Big Three Car Companies And Bail Out

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There must be an across the board pay cut, including for the CEOs and all managers, not just the assembly line employees. Many jobs can be saved just be eliminating the millions in compensation for top management. These managers obviously don’t have unique skills otherwise the companies wouldn’t be teetering, regardless of the global financial malaise; they can be replaced.

[Post Election: The Economic Woes]

Of course the so-called "Big Three," General Motors, Ford, and Chrysler will get the bailout they are seeking—the decision won’t come from Congress; the decision comes from the announcement that the nation lost 533,000 jobs in November, which brings total job losses this year to 1.9 million. The unemployment rate is edging towards 7%.

More woes are on the horizon. The car companies should get relief based on strict conditions; at the same time, the government must start announcing dates by which
some of the Job Creation programs can realistically be launched. Otherwise the public will resent any assistance to the car industry, as with the banks. Some of the
banks, ironically, have not been lending to businesses even though they have received billions from the government.

The auto industry employs an estimated 300,000 people; and millions more jobs, such as the parts suppliers’ chain, are dependent on the car industry.

But the Big Three still should sign on to tough measures to get the bailout.

[] The first question that the Senators should have posed to the CEOs of GM, Ford, and Chrysler at the beginning of the current hearings in Washington should have been "Sir, how much do you currently make in total annual compensation?"

There must be an across the board pay cut, including for the CEOs and all managers, not just the assembly line employees. Many jobs can be saved just be eliminating the millions in compensation for top management. These managers obviously don’t have unique skills otherwise the companies wouldn’t be teetering, regardless of the global financial malaise; they can be replaced. They must be forced to abandon millions or denied billions of dollars in bailout money for the companies.

[] The auto companies should consider mergers to reduce costs while maintaining economies of scale.

[] The auto companies should even consider a merger with a leading Japanese company that is already far ahead in fuel-efficient and other hybrid cars technology.

[] All of the above won’t amount to much if the retirees healthcare bill and pensions can’t be somehow renegotiated; where possible, some retirees may have to be invited back to work. If the retirees are approached in a respectful and non-confrontational manner, they might consider cooperating voluntarily. Otherwise the companies may be forced into bankruptcy resulting in a loss-loss for current employees and the retirees.

[] With the record job losses, and with it consumer purchasing power, effective demand can only be created by providing consumers money for purchasing cars, which of course will lead to deeper government deficits.

[] If the CEOs and top management reject the terms for a bailout, the companies should be forced into bankruptcy and then acquired by a partnership between the government and newly created private companies comprising experts in the auto industry.

The Big Three should be saved not because they deserve it more than any other industry, but because the domino effect of collapse would be calamitous. Yet, the government must dictate the terms of the bailout.



 

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