Too big to fail?

Are they really?

Failing

The “Big Three” US automakers are trying to convince Congress and the American taxpayers that they are too big and important to the US economy to be allowed to fail. But are they? And if they do, what are the real ramifications? The truth is, they already have.

Presently, they are asking for $25 billion dollars, money that was conceptually set aside for an R&D infusion to develop new vehicles that would be better suited to today’s market, realities of fuel supplies, and environmental concerns. However, that money would have better been offered a few years back so that they would now have the vehicles that the markets want, rather than SUVs and trucks. Of course, they wouldn't have had interest back then, seeing he profits to be made by building bigger, so that’s a moot point. If that money were given to them, now, it would be sucked down the drain like that rest of their remaining capital, and they would return to the trough within a year, still without progress on new vehicles.

So, what to do?

Let them go into Chapter 11. It won't be the economic disaster that the automakers and their unions predict. Of course, some jobs will be lost in the short term, but when (or if) they emerge from bankruptcy, if done right, they will be more competitive in the market and their remaining employees will have more job security.

Solutions

The US automakers are bloated dinosaurs, still working under business plans put together many decades ago, when they truly were the engines of the US economy. Things have changed, but they haven’t. They have too many brands, overlapping models that mean that each company competes not just with other automakers, but also with themselves. This was fine back when GM, Ford, Chrysler, AMC (remember them?), etc. had the entire market. But those times are long gone. Consumers have more choices, and have voted with their feet. In order to survive, GM, Ford, and Chrysler have to reorganize or die. It’s just that simple.

Ideas

Does GM really need all of those brands? Does it really need two truck brands selling the same product with slight cosmetic differences? Does it really need to have Chevrolet, Buick, Pontiac and Cadillac? Toyota and Nissan have two main brands- Toyota/Lexus and Nissan/Infiniti. GM could be successful with just Chevrolet and Cadillac. Does Ford really need the Mercury brand? Chrysler sells the same SUVs as Chryslers, Jeeps, and Dodges. And they sell their minivans as both Chryslers and Dodges. They could easily have Chrysler sell cars, Jeep SUVs, and Dodge trucks.

Why all of this redundancy? Too many dealerships left over from decades past. They should be consolidated, along with the brands that they carry. The dealers, along with the manufacturers, would become more profitable.

Labor is another problem for the “Big Three.” Their costs are such that they can’t compete. And to top it of, they are paying people not to work so that they will be available to work again when shuttered plants are reopened (like that will actually happen). Though I feel badly for the effected workers, their leaders went into collusion with their employers many yeas ago with a plan that can't survive today.

Bankruptcy

It’s the only solution. The automakers are spreading rumors that consumers would lose confidence in them if they went into chapter. Unlikely. Most of their previous customers left a long time ago an the remaining ones are their because of brand loyalty. If they haven’t moved on before now, they will stick it out. Airline passengers didn't stop flying when the major airlines reorganized, and the automakers will survive.