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Posts Tagged ‘automoblles’

The congressional hearings which are currently underway in Congress provide another window into the last gasp of a Twentieth Century iconic industry. The CEO’s that are appearing before Congress today do so in an effort to salvage a business model that has become obsolete. At one time the American automobile industry was a dominant symbol of the American economy and represented the power of American intellect and enterprise as evidenced by bigger vehicles, with bigger engines for consumers with bigger dreams. 

Today we are in an environment vastly different from the post world war two boom that led to the creation of classic big fin, white walled, chrome sculptures that roamed our streets and highways in an America that was driving toward the future at an ever accelerating pace.

 The politics of the day require that CEO’s embrace technologies that they are not prepared for in order to push the green agenda forward. In this case no green support means no green dollars from Congress. The irony of course is that Detroit’s Big three automakers are asking for support at a time when fuel prices are at a three year low as a result of the speculation in the oil market having succumbed to another cycle of reduced demand caused by a recession that some economists indicate began a year ago in December 2007. 

An industry,  that was begun over a century ago by a few entrepreneurs, that laid the ground work for an economic renaissance has become the symbol of all that is wrong in American business today. We are quick to malign the CEO’s for the state of the industry and the state of their particular companies however, little allowance is given for the rapid decline of our current economy and the subsequent effect on consumers purchase of automobiles. After soaring fuel prices over the summer we said goodbye to our SUV’s and embraced crossovers, hybrids, smart cars, solar fuel, wind turbines, cycling and skateboarding.

Consumers now bear the burden of those choices by hastening the decline of an industry burdened by high labor and benefit costs. Support must be provided to the big three automakers to prevent another underpinning of our economy to sucumb to the economic battle we are currenlty engaged in.  There should be no question in the minds of Congress that should the American auto industry collapse in the near term the effects on the broader economy will be catastrophic. There is no time for grandstanding on political principle when the broader issues are immediate and demand resolution.

CEO’s make decisions everyday about their business. The group of three before Congress today have decided to comply as necessary to redeem themselves, their companies and their industry. Clearly, the symbolism conveyed by each of them driving to Washington as opposed to flying in corporate jets is meaningful for the moment. However, what should be most critical is the plan to resolve near term cash requirements and the longer term business plan to revive a sickened economic linchpin. That plan may result in the sale of existing corporate air fleets or a reduction in private charters as the auto companies move forward and indeed if directed by Congress. 

Taxpayer support in the form of low interest bridge loans would certainly be appealing to me if I were CEO4aday at one of the auto companies and the intrusion by Congress in my business would be tolerated given my available options. I doubt that covenants and restrictions on business practices would be significantly different from Congress than that of other sources of funding if they were available.

We are experiencing a hybrid form of captalism in 2008 and what better vehicle to showcase it than the auto industry. Congress should act quickly to pass a legislative solution for the auto industry while holding management acountable for both short and long term viability in their business practice.

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