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The Big Three are Back in Washington

This article was written by in Consumer. 13 comments.


The CEOs of Ford, General Motors, and Chrysler are heading to Washington, D.C. today for the second time to plead for government assistance. The first trip resulted in public relations faux pas. They flew to Congress on private corporate jets, spending much more company money than necessary. This brings to mind the image of someone driving a Bentley to pick up a welfare check. More importantly, they appeared before Congress without a solid plan for improving their companies’ health.

The Big Three corporate leaders got the message. They’re coming back, driving from Detroit to Washington with hybrid vehicles. That moves has made a lot of noise in the new media, but the important part is the plan.

Like the hybrids, the CEOs have made a symblic gesture to reduce their salaries to $1 each per year, but only if they get their bailout loans from the rest of the country. Beyond the symbolism, it’s the plan that’s important. General Motors is offering the most drastic proposal of the three, including a reduction in workfroce by at least one third and reducing the number of plants. Ford wants to increase production of the small Focus, simplifying and reducing the expense of the design.

Are these proposals enough?

The domestic auto industry will most likely get their money. This time around, they’re asking for $34 billion, more than the $25 billion they thought would do the trick last month. They might not get all of what they want, but I don’t see Congress letting these companies fail.

Published or updated December 4, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 13 comments… read them below or add one }

avatar Eden

They should be allowed to fail. If they do get this bailout, they’ll be back soon enough asking for more.

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avatar Mike

These are empty gestures. They should have “gone to these extremes” long ago, not now when they want a free hand-out. After all, they’re showing up in hybrids now only because people were so angry at them the first time they showed up in jets demanding money. They didn’t even clue in the first time they wanted money. I love how it’s OUR fault how the world will be in ruin if WE let them fail by not giving them our money for free! How about running a company properly in the first place??? These people make me so angry, the nerve they have…

DON’T bail them out, don’t believe anything they say, let them fail so a more efficient company can take over.

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avatar CJ

$1 per year means nothing as they likely have lots of stock in the company and even if they lost their jobs, the golden parachute would be large. It’s just a publicity stunt.

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avatar sjm

Let ALL three fail. The next generation of efficient cars will come from cilicon valley and NOT Detroit. All three are spoil brats who do not want to grow up and be self sufficient. Tough love is the best medicine. Bankcruptcy is the best medicine even though it taste like crap.

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avatar Craig

I agree with CJ that the salary is a publicity stunt. I like everyone else want to learn about their new business model. The companies should be making more efficient cars that require less money to fill up the tank, and could benefit the environment. Of course that’s asking a lot, but people want to see change. Is there any?

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avatar UH2L

It’s amazing the amount of ignorance there is out there about the auto industry. Cars are not computers, software, or cell phones, and you can’ outsource them to China and start making cars in a couple of months. There are years of lead times for tooling, testing, and development, and so much specialized expertise is behind them. I think a lot of the anti-loan sentiment is out of jealousy and disdain. We should move beyond that in understanding what is best for our country and its people. I became tired of retyping why I think the loans, (not bail-outs since the money is to be repaid), are necessary…

link

I address all the issues 1-by-1. Please have a read.

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avatar UH2L

To add another point. I expect that if the Detroit 3 get their loans that they will be required to produce more efficient vehicles which is good. But is there any guarantee that people will want to buy these instead of more powerful vehicles if gas prices stay below $2 per gallon? No. Consumers didn’t want them before when gas was under $2 a gallon and now that it is again, Ford had to add shifts to build its F150 pick-up trucks. And you can criticize them for doing so, but if they didn’t, Toyota would have been happy to ramp up their Tundra production to fulfill the need and increase their own profits. I just doubt that the public and the media would criticize Toyota, (the media darlings that they are), for doing so.

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avatar vilkri

I read about an analyst yesterday who estimated that the big 3 needed $125 billion (or was it 175) to get back in shape.

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avatar PerDiem

If they are really worth saving, Warren Buffet would have bought one of them by now.

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avatar York

Eden said it first and said it best, they should be allowed to fail. Their business model is failed with bloated union salaries / benefits and cars that people don’t want. Until these issues are fixed, a “loan” is money going down the toilet

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avatar UH2L

York,

They may have slightly higher salaries but the benefits are ones that have helped us all get better benefits. I guess you want our country to have to pay for their unemployment and Medicaid now while having less tax revenue from the millions of lost jobs. And since when is nearly half of the market cars that people don’t want? Read the link I posted above to learn about the realities of the auto industry.

UH2L

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avatar Chris

I’ve been discussing this with someone at work pretty intensely. On one hand, they should be allowed to fail because that is capitalism…but on the other it could lead to a huge snowball effect of job losses, etc. There are so many distributors and suppliers, etc. that are tied to the big three that it could get pretty ugly.

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avatar Jim

A lot of people here think the automakers shouldn’t get loans and should be allowed to fail. To those people: Do you think AIG or the banks shouldn’t have gotten loans they already got and should they have been allowed to fail?

Just curious. It seems theres a lot of people very against auto maker loans. I don’t seem to remember such an outcry and criticism of AIG and banks who already got several times as much without highly publicized congressional criticism of executive jets or executive pay.

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