Thursday, November 13, 2008

No Life Support, Please

General Motors and Ford are in trouble, and seek a government bailout. Bailouts are generally a mistake, and I believe would be one in this case. These companies are poorly managed, subject to bullying by the UAW, and seemingly unable to make fuel efficient cars of high quality at reasonable prices. And in terms of new product development, they are whatever the opposite of "agile" is: the terms slow, clumsy, and ponderous come to mind.

Good friends recently took two auto plant tours while doing a cross-country RV trip. They visited a GM plant and a Toyota plant and said the differences were night and day. The Toyota plant was, they said, clean and modern and robots were doing a lot of the work. They reported the GM plant was old, dirty, and most of the work was being done by (highly paid) unhappy-looking people.

A bailout would reward failure at these firms, and that isn't a good idea. It is possible that spending a year in Chapter 11 bankruptcy would give them the opportunity to dump their UAW contracts, close their oldest and least efficient plants, and rationalize their international production. Then again, they may be beyond help.