for Chrysler.

Then, there is Senator Shelby of Alabama who said the bridge loans are a “bridge loan to nowhere,” when in fact they are a bridge loan to somewhere and that somewhere is better economic times.  Then again, maybe he knows something the rest of us don’t know, that better economic times won’t come anytime soon?

MAKING A BETTER DECISION

An American automobile industry is important to the economic vitality and prosperity of this country.   Furthermore, the money required to save our three auto companies is comparatively small to the major blunders made by our political leaders.  A strong manufacturing base must be rebuilt and sustained and America must have a leadership role in the design and development of automobiles.

Political leadership in this nation continues to be flawed and has seen a disproportionate share of contemptible decision-making, with a track record that reflects this as is evidenced by the state of the nation today.  Considering that most in Congress and the Senate are ready to deny the American auto industry a survival lifeline – one which is necessary because of poor political and economic leadership – and considering that governmental leadership has been almost exclusively unsound, then it must be that to deny the industry now would in fact be the wrong decision once again.