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Why the “Big 3″ Automakers may not DESERVE survival

Today, I’ve heard one EXTREMELY stupid thing.  People in the US Government are calling for a bailout of GM and the other “Big 3″ US automakers, due to the fact that they are very near bankruptcy.   I have to say only one thing:

ARE YOU FREAKIN’ INSANE!?  WHY!?

Now I’m of course aware of the 2 million jobs that are held currently by employees of these car-makers,   and their losing there jobs would indeed be not only a tragedy, but a large strain on our government, and our morale as a country.  I’m also aware of the brand-identity that GM, Ford, and Chrysler carry.  They are names like US Steel.  Things that were at one time rock solid, the foundation of the US Economy.  Things that could NEVER possibly go out of business.

The problem is,  that is exactly what’s happening.  And it’s their own fault.

Continue on after the jump:

For years the image of US Automakers is one of companies that have lagged way behind in design, reliability, and overall quality of the vehicles they have produced.  This has led to a consumer exodus to off-shore companies like Honda, Toyota, Hyundai, and others who have taken the opportunity to drastically improve quality, and innovate in the areas of design all while keeping the price equivalent to, or lower than, American counterparts.  It has only been recently, perhaps since 2003 or so that the US Automakers have even begun to REALIZE how badly they were doing, and only extremely recently have even begun to compete in the areas of design.  Once again, the Non-US automakers have jumped ahead again recently, focusing on fuel efficiency and hybrid technologies,  leaving the US automakers in a rut.

Unfortunately, among the general consumer, there is still a stigma attached to US automobiles.  They are considered to be generally inferior, lower quality gas hogs regardless of the truth of the matter.

I am among a group of people that I know who have purchased new cars within the past 3 years.  Only one of those 10 people has purchased an American vehicle.  The majority of them purchased Nissans, a few others Toyota, one Honda,  and I purchased a Kia.   Which for the 2 months I’ve owned it so far, has been nothing short of fantastic.

The sole buyer of the american car?  He purchased a new Mustang.  Arguably the one good design decision that Ford has made in more than a decade.  Even though he is impressed with the “cool-factor” and performance of the car,  he remains underwhelmed with the quality.   The design of the interior he called “horrible”.   And the cheap chromed-plastic accents, and cheap materials used in the interior are 
“frustratingly bad for a $30k+ car”.

In these days of iPods and laptops as fashion accessories,  people flock towards GOOD DESIGN over most anything.  There’s a reason the Nissan Altima has been one of the best selling new cars of the past few years.  Not only does it compare in design, fit and finish, and overall quality with luxury cars from Lexus and Infiniti,  but it drives EXTREMELY well, and looks to be one of the most reliable cars released in years.

But I’ve gotten off on a tangent.  The point is, that Non-US Automakers are absolutely smashing us when it comes to design, reliability, and fit and finish.   So is there any reason that people couldn’t have seen this financial problem coming from a mile away?  I certainly did.  My parents bought a Ford Contour brand new in 1997.   It was fraught with problems from the get go,  so much so that they actually got it replaced with ANOTHER car under the lemon law.   That new car had even more problems than the first, and after sinking thousands of dollars worth of repairs into it, they vowed to never buy American again.   Somehow I don’t think this was an isolated incident.

So that brings me to the bailout.  Why in the world would bailing out these seemingly incompetant companies be a GOOD thing?  Like it or not, we live in a capitalist society.  Companies that provide the best service at the best price succeed.  Those who do not,  don’t.  If these companies can’t compete on the playing field,  I say let them go into Chapter 11 and be bought out by other companies, or endure a restructuring that will ensure that they re-enter the market lean and mean, with some actual DRIVE to create better cars at lower prices.

If they go out of business in the process, so be it.  It will likely not be the end of many of the American tent-pole vehicles like the Mustang.  Believe me that I’m sure there are many an automaker out there who would be drooling over the opportunity to buy the Ford name and to bring it back to it’s former glory.

The same goes for the factories that would be abandoned.   Likely the factories would be bought up by other automakers,  retooled and modernized.  Many of the displaced workers would likely get jobs with the new automakers, and those who didn’t would have to find something new to do.  It hurts, but such is life.  I currently work in the neon industry,  an industry that is dying to to environmental concerns, and the drive towards more subtle forms of signage.  I’m going back to school to learn something new,  and I’m not afraid of that.  Likely whatever I choose to do in the future will make me more money simply because I’ll be more prepared to compete in a global economy.

Giving a bailout to these automakers would save the jobs in the short term, but just ensure the death of these companies in the future.  A company fat with bailout money would have even less drive to innovate than they do now.  They wouldn’t HAVE to create good products, simply because they know that at the first sign of financial distress they will likely be bailed out again.  Corporate bonuses and all. 

Let’s put this situation another way.  In the Tech Industry a former giant is in distress.  Yahoo’s stocks are trading at all time lows,  and they are wildly restructuring in a desperate effort to survive, because rival Google has been able to provide a better and more valuable product.  What if Yahoo came to the US Government and said “We’re an internet institution, and our failure would cause the loss of thousands of jobs, and degrade the morale on the entire US Economy,   can you please give us a billion dollar bailout?”

What would the government say then?   They’d say HELL NO.

So just because these automakers are larger companies, that have been around longer, that gives them more of a reason to come looking for handouts?  I think not.  If you’re being out marketed, then either fix it or go out of business.

I can’t state how strongly I disagree with this bailout proposal.  GM and the other Big 3 automakers are rolling in corporate bonuses and private jets, even while the companies are falling apart.  It’s time for them to learn that even the mighty can fall.  When (or if) they get up,  the auto industry will end up being all the better for it.

Sometimes the medicine tastes bad,  but if you don’t take it, it’ll only get worse.