$25 billion to who? For what??
Ok, let me know if I heard this correctly. We’re going to give $25 billion of taxpayers’ money to GM so they can continue to lose $2 billion of it each month. I’m no math genius but that means they will lose all of it in…let’s see…divide 12 into…carry the…bring the remainder over…A YEAR! (Right?) To be fair, if they simultaneously implemented massive cost cutting measures they could make it last another entire six months!
I agree we have to do something. If GM ceases to exist, so does the entire U.S. automobile industry (how far behind can Ford and Chrysler be?) This doesn’t just mean the end of the Big-3; it means the end of an entire supply chain — hundreds of companies employing hundreds of thousands of people. The U.S. needs this industry and it is in a very bad place. When I think about the government writing GM a check for $25 billion (a very, very…very small portion of which is mine) I get, well, angry. The word “insanity” comes to my mind.
If I believed for a minute that the decision makers who run GM could take $25 billion and magically reverse thirty years of bad decisions in order to save an industry of strategic importance, I would say go for it. But we’re talking about massive reengineering, retooling, reorganization and, hardest and most improbable of all, cultural change. Therefore, the $25 billion will be used to simply keep GM operating as is - “keeping the lights on”, so to speak. It’s going to take something much harder than a handout to stop the bleeding and fix this industry. So what would work? Let’s seeeeee…how about selling more cars? Brilliant!
So here’s an idea: why not use $25 billion to actually help GM (and the others) sell more cars? Here’re the basics of how it might work:
1. Keep the lights on. Write a check to GM for something south of $25 billion, say, $10 billion. Sadly, GM is at that place where only a huge infusion of cash can keep them alive in the short-term. This is necessary to keep the production lines going for a while. If GM up-ends and can’t make cars then they can’t sell them either.
2. Give the rest of it to me (and all the other taxpayers, of course) in the form of tax incentives to buy an American car. Give me the opportunity to actually get something of value for helping to bail out the industry, like a car! If the thousands of American households who buy Japanese and European cars every year are offered a meaningful incentive to instead buy American, we will hear a loud, collective, “hmmmm”, as the nation pauses to consider the offer. Hey, we’re Americans. We love incentives, especially the tax kind.
Now I can’t ignore one of the main reasons why our domestic auto industry is in the shape it’s in: decades of poor quality and design vis-a-vis imported alternatives. This debate will continue; however, U.S. automobiles are now comparable in quality to most foreign-built cars and have come a long way on the design front. Look it up. Again, motivate me to shop, test drive and be impressed, and I might just buy.
3. Make it meaningful. I’m not talking about a tax break of a few hundred dollars here. I’m talking about a real incentive. How about $5,000? I don’t know about you, but for that I would not only seriously consider an American car, but I might even accelerate my next purchase by a year of so to get one. Not everyone will take advantage of the offer for a variety of reasons, but for arguments sake, at that level of incentive the industry could make up to (more math here) three million incremental car sales! Now THAT would keep the lights on.
4. Sweeten the deal. How about added tax breaks if I buy the fuel efficient variety? Yes, GM, Ford and Chrysler make them too. This way we help solve another big problem we face.
5. Make credit available. Remember that other bailout that’s underway? That one is about getting the banks to make loans again. How about car loans? Can we tell the banks that a certain amount of the $700 billion has to be for auto loans to people buying American cars? For $700 billion we can tell them to do lots of things.
6. Lower the boom. Taxpayers have to get angry about this. Sure we might get a deal on a car, but honestly we’d rather not be in this situation. If the above worked, then GM and the others will still be in business and generating life-giving cash by doing what they’re supposed be doing (making and selling cars) and not by draining the Treasury. But the underlying problems at these companies will still exist. These companies have to get competitive and self-sufficient so they can continue after the life lines run out (I’m not advocating an evergreen program). I don’t know enough about the people running GM at the moment to know whether they’re the architects of this death spiral, but they are accountable regardless. $25 billion buys a lot of influence over decisions and decision makers. Time to use some of it. It wouldn’t be the first time.
So there you have it. We save an important industry, we use taxpayers’ dollars responsibly, we incent positive behaviors in the system, and we stimulate the economy.
That’s “Goldberg” with an “e” if you’re writing up the Nobel Prize submission.