Wednesday, April 1, 2009

Three Smart Lists of Ways to Fix the Auto Industry

Free market advocates operate in a fixed mode that is easy to appreciate. Clear thinking with a common goal, that is, market driven results, is a given. But the dash of common sense that goes with it is always gratifying.
The Detroit Three – and I include Ford because it, too, is a mess – has stolen the free market from the auto industry. General Motors and Chrysler, classically corporate and unyieldingly rigid in their respective operations, are now nothing more than welfare begging Sad Sacks with nothing to offer but heaps of poorly designed and shoddily constructed metal. Witness the Chrysler Sebring, the Ford Mustang and the Chevy Malibu.
Last night I was privileged to hear a 60-minute talk from economist David Littmann, which was presented at Michigan State University by Students for a Free Economy.
In a chat that name dropped a litany of heavyweights, from Simon Bolivar to Albert Einstein, Littmann provided a tidy little history of the current economic debacle. Near the end of his appearance, a question was asked how he would fix the auto industry. His remedy? It was all directed at the government rather than the car companies - Lower the corporate income tax, pull back on this urgency to produce “green” cars, and remove CAFÉ standards.
In other words, let the free market decide what cars to sell and buy. That was already being done before the market slide, of course. Folks preferred Toyota and Honda and Nissan at an increasing rate. GM, Ford and Chrysler were headed for the junk yard. And that would have been that, perhaps, if the bottom would not have been pulled out overall car sales fell to a two-decade low.
Recently, a couple other commentators offered their solution for the auto industry, only these guys were from the auto world. One, Drew Winter, is a former colleague of mine and a writer at Ward’s Auto World. He’s a smart man who should probably be giving more media appearances just based on his expertise.
Winter lays out some new rules that include:
• no more wallowing in the past in terms of Detroit’s legacy to the American worker – “...No one outside Michigan — and I mean no one — cares. Wallowing in the past isolates us from reality and holds us back.”
• No apologies for building the big vehicles that consumers want: “They are the most popular vehicles in America, and my highest-volume, most profitable products.”
• No more marketing to the greenies: “Environmentalists who see motor vehicles as evil are not a demographic worthy of my marketing dollars.”
Winter also claims that the wages paid to Detroit Three workers are not an issue, and there I disagree to an extent. It’s not so much the wages but the benefits and legacy costs, which stem from the wage package that is ensuring Detroit cannot compete.
Forbes columnist Jerry Flint is a sage master of the auto industry. He still attends the big car shows, charming wife in tow, even though he has seen them all 30 times. Nothing would seem to be new to Flint, yet he makes sure he is current and in the know at a time when most auto workers would be fat and lazy in their Traverse City vacation home.
Flint also advises how to keep the industry afloat in a recent column.
Among his suggestions: Back off of electric cars, hand out tax credits on car purchases and, echoing Littman, lay back on the fuel efficiency demands.
This trio of wisdom knows that the free market will pull the auto industry through. If there are victims, such as GM and Chrysler, that’s the way things work in such a system. And at least someone is listening to one of these guys: The IRS on Monday announced a credit on tax paid on new cars. This needs to be extended to used cars over $25,000. But it’s a start.

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