James’s Musings

thoughts, photography, and geeky stuff
from an unrelentingly curious Silicon Valley entrepreneur

Vehicular Hats in Hands

by James G. Beldock on November 19, 2008

I just spent an un­com­fort­able hour watch­ing the CEOs of Ford, GM and Chrysler tes­ti­fy in front of the Senate Banking com­mit­tee on C-SPAN. (I’m not nor­mal­ly a C-SPAN view­er, but ex­tra­or­di­nary times call for ex­tra­or­di­nary view­ing.) As a CEO, I have spent my re­cent days in part en­gaged in bat­tling the ram­i­fi­ca­tions of the down­turn. So it’s hard to lis­ten to the­se three guys, with whom I share a title—if not the un­fath­omably large businesses—and not feel for them.

source1

To lis­ten to Robert Nardelli (Chrysler, for­mer­ly CEO of Home Depot), his com­pa­ny has min­utes re­main­ing. I’ve cer­tain­ly ex­pressed a sense of ur­gen­cy be­fore in my job when work­ing to close a deal, but it’s im­pos­si­ble to lis­ten to him and not sense some­thing pro­found. Three of our great in­dus­tri­al gi­ants are will­ing to speak pub­licly about endgame. Rick Wagoner (GM) se­ri­ous­ly dis­cussed a “pre-packed” Chapter 7 bank­rupt­cy (sure­ly a tri­al bal­loon al­ter­na­tive if ever I’ve heard one) by quot­ing mar­ket­ing stud­ies which show con­sumers are over­whelm­ing­ly un­will­ing to buy a car from a bank­rupt com­pa­ny. When was the last time you heard the CEO of a ma­jor non-fi­nan­cial com­pa­ny speak­ing about such po­ten­tial down­sid­es alongside his com­peti­tors? Extraordinary times in­deed.

But not ex­tra­or­di­nary enough.

Towards the tail end, Alan Mullaley (Ford, for­mer­ly Boeing) was asked whether his com­pa­ny would ex­ceed the new CAFE fu­el econ­o­my stan­dards. His re­spon­se? That Ford would bare­ly be able to make them, and would not be able to ex­ceed them. The oth­ers agreed with him. That one re­spon­se con­vinced me that any bailout of US au­to­mo­bile man­u­fac­tur­ers should 1) be to­tal­ly fo­cused on sav­ing jobs (mil­lions of them, po­ten­tial­ly), and 2) must be so severe­ly puni­tive of the com­pa­nies them­selves that they don’t get out of jail free. These three com­pa­nies have suc­ceed­ed in lob­by­ing their way out of in­no­va­tion leg­is­la­tion (fu­el econ­o­my, safe­ty, pub­lic trans­port, etc.) for decades. Consumers have re­spond­ed by choos­ing for­eign man­u­fac­tur­ers pref­er­en­tial­ly (e.g. Toyota who pushed hy­brid tech­nol­o­gy as a dif­fer­en­tia­tor). US man­u­fac­tur­ers drop to the bot­tom of the list of con­sumer choic­es be­cause of the man­u­fac­tur­ers’ com­pla­cen­cy, and then a con­trac­tion comes along and en­dan­gers the bot­tom of the bar­rel. Surprise, GM, Ford, Chrysler, you now in­hab­it the bot­tom of the bar­rel pre­cise­ly be­cause of your com­pla­cen­cy!

A lit­tle cap­i­tal­ist Darwinism is in or­der here. If the­se guys had worked on fu­el econ­o­my and al­ter­na­tive tech­nolo­gies 20 years ago, CAFE stan­dards would be un­nec­es­sary now. For want of those pri­or in­vest­ments, it is not the Government’s job to sub­si­dize their lack of busi­ness skills. Do what we need to to save the jobs (lest we fur­ther en­dan­ger the econ­o­my), but oth­er­wise I vote let the­se com­pa­nies suf­fer the fate of oth­ers who stick their heads in the sand.

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  1. Businessweek on­line, “Auto Execs in the Hot Seat” http://www.businessweek.com/bwdaily/dnflash/content/nov2008/db20081118_113319.htm?chan=rss_topStories_ssi_5 []

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