The Proposal

The leaders of Ford Motor Co., General Motors Corp., and Chrysler LLC ditched their corporate jets for fuel efficient hybrid cars and drove the five hundred miles to Washington this week, intending to make a second appeal to Congress for a bailout.  The CEOs move to driving fuel efficient vehicles was an attempt to make amends for their contentious arrivals in corporate jets the previous week; a fact which Congress and the public haven’t forgotten.  But instead of the unstructured plans and jumbled pleas from their prior meeting, the big three automakers compiled comprehensive documents detailing their strategies for utilizing bailout funds and reimbursing the government. 

Congressional leaders are reviewing the three separate plans from the automakers in preparation for hearings Thursday and Friday, when it is possible that the future of the American auto industry will be determined.  White House Press Secretary Dana Perino said of the automakers plans:

It sounds to me like the companies have given this a lot of thought and are willing to make some tough decisions.  We just need a little more time to pore through the documents.

The CEOs of Ford, GM, and Chrysler each outlined a different plan for success, and requested bailout funds in excess of the original $25 billion figure; the figure increased to a potential $34 billion.  It’s hard to imagine a little more than a week ago the automakers were pleading for $25 billion, and are now set on a combined $34 billion, but in truth it is just GM that is requesting a great deal more.  Here are the plans in respect to each automaker:

Ford Motor Co.

Tuesday the Associated Press was abuzz about Ford CEO Alan Mulally’s statement that he would work for $1 per year if the company accepted government aid.  Ford’s plan requested $9 billion of the auto industry bailout loan as a safeguard for worsening conditions, but believed that the business had enough cash to last through the next year. 

Ford also promised significant changes to company policies and procedures and its future direction.  The company will begin by selling its five corporate aircraft, having been harshly criticized for their use the previous month.  In addition, Ford management employee bonuses will be cancelled for 2009, and salaried employees will not receive merit increases. 

Ford has agreed to change its direction by accelerating plans to produce electric vehicles, and also improve hybrid gas-electric technology.  The first of the new electric vehicles will be a small van for commercial use in 2010, and a compact reminiscent in size to the Ford Focus in 2011. 

General Motors Corp.

General Motors requested the most government aid amongst the Detroit automakers, stating it would seek up to $18 billion, including $12 billion in loans, and a $6 billion line of credit should market conditions worsen.  GM claimed to be in the most need of funds, with an estimated $4 billion required before the end of December to avoid filing for bankruptcy.  General Motors CEO Rick Wagoner also vowed to accept a $1 per year salary, and promised to make major pay cuts to the salaries of top executives. 

GM’s plan would begin with the company taking significant steps to restructure, including the reduction of 20,000 – 30,000 workers, and the closure of 1,750 dealerships and nine plants; this would all be accomplished by 2012, according to Wagoner. 

GM would focus on its four most renowned brands: Chevrolet, GMC, Buick, and Cadillac, with the future of Saab, Saturn, and Pontiac in question.  The Hummer brand has been all but dropped from the GM roster, with the titanic gas guzzler’s sales down almost 50% during the first ten months of the year.  GM intends to open negotiations with the United Auto Workers union to seek concessions in order to preserve its survival. 

Chrysler LLC

Following Ford CEO Alan Mulally’s announcement that he would work for $1 per year, Chrysler stated that its CEO, Bob Nardelli, was already working for $1 per year under the Chrysler plan.  In light of the fact that Chrysler does not disclose executive pay, and that the statement was issued after an abysmal hearing last week, Chrysler’s boast seems fictitious, or at the least inaccurate.  Whether there is truth or not to Nardelli’s current salary figure, Chrysler confirmed its previous request for a $7 billion loan. 

Despite grim auto sales in 2008, Chrysler does have at least one diamond in the rough with the Jeep Patriot, a gasoline efficient SUV which yielded a 62% increase in sales from the previous year.  However, with most of the lowest overall auto sales, Chrysler has a lot more room for improvement compared to Ford or GM. 

Chrysler’s plans for the future center around developing partnerships, strategic alliances, and consolidations with the goal of eliminating debt and fostering future prosperity.  The company had considered a merger with GM to create a turnaround, but discussions were halted in November when GM switched to focus on its own turnaround efforts.  Chrysler predicted a return to profitability in 2012, and cited its government bailout in 1979 which it repaid with interest four years later as evidence of the company’s commitment. 

The Verdict

Despite unsubstantiated corporate threats of another Great Depression from the meltdown of the American auto industry, Ford, GM, and Chrysler have a proven track record of successes.  The United States owes these companies a debt of gratitude for their contributions to the police force, military, and average consumers for the last century.  Ford pioneered the auto industry, and GM and Chrysler followed in the wake of its successes; now these three need help from the country they helped achieve greatness. 

Even though they built gas guzzling SUVs, designed inferior compacts and sedans, and failed to appeal to the modern consumer, the American auto industry is made up of millions of good hearted individuals, both managers and workers, who deserve at least one opportunity for a fresh start.  What would America be without the muscle cars of the 1950s, the minivan, and the rugged trucks utilized for millions of blue collar jobs?  The shepherds of the auto industry might have lost their way, but what is America without second chances?

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