Sanford D. Horn | Not Your Father’s Stock Market – Does Anyone Really Miss Oldsmobile?
During Independence Day weekend in 2005 I bought a brand new Chevy Malibu. It’s such a nice automobile that General Motors now wants me to buy another one, except they won’t actually let me have the car. They, along with Ford and Chrysler want my money, but have nothing to offer in return. The same is true for the rest of American automobile owners and even those who do not currently own a vehicle of any kind.
Yes, my friends, welcome to the great American Automobile Bailout. The big three American auto makers in the United States flew into Washington, D.C. – on private jets, no less – obviously not learning anything from the piggish largesse demonstrated by AIG – hats in hand – upturned – begging Congress for a $25 billion “loan” to keep them afloat.
Remembering former First Lady Nancy Reagan’s anti-drug mantra of the 1980s, advice to Congress, “Just say no.” First the banking and financial industry, now the automobile industry, where does it end? Who will come calling next? Textile workers? The newspaper industry? Of course their failings are their own fault for all the pulp fiction the alleged mainstream media disguises as journalism. Well, as Harry Truman so eloquently noted on his Oval Office desk, “The buck stops here,” and here is with the American taxpayers. After all, the money Congress would “loan” the big three comes from the revenue provided by the American taxpayer.
And what do the taxpayers get in return?
Supporters of the bailout say it is necessary to prevent the auto industry from going bankrupt and eventually out of business causing the elimination of over one million jobs related directly and indirectly to the auto industry. Congressman Barney Frank (D-Mass.) never meet a bailout he didn’t like – starting with the initial $700 billion and the $100 billion dumped in the laps of the AIG weasels who continued living high off the hog on the backs of the taxpayers while the AIG executives were getting cushy massages. If Frank is for it, it must be the wrong thing to do.
On the other hand, Congressman Elijah Cummings (D-Md.) was right on target when he called for Edward Liddy, AIG’s beleaguered CEO, to resign as a condition of the bailout. Why keep the same leaders at the helm to continue running the ship into the ground.
The automobile industry is to blame for their current failings. Obviously they are not producing the vehicles that the American motorist wants to drive or if they are, the cost is too prohibitive. And just why is the cost too prohibitive? It begins and ends with labor costs. The labor costs of the big three auto makers in the United States is roughly $73 to $74 per hour, while the labor cost of the average American worker not a part of the big three is about $28 to $29 per hour. By the way, in Japan, the labor cost of the auto worker is about $45 an hour.
If the government bails out the automobile industry what is to prevent it from continuing along the same path to disaster? Certainly not the government, who can barely manage its own affairs. If the big three face Chapter 11 bankruptcy they would be forced to reorganize themselves in a more fiscally prudent manner. Perhaps it is time for GM’s G. Richard Wagoner Jr., Alan Mulally of Ford and Robert Nardelli of Chrysler, the Larry, Moe and Curly of automotive CEOs, to be left at the side of the road.
Reorganization ought to include a panel of “civilians” to advise the big three what will drive customers back into the showrooms. Perhaps the big three simply need to make better vehicles. Although to be fair, I have only owned American cars and have had success with them, including my current Malibu, which I really enjoy, but then, I have low expectations – get me where I need to go safely and in a timely fashion. I probably would not be a good candidate for the civilian panel.
In fact my first car was a 1973 Delta 88 Oldsmobile – a big ole honking four door, dare I say, Carolina blue, behemoth of a car that had crank windows, AM-only radio and took regular leaded gasoline. Oldsmobile has gone the way of the dinosaur and America has survived. Perhaps if GM, Ford or Chrysler faded away or merged with one another and streamlined themselves, they could once again be the strong, solid American automobile manufacturer people remember from yesteryear. Sometimes a thinning of the herd strengthens the herd. Probably something of which Darwin would approve.
Former Massachusetts governor Mitt Romney, himself a Michigan native, has come out against the bailout. He suggests that bankruptcy is the appropriate way to go as well, because why should the American taxpayer be forced to pay for something they obviously did not want in the first place. Romney’s father, George Romney, headed up American Motors starting in 1954. Anyone miss American Motors? They came into this world as a result of a merger between the Nash-Kelvinator Corporation and the Hudson Motor Car Company in 1954. They foolishly merged with the French company Renault in the 1970s and finally exited stage left when Chrysler bought out AMC. (Renault after all produced the hideous Le Car in the early to mid ‘70s. What a piece of crap.)
Lead, follow or get out of the way is the advice for the big three. If they can’t make it on their own, it just wasn’t meant to be. If bankruptcy will shake loose the cobwebs and give people something worth buying at a price worth paying, consumers will be back. If not, perhaps one of the big three needs to fade into the sunset.
Some who support the bailout have suggested it would be bad for the economy if the bailout does not occur. Well, let’s look at the tumbling stock market. When the Democratic-lead Congress approved the initial $700 billion bailout did the market suddenly turn around and enjoy an upswing? No. And with continued talks of more government handouts with taxpayer dollars, the market continues sliding into the mire and muck.
When the Dow Jones Industrial Average, first published on May 26, 1896 in Customer’s Afternoon Letter, the original Dow Industrials featured but 12 companies from America’s important industries. In 1916 the Dow expanded to 20 companies and finally in 1928 settled on 30 companies – the number used to this day. Of the original 12, General Electric is the last man standing – and barely at that. They have enough of their own problems.
So, what happened to the U.S. Leather Company? Dissolved in 1952. What about North American Company? Broken up in the ‘40s. How about the National Lead Company? Today they are NL Industries, but they were tossed off the Dow in 1916. And the American Sugar Company? Today, they are Domino Foods, Inc. – sugar, not pizza. Companies come and companies go – like the song says, a time to be born and a time to die.
And what about the original Dow 30? Sure, Chrysler and GM are still standing, but did the country fold when Bethlehem Steel, founded in 1857, went bankrupt in 2001 and dissolved two years later? No, other businesses pick up the pace. Anyone miss Woolworth? OK, it was an American institution, but now there is Wal-Mart. Potsum Inc. became General Foods, while American Can became Primerica. Standard Oil of New Jersey became Exxon while Texas Corp. became Texaco and is now Chevron – just a hair of a different color. All part of the original 30. In business there are no sacred cows.
It may not be necessary to reinvent the wheel, but reinventing the American automobile industry sure seems like a prudent idea.
– Column by Sanford D. Horn