December 1, 2008

Government needs to reform auto industry

By David A. Love
Progressive Media Project/
McClatchy-Tribune News Service

November 28, 2008

The U.S. auto industry is solely to blame for its problems, and any government aid package must have strings attached.

As someone who worked for two of the Big Three automakers, I witnessed firsthand the problems in the industry: large, inefficient bureaucracies that kill good ideas, a crippling, top-down, military-style chain of command and a system that churns out bland, uninspiring products.

In the 1970s, the Big Three were manufacturing their gas guzzlers when the United States was hit by the oil crisis. Unprepared for change, they were served up as lunch by their Japanese and European competitors, which offered smaller, attractive, fuel-efficient cars.

In the 1990s, General Motors introduced a battery electric vehicle, the EV1. But GM killed the car.

Instead, GM, as well as Chrysler and Ford, invested in SUVs, Hummers and other tank-like vehicles that boasted single-digit fuel economy, yet reaped great profits for their manufacturers. Then the price of oil soared, and like three decades earlier, reality caught up with the Big Three.

And yet, for all of their failures, America's car companies continue to lavishly reward their executives. For example, Ford CEO Alan Mulally earned $39.1 million in the first four months of 2006, in a year when his company posted a $12.7 billion loss, according to Reuters.

Rick Wagoner, GM's CEO, received a 33 percent pay raise in 2008 and equity compensation of at least $1.68 million in 2007, a year when GM reported a $38.7 billion loss, according to the Wall Street Journal.

Meanwhile, the head of Toyota makes roughly $1 million a year, and the Japanese automaker will likely make a total of $5 billion in this recessionary year. After all, that company manufacturers cars that people actually want to buy.

This is where the U.S. government comes in. Now is the time for the government to force the Big Three to change their product line.

President-elect Barack Obama's plan to put 1 million electric vehicles on the road in 10 years sets the proper tone for a nation that wants to grow its industry and save the environment. Detroit must commit itself to manufacturing efficient and affordable vehicles that operate on alternative fuel sources.

At the same time, government must ensure that unions are strong in a revitalized auto industry. They should not have to pay for the foolish decisions of management.

What's more, if we had universal health care in this country, it would make the auto companies more competitive with their Asian and European competitors.

Never has there been a greater opportunity for an ailing automobile industry to turn their lemons into lemonade. But they do not deserve a blank check.

If the Big Three don't agree to go green, then let ExxonMobil bail them out.


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El Jaguar Edu said...

This is such an important topic on so many levels, and I see the frustration in many people's reactions when this issue comes up. My only worry is that the solutions may be so obvious that they will appear foreign or impossible to many of us. I really hope that we as a country can turn this around. We need to marry innovation with progress. Glad to see that you are willing to speak about, especially given your experience in the auto industry. - Edu