What Would Slandy Do?  I’ve been asked many times recently - what is the answer?  Surely, the government shouldn’t just throw money at the D3.  They need to reform, etc, etc.  At the risk of being presumptuous, here’s what I would do, if I were emperor for a day (just for the auto situation - I have a whole separate list for other topics :^) ).

First, I would allow ALL of the protections of chapter 11 bankruptcy without the actual filing.  The “B” word would be death to the car makers.  Nobody is going to buy a car from a bankrupt automaker.  This would allow them the breathing room to make the changes they need, including rewriting the UAW contract.  I’ve written that the UAW has already given, which is true, but other areas need to be addressed.  The top of that list is work rules.  It is true that the cost of a UAW worker is about the same as a “transplant” worker, but the onerous UAW work rules force the D3 to have too many workers and pay all of the workers the same, regardless of their actual job.  This results in the guy who cuts the grass to be paid the same as the workers in the plant who actually make the cars.

This would also include a provision that supersedes the state franchise laws.  One of the biggest problems is the number of dealers.  The D3 (or any other maker) is severely restricted from rationalizing the number of dealers by state franchise laws.  The D3 have way too many dealers, primarily in urban areas, but would have to pay billions to reduce the number.  Meanwhile, the dealers can’t make any money because there aren’t enough sales to go around.  The D3 need to have the power, with some restrictions/oversight to reduce their dealer count without using all of their cash.

Next, I have suggestions for each of the D3.  First, Chrysler.  Chrysler is in a unique situation, having ownership that is a private equity firm (Cerberus) that obviously doesn’t want to be in the car business.  Cerberus obviously bought their 80.1% stake in Chrysler cheap (or so they thought) and hoped to make a quick buck.  Oops.  Some think the government should just let Chrysler die, because Cerberus doesn’t deserve the help.  Maybe, but what about the workers and management that had nothing to do with all of the ownership changes?  Why should they suffer?  To address this, Emperor Slandy will give the loan to Chrysler in exchange for 100% ownership of Chrysler, including the 19.9% Daimler stake.  Next, I GIVE (or sell for a nominal amount) Chrysler to Nissan-Renault or Volkswagen or another OEM whose product lineup would be complemented by Chrysler’s.  In return for this gift, they would have to agree to keep a certain number of employees and plants open and working.  They would get the benefit of the Chapter 11-like protections to restructure Chrysler’s business.  Cerberus should be happy with that, as they can just walk away without any further losses.  Same for Daimler.  Chrysler employees should be happy too, especially considering the alternatives.  And we, the taxpayers should be happy as well.  We’ve saved jobs with potentially no cost, assuming that the loan is paid back.

General Motors needs the loan, and the fake bankruptcy will give them the room to restructure into a leaner, meaner, more competitive enterprise.  One cost savings that GM should have put in place years ago is their company car program, otherwise known as PEP (Product Evaluation Program).  In its present form, PEP car drivers get a new (usually fully-loaded) vehicle to drive every 4 months.  For this, they are charged a nominal fee ($150/month), which includes EVERYTHING (gas, insurance, maintenance and repairs, unlimited miles).  GM justifies this program by saying it puts the products in the hands of the employees so they can be more familiar with the products and can therefore make suggestions for improvement.  Possibly, but this program, with the structural costs that go with it, is a huge expense that GM cannot afford, even in good times.  The dealers would certainly appreciate the increase in business that would follow (see comment above).  GM could adopt Ford’s company-car program.  See below.

Ford is in the best shape, and doesn’t need any loans…for now.  Ford’s company-car program could use some changes as well.  Management-level employees at Ford get to lease 1 or 2 (depending upon the level) vehicles per year which include everything the GM program does except gas.  The difference is that Ford employees pay much more and the amount depends on how expensive the car is, so Ford makes money on its program.  The suggested change is to eliminate the company-car garages and infrastructure that support the program in and around Dearborn.  Give the dealers the business; they will appreciate the increased business as much as GM’s will, and Ford saves millions.

I also think that all remaining employees, from the top down, should take a pay cut of 5%.  The sacrifices should be spread out among everybody.

The government needs to do its part as well.  We need health care reform (as the countries of the foreign competitors do), trade reform (previously discussed), a coherent energy policy that would include a significantly increased carbon/gas tax and better monetary policy that would address currency manipulation practiced by our friends in other countries.  With all of these in place, the playing field will be more level, allowing our home teams to really show that they can be competitive when the deck is not stacked against them.

If this makes sense to you, you need to do 2 things.  First, write your congressional representatives.  Second, vote Slandy for Emperor!  If you don’t agree, post a comment below with a better idea.  I am always willing to listen to the people.

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