SAVE THE DINOSAURS?

I have to admit that I'm really torn on the whole concept of bailing out the big three auto makers. My heart says to let'm go down, but my head thinks that could be extremely bad news for the country.

Before getting into that, however, a little background ... I am pretty opinionated when I want to be (or even when I don't), but I'm not generally arrogant enough to think I could run a business better than most. For example, I've said many a time that I am not "a finance guy" in advance of expressing to my thoughts on the whole Wall Street situation. Having said that, there are two areas where I -- in all modesty -- feel you could litterly plop me down in the CEO chair and receive far superior results than you're getting from the knuckleheads in charge today. One such area is television: I mean, who cancels Pushing Daisies but gives Knight Rider a full season? But that's a post for a different day.

The main area I'd like to discuss is the automobile industry ... Long before $4 a gallon gas, I was telling anyone who would listen that the first U.S. company to own fuel efficient cars would be the "winner" in this arena. And I distinctly remember some friends calling me naive when I said that -- the day I took over as CEO -- I would demand that all our cars be hybrids. I also remember arguing that these old school thinkers in charge of GM, Ford, and Chrysler need to be replaced with a Steve Jobs type who could innovate and shake things up. "It's just not that easy," my friends would say. Well, who's having the last cry now?

So, my inspiration for writing this post was a recent op-ed piece by Thomas L. Friedman titled How to Fix a Flat. In the column, he starts off by saying the following:

How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it. It led to a situation whereby General Motors could make money only by selling big, gas-guzzling S.U.V.’s and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, G.M. threw way too much energy into lobbying and maneuvering to protect its gas guzzlers ...

... And it included endless lobbying to block Congress from raising the miles-per-gallon requirements. The result was an industry that became brain dead ... Nothing typified this more than statements like those of Bob Lutz, G.M.’s vice chairman. He has been quoted as saying that hybrids like the Toyota Prius "make no economic sense." And, in February, D Magazine of Dallas quoted him as saying that global warming "is a total crock of [expletive]." ... These are the guys taxpayers are being asked to bail out.

Amen, brother! As one of my friends often points out regarding his newest vehicle: "This is basically the same car I was driving 35 years ago." Can you imagine if the computer industry ran this way? Friedman then goes on to talk about placing conditions on such a bailout and ends this way:

I would add other conditions: Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.

Lastly, somebody ought to call Steve Jobs, who doesn’t need to be bribed to do innovation, and ask him if he’d like to do national service and run a car company for a year. I’d bet it wouldn’t take him much longer than that to come up with the G.M. iCar.

Hmm, demonstrate a plan for hybrid-electric and then call Steve Jobs? Where have I heard that before? So, yes, I will say without hesitation that I could have single-handedly saved the U.S. auto industry. But my phone never rang :(

Okay, now that I got that "I told you so" moment out of my system, the question still remains of why we should help these horrible people who have spent that last half century doing everything in their power to ruin their own companies. Well, simply put, the loss of jobs that would result from them going down could very well throw us into a depression, and I don't think you can underestimate how many Americans are linked in some way or another to this industry. If unemployment wasn't steadily rising (and the credit markets weren't frozen), then I would say to let them go into bankruptcy. But I'm just not sure we can afford to let that happen in this financial climate.

That being said, I reluctantly agreed with the Wall Street bailout a few months back, and that has pretty much been a dismal failure. It seems that many of the banks -- rather than opening up lines of credit -- just hoarded the cash or used it to pay for bonuses, dividends, and even luxury trips. What's to say that these idiot car executives won't do much of the same?

So, should we bail them out or not? ... I just don't know. Do you?

THIS CAFE HAS GOOD EATS

The Senate did a very good thing last week. For the first time in 30 years, they actually passed a bill to significantly increase fuel economy (CAFE) standards for cars and trucks. You can read all the details in this New York Times article, but here's the long and short of it:

Environmental groups, though disappointed by the setbacks on renewable fuels, nevertheless hailed the vote on higher mileage requirements as a long-sought victory that could eventually reduce American gasoline consumption by more than 1 million gallons of gasoline a day.

If the Senate bill becomes law, car manufacturers would have to increase the average mileage of new cars and light trucks to 35 miles per gallon by 2020, compared with roughly 25 miles per gallon today.

Car companies had lobbied ferociously for a much weaker requirement of 30 miles per gallon for light trucks and sport-utility vehicles. To muster enough votes to prevent a filibuster, about a dozen lawmakers from both parties hammered out a deal that included the higher standard but omitted explicit requirements for further increases in efficiency after 2020.

The automobile companies (of course) fought this thing to the bitter end, and I couldn't have less sympathy for them. I know that I shouldn't be surprised by these things anymore, but I'm quite stunned that they've been able to get away with this for so long. Year after year, the car manufacturers have argued that increasing fuel efficiency standards in their vehicles would be financially devastating and technically implausible. This argument is so tired it makes Rip van Winkle seem energetic. Don't tell me the country that pumps out lightning fast computers and "do everything" iPods like candy can't make a better car within a two decades time frame. As a friend of mine always says of his newly purchased vehicle, "This is the same car I had twenty years ago." And isn't it sad that American cars wouldn't even be allowed in China or Europe because they get such crappy mileage?

To be honest, the thing that baffles me more than anything is why car companies would even want to continue this battle. If you look at the financial outlook for GM, Ford, and Chrysler; they are hemorrhaging money right now. And if you ask anyone the reason, they will all say that the Japanese are killing them with fuel efficient vehicles. I am the CEO of nothing, but even I'm smart enough to notice SUV sales went way down and hybrid sales went way up when gas prices skyrocketed. I suppose I can understand -- but not agree with -- their old reasoning that Americans want fast, powerful cars. But the resistance to aggressively developing fuel efficient cars is HURTING THEIR BOTTOM LINE (even Republicans should worry about that). And I'm clearly not the only one having these thoughts. Here's what a fellow blogger wrote:

They don't know it yet, or maybe they do, but US automakers are a dead men walking. How can we take people with attitudes such as these exhibit seriously? It's almost like they want to fail. Maybe they do, maybe they want to fail so that they can break the last of the unions and their pension funds too.

There are a few organizations like Friends of the Earth that don't think this bill is very good due to the fact that it doesn't have any mandates on the use of renewable energy sources, like solar or wind. My concern is actually that it isn't even aggressive enough for just the CAFE standards alone. Many respectable scientists have stated that we only have about 10 years to significantly curb greenhouse gas emissions in order to avoid a "tipping point" from which we can't recover. So, dates like 2020 just don't cut it in my opinion.

This whole discussion might be a moot point anyway, because the bill still has to go through the House before it becomes law, and who knows how watered down it will be by then. But for now, the average man should savor the victory.