BIG 3 AUTO INDUSTRY BAILOUT DRAMA CONTINUES

What the 110th US Congress could not or would not do in its last days, the good old Bush White House got done, in its own dwindling away and winding-down days.  Two of America’s remaining Big 3 auto companies will get almost $14 billion to tide them over to…what? Their spring 2009 mandated reorganization?  A dramatic consumer market recovery?  An upturn in the troubled financial markets?  The return of sensible corporate sector financing by the financial services sector (the original bail out folks)?  All of these and more?

 

The Ford Motor folks say they’re all right for now, thanks, but General Motors and Chrysler were in desperate need of cash and other public sector support, so the two companies are getting their first checks in a few days.  The Bush Administration used the last bit of money remaining in the much-criticized TARP as approved by the Congress before it adjourned.  The money is all gone now – the overwhelming amount to large bank holding companies and financial services organizations with little strings attached in comparison.  For the auto guys, it is a different story. There are strict mandates attached to the funding that GM and Chrysler must abide to, or return the money next year.

 

As always, there are a lot of back stories to all this.  The auto chiefs made a classic blunder, a huge miscalculation of perceptions and public relations, you’ll remember, by taking separate private jets to Washington to ask for public support.  They were all in the hot seat for hours on Capitol Hill.  One of the old lions of Corporate Public Relations fame, who ruled in days of yore, and sat at the right hand of the CEO, surely would have counseled their client – The Boss – on how to get to Washington and what to say when you are asked…what do you need?  (And they would have primed the pump so that the question asked by House and Senate was, how can we help?)

 


The good old days for Detroit

There would be this scenario:  The best example of a new era auto – high mileage, low emissions, affordable, “green,” etc. — would have been received at the production plant as it came off the line by the chief executive. Photos and video and a special Webcast would capture the moment as the Heartland auto workers delivered the car, signed by all the local plant workers on the rooftop where it could be seen later from the Capitol windows, and a well organized drive would take place, CEO at the wheel, through America’s hometowns and the key districts (if possible) of the members of congress and senate. Certainly through Ohio, Pennsylvania, West Virginia, and Maryland (through Baltimore and past all those piled up foreign autos at the docks awaiting delivery).

 

Along the way there would be stops at local dealers, maybe a few auto plants and one or two of the company’s Tier One suppliers, and at chambers of commerce rallies organized by local dealer organizations.

Message:  We are all in this together, folks.

 

Then on Capitol Hill there would be a “spontaneous” rally with hundreds of auto workers and dealers and suppliers welcoming the chief executive to town, and a grand display of The Car (and other examples of Detroit’s best) on the National Mall, or near to it.  Congressional staff and even members, along with journalists, and a few advocate leaders thrown in (Sierra Club sounds good), would be welcomed and invited to drive the car around the Capitol Hill neighborhoods. This is Show Time! This is all about the future of American Car Companies and how we can help them!

 

Alas, those well-experienced PR lions of yesteryear are all gone now. We worked with some, such as Willis Player, the brilliant head of PR for Pan American World Airways, and Holmes Brown (my boss and mentor) at American Airlines (before that, he was head communicator at , Ford Motor Company).  In recent years the corporate PR staffs have dwindled away – don’t need communications, right? – and an army of eager independent outside PR agencies stand ready to deliver. If asked.

 

Those PR legends of yore would probably have told the auto chief and the staff attorneys that was not a good idea to ask for serious money from the people you have been suing for years.  The carmakers have filed lawsuit-after-lawsuit trying to stop or slow down various environmental and fuel economy and other public policy initiatives.  I’m surprised that one of the conditions imposed by congress wasn’t a withdrawal of these legal challenges by GM and Chrysler.  Probably would be unconstitutional.  But hey, isn’t a lot that goes on these days in Washington…a little or a lot unconstitutional?  Never mind.

 

The auto companies now have marching orders, or at least strict terms and conditions applied to the paltry sums received.  I know, we’re talking about real dollars at stake, especially on America’s Main Streets, but not on Wall Street, in 2008 terms.

 

What’s ahead?

 

  • Probably a paring down of the number of models and makes of Detroit-built cars and trucks.  (As one American auto exec asked rhetorically, if Toyota can be Number One with only two marques and a handful of models, why do we need so many brands and models?  Stay Tuned.)
  • Wholesale re-alignment of the types of cars manufactured and marketed in the USA.  “Green” is the watchword of the day.
  • A slimming down of dealer outlets, although there are some tough state laws on the books to protect the home turf retailers.  But we might see one-third, or even one-half of dealerships eventually disappear.
  • A restructuring of the basic businesses, closing of factories, laying off even more workers, more aggressive outsourcing key items to suppliers, and more.
  • Changes in the financing of pension funding and the retiree benefit packages. (In bankruptcy, under existing conditions, the Pension Benefit Guarantee Corporation would have a first-in-line claims on pension shortfalls.)
  • Maybe a combination or two, with the Big Three becoming Two or even One.  Don’t bet against this in some form.  More fees for the investment bankers, too.
And therein are the sources of lots of future pain for Main Street, of which the American auto business has been a big factor for a century.  Manufacturing jobs have a 4-to-1 or 5-to-1 ripple effect, one auto worker helping to create four or five other jobs — and as these much-desired industrial jobs disappear from our hometowns, there will be lots of personal pain.  Not to mention the potential of hundreds of thousands more foreclosures and falling home prices in the future (these could occur in local markets where banks and home sales are not yet in trouble).

 

It is good that President George W. Bush stepped in to support, at least temporarily, the backbone of American industrial might – Detroit’s Big Three.  In the scheme of things, with many hundreds of billions flowing out to the nation’s financial services companies, this was a small amount to invest. (And these are investments, we must note.)  Let’s hope the leadership of the auto companies follow through on their plans (plans which were painfully absent at those first Capitol Hill hearings) and that they can revive their companies’ fortunes.

 

What would this Car Nation, the America we know and love, be without the Detroit companies?  I shudder to think of that possibility.  We are all in this together.  The good news: This is a really good time to buy an America-made car or small truck – the companies have some terrific products to offer at every price point!

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