Let The Automakers Go Bankrupt

After watching the Big Three Automakers go before the House Financial Committee Wednesday, I cannot but help shake my head. Yet another industry asking for a handout. And what timing - right when the economy is falling flat on its face.

I am not happy that I have to dig into my pocket and help companies that I have no vested interest in that don't serve me, my country, or my environment. Are you?

I ask myself what makes GM, Chrysler and Ford so special? Is it that they have been iconic figures throughout American business history? Or is it because of the love for the products they produce?

If the Big Three aren't serving the general population by creating products that are inline with what is best for the people and the environment, then they should be let go and let other auto makers that have a clue to fill that void.

Over the past two decades the Big Three automakers have shown that they aren't very serious about the environment nor concerned about fuel efficient vehicles. Instead, they are interested in their own greedy profits lobbying against it - especially General Motors. Evidence of that is in the manufacturing plants in Canada, Mexico, and other foreign countries where there are cost savings at the expense of the American autoworker. That is just plain wrong.

Then ask why did these companies go against conventional wisdom and produce gas guzzling SUVs prior to a pro-oil administration? Did they get any special treatment? According to OpenSecrets.org, General Motors lobbied for nearly $10 million in 2008. United Autoworkers for nearly $25 million.

And how is the Bush administration treating them today as it heads out the door? That's right, they are being snubbed. President Bush and Secretary of Treasure Paulson aren't going to lend one penny out of the $700 billion dollar bailout money as Michigan didn't carry McCain (Obama won 57% of the vote). So they are now forced to run to Obama to help them out.

US automakers are out of control and need a short leash. If the American public is going to help them out, they need to give us some definite answers. Yesterday Rick Waggoner CEO of General Motors avoided many crucial questions directed towards him especially the question of when would they run out of cash.

Maybe we US citizens should ask ourselves why we should take a part of our salary to give to US automakers who don't have their act together. More so when the cars they produce are being built outside of the country.

In lieu of the situation, here's what I propose. I call this the "Americans Own Automakers" bailout plan:

1. Go Bankrupt

   There's little value in the assets of Ford, Chrysler and General Motors. Start fresh with a new business model and have a government division watch and monitor you. I don't want your stinky books and I'm surely not going to buy your crappy stock.

2. Executive Pay Reward System

   If you are running a company in the ground you don't deserve to make more than the President of the United States. Salary compensation should be like when I grew up. I got a weekly stipend for doing my chores. When I did good work, I got a bonus.

   Same should go true here. Reward on obtainment of goals, not incompetence for running a ship into the ground.

3. Autoworkers Are Overpaid

   Autoworkers are making too much and your labor unions are too powerful. $75/hour including benefits? Give me a break. Go bankrupt and go back to the table for a much lower labor contract.

   • For those who are senior level, no more than $35/hour
   • Rookies start off at $12/hour
   • All employees get health benefits

   Thats it. No more.

4. Raise Capital With A New Offering

   Get rid of the companies. Sorry shareholders but there's nothing investors want with the old stuff.

   Create one company and streamline your outfits under one corporate roof. Liquidate all your assets and lump them all together. You need to compete with foreign automakers as a strong unit.

   The people of this country will give you $25 Billion dollars as starters. But you will in turn give us $25 Billion in "B" shares.

   Sixty percent of the company will consist of "B" shares, owned by the citizens of this country. The other forty percent will be held by outside investment institutions like mutual funds and state pension funds in "A" shares. "A" shares are not convertible to "B" shares and vice versa.

   Both "A" and "B" shares will trade publicly on the NYSE. There will be no options trading that can influence the stock price. The company may purchase back both "A" and "B" shares at any time. However, it may not issue out more "A" or "B" shares.

5. Transparency

   If the US taxpayers are going to foot this bailout, we want to see the books. It should be a requirement for you to post your accounting on a real time basis on your corporate website. Forget the 10Q and 10K filings. We want to see where our money is going.

6. New Vehicle Requirements

   Screw the Hummers. Forget the Escalades. Its time for you to start developing vehicles on a time schedule to meet consumer and environment demands. You got away with producing SUVs and gas guzzlers over the years. Now its time to hold you accountable if you want to stay in business.

   All passenger cars should meet a 30 mile per gallon minimum fuel standard. Light duty trucks should meet a 24 mile per gallon minimum fuel standard. All of these should be obtained before 2010.

There's a plan for starters and for Gods sake start producing better cars because nobody in this country is going to buy your product if you are near bankruptcy.

About Kerry Kobashi

Kerry is the founder of KerryOnWorld. He lives in Silicon Valley and has worked as an engineer and project manager. He owns Kobashi Computing a consulting company.