Should the US auto manufacturers be saved?

The pre-production Chevy Volt makes its debut at the Los Angeles Auto Show

With all of the news on the US automakers going to Washington this week, many are calling for a shake-up of the management at GM, Ford and Chrysler. They justify their call by pointing at the carmakers and accusing them of putting their heads in the sand while letting their respective companies gradually lose market share to foreign manufacturers.

This argument may have been valid in the 1980’s but not today. Ford and Chrysler both have new management teams in place. And GM has a new focus on product, product that Americans will buy.

Ford’s new chief, Alan Mulally, came to Ford after a highly successful career at Boeing. He has put together a new team and has set in motion a product plan the concentrates on smaller cars along with new technologies and green thinking. The Ford Fusion (and the just announced Fusion Hybrid) is clearly a competitive equal to the vaunted Toyota Camry and Honda Accord, but all we hear about are gas-thirsty Ford trucks and SUV’s. Do you know that Toyota’s line-up features more big SUV nameplates then Ford?

Chrysler is basically a brand-new company formed after years of German control during the Daimler-Chrysler takeover. Chrysler has just unveiled prototypes of extended-range electric and pure electric vehicles and the LA Auto Show this week, with a release target of 2010 no less. Chrysler is currently headed up by Bob Nardelli, of Home Depot fame and while not a car guy, has a reputation for cutting costs and getting things done. Current product wise, Chrysler is in the most trouble of the US automakers with the only the Dodge Caliber as a small, fuel-frugal offering.

If anyone should be on the chopping block it should be Rick Wagoner. He has overseen the decline of the once great GM, but at least he was smart enough to bring in Bob Lutz and put him in charge of product. The result is some innovative design like the Tahoe Hybrid, and soon the Chevrolet Volt. The plug-in hybrid Volt, like Chrysler’s electric, has the potential to be a complete game-changer for automotive technology. Plug-in electrics promise to bring America into the forefront of green automotive design and American companies should be leading the parade.

It is quite simple, if the US manufacturers are allowed to go into bankruptcy, the first thing that will get cut is all of the leading edge, high tech development. These programs may have high potential return but also enormous risk. The manufacturers would be forced to concentrate on basic vehicles with proven technology (read gasoline, internal combustion engines) and little innovation. Now we open the market to allow the foreign manufacturers to introduce the new technology, leaving Ford, GM and Chrysler to, at best, license the technology from Japan & Co. Sounds like television sets and personal computers doesn’t it?

A bailout won’t be as simple as writing a $20 billion check to Detroit. A number of steps need to be taken to restore prosperity to the American automotive scene. Many senators and congressmen are calling for limitations on bonuses and other compensation for auto executives. This is probably a good idea, at least until the government loan is paid back. But salaries throughout the chain need to be addressed, including the union workers at the plants. It is union rates and especially the benefit programs that hamstring the US manufacturers in their ability to compete worldwide. Compared to European and Asian manufacturers, Detroit is excessively burdened with labor costs and retirement packages that add significantly to the price of each and every vehicle.

Allowing the companies to go through bankruptcy and throwing out the current management teams will potentially be a drastic step backwards. Look at the plans that are already in place, the products are sound, in step with the times, and attractive to the American consumer. And above all, taking government money should not mean government control of product planning. History has shown that the companies are most successful when the true gear-head, car people are making the decisions. Now if we can just get those executives to stop using the company jets while begging for money…