Autos and the Three Little Pigs

By Tim Holland

Why the nursery rhyme of the Three Little Pigs came to mind as I watched the hearings featuring the three major American brand auto companies pleading their cases for a government bailout, isn’t entirely clear, except for the possible similarities that seemed to appear? Was that a trough in front of them or a table?

Someone might make the case for the Three Blind Mice but I don’t think any of the auto representatives were in any way blind unless you add the concept of self delusion to a definition of blindness. But no, the Three Little Pigs seems to work.

Consider where they showed themselves to be. Certainly Chrysler would appear to be housed in a building made of straw and GM in one of sticks. For the time being we will give the brick house to Ford. The rapid deterioration of the economy can play the part of the wolf.

The consensus at the hearings was that GM and Chrysler are definitely headed for bankruptcy in the form of Chapter 11 and one of the suggestions made was to have Chrysler and GM merge. In effect, take a straw house and merge it with a stick one; somehow I don’t see that as a serious solution that will make them sustainable.

As the meeting wore on, it became apparent that the reason for the attendance of the CEO of Ford was to protect his company from being put at a disadvantage if the other two companies were to be successful in obtaining financial assistance from the government. He was actually seen to smile from time to time.

The star of the hearings turned out to be Sen. Bob Corker (R) of Tenn. who’s questioning and analysis of the financial situation in which GM, in particular, found itself, was referred to and applauded by the committee leadership of both the Senate and the House. Corker was particularly harsh with GM indicating that management, over the years, created the environment that led to the current mess in the industry.

All of the questioning over the week seemed to come to the conclusion that the American automobile companies do not deserve to be bailed out but, given the state of the economy and its prognosis for the coming year, we may not be able to let them fail either. The question that remained is how do you keep from punishing the American people further and yet effectively punish the management culture of the American auto industry? Congress is already throwing around some draft proposals that, of course, will not have the word “bail-out” in them.

When the three little pigs got themselves into trouble they just kept moving from one shaky pig house to the next until the wolf ran out of steam and left them alone. I don’t think that’s going to work this time. The auto companies have been merging and buying up one another for decades but they never want to spend the money on redesigning the basic structure that surrounds them.

At this point, even the brick housed company may come to find that its really only brick veneer and won’t hold up against a really big wolf with a great set of lungs, which is the way the 2009 economy seems to be shaping up.

So, bad as it may seem, Congress is going to have to do something. The problem is that we’re still dealing with the old Congress and the old President and there is a lot of ideology out there that is more concerned with structure and setting precedent and wants the business and economic cycle to take care of everything rather than have government interfere. The reality is that it was the active undoing of the protective devices that had been put in place that created the problem, so sitting on the sidelines now is not the time to stand on principle. The dam is about to fail and, yes, we need a new dam, and the management of the dam needs to be punished but lets not take down all those cities and towns downstream if there is a way to shore up the existing dam while the new one is being built.

Now, as Senator Corker argued, we may be too late and the dam is going to fail anyway so why bother to shore it up since all the money put into it will be wasted in the long run? Well, maybe so but someone has to start thinking about more than ideology or economic theory.

The key to stopping the slide and limiting the recession is something called JOBS. The more jobs that are lost, the more people think they are going to lose their jobs the more spending will curtail. If propping up the American auto industry will save jobs then Congress has to find away to accomplish it. Just don’t do anything PERMANENT; make all actions temporary with expiration dates so clear heads can make the right decisions to build a “real” brick house and maybe find some pigs that aren’t quite so short sighted, arrogant and self centered to move in.