It's easy to hate three corporate execs who fly to Washington in private jets, and ask for a federal bailout. It's a lot harder to point fingers at retired assembly line workers who stand to lose their pensions if the automakers go bankrupt.
If General Motors, Ford and Chrysler go away, the implications would be cataclysmic, not only for the hundreds of thousands of current and retired employees, but for suppliers and ancillary businesses as well.
Unfortunately, government funding seems to be the only short-term solution for what appears to be a financial Hiroshima affecting the upper Midwest.
Having said that, the next question is how to prevent the same thing from happening again, once this money runs out. Will mandating smaller, more fuel-efficient cars get the automakers out of financial hot water?
My personal opinion is that it will not. For one thing, all three companies already produce small cars. Until the price of gas spiked last summer, nobody wanted to buy them.
Conversely, Toyota, Honda, Mercedes-Benz, Volkswagen and Audi all produce full-size trucks. While the entire industry suffered financial losses last year, none of the aforementioned companies is on the verge of bankruptcy.
The problem has less to do with the types of cars being produced than the way the manufacturers produce them, as well as the dealership experience.
Building Cars the Right Way
Let's face it: this mess didn't start with last summer's spike in gas prices. It began forty years ago with the fuel crisis of the mid-1970s. When gas prices rose, Japanese automakers grabbed the opportunity to sell small cars in the United States. By the time the domestics reacted in kind, Asia had forever changed the landscape of the American auto industry.
Fuel efficiency wasn't the only thing Toyota and Honda had going for them. Their cars were also reliable: more reliable than many of the models they were competing against.
This was no accident: it was the product of the Japanese quality gates system, that eventually became an industry standard.
In the quality gates system, each vehicle passes through three quality checkpoints on the assembly line. Checkpoint inspectors have the authority to shut down the assembly line to fix any quality problem they find. As a result, very few imperfect cars emerge from the assembly plant.
While American manufacturers continued to put thousands of known bad parts into cars in order to use up existing inventory, the Japanese instituted the "just-in-time" method of inventory management to minimize inventory waste and expense.
Rather than storing large quantities of parts at the assembly plant, the manufacturer uses a network of area suppliers who can bring in the parts as they are needed. If a part doesn't work, the quality gates process identifies it quickly, and the plant finds a more reliable source. Just-in-time manufacturing has also become an industry standard.
The Big Table
Toyota calls its production planning process "the big table." Before the first production car rolls off the assembly line, individuals from every level of its design, production and distribution get together to strategize. The idea is to eliminate any redundant or unnecessary parts, and make the assembly and distribution of the product as efficient as possible.
One of the areas subject to scrutiny is the assembly line. The group looks for any activity that it calls a "red light process:" something that might cause the assembly line to shut down.
For example, the company may decide that a one-piece headliner is a bad risk, because the assembly line worker is likely to get injured while installing it. A multi-piece headliner, while slightly more costly, is easier to install, and therefore more cost-effective.
Not surprisingly, assembly line workers are happier when their bosses look out for their well-being. None of the Japanese assembly plants in this country are unionized. Despite that, people who work there are pretty happy.
As the lines between their brands blur, American manufacturers are forced to create redundant models to keep their dealer networks happy. Here's an example:
When I was a kid, Chevrolet was the volume leader, Oldsmobile, the technology leader, Pontiac, the performance brand, Buick, mid luxury, Cadillac, high luxury, and GMC made trucks.
Eventually, Oldsmobile completely lost its identity and went away. Buick dealerships panicked because their median buyer was getting older and older, and Cadillac dealerships didn't want their customers going elsewhere when the sport-utility craze hit.
So rather than creating a single mid-size cross-over vehicle, General Motors created a bucket full: one for GMC, one for Buick, one for Cadillac, and of course, one for Chevy. Cadillac buyers didn't want a Chevy Tahoe in their driveways, so instead, they got the Escalade.
When Saab came on board, the brand as it existed couldn't command the sales volume dealers needed. So Saab, which had never made anything bigger than a compact sedan, got the 9-7x, it's very own full-sized sport utility vehicle.
Chrysler's biggest problem is its size: it's a considerably smaller company than GM or Ford.
In order to be competitive, Chrysler has been forced into some unfortunately business alliances, most notably, its partnership with Mercedes-Benz. Neither manufacturer got what it wanted out of the deal, and the conflicting corporate cultures created virtually instantaneous bad blood.
The Problem With Dealerships
The domestic automakers have to address the problems their dealerships have with customers, especially women. When it comes to bad experiences in American car dealerships, I have personal experience to draw on.
Today, women make up over fifty percent of the new car buyers. Somehow, the manufacturers have to get their dealers to treat women with respect.
Since dealerships are franchises, it's a tricky problem. One solution is to make the internet the dealership of the future.
We're already seeing companies such as Scion, Volvo and Mini using interactive web sites as part of the ordering process. The buyer essentially builds her car online. Scion's monospec pricing eliminates haggling over the sticker. The primary purpose of the dealership is to deliver the car and provide service.
The bottom line is that forty years worth of mistakes and bad customer relations aren't going to go away overnight. Nor can we expect them to. Conversely, if we allow these automakers to go out of business, we can be pretty sure that the manufacturing jobs that go overseas aren't coming back.
Fixing the domestic automakers has to start at square one: these companies have to change the way they build cars. They need to eliminate unprofitable brands, and reevaluate redundant products to see if they make sense.
The dealerships need to get on board too. Since dealerships make most of their money on used cars and service, it behooves them to treat customers right. Chances are that a person burned on a new car deal isn't coming back for a tune-up.
In 1955 Charlie Wilson, who was the chairman of General Motors at the time said: "What is good for General Motors is good for America."
While that's no longer the case, what's bad for General Motors is definitely bad for the GNP. If General Motors were to fold, the loss in tax revenues would far exceed the amount of the proposed bailout.
Bottom line: It's a long road ahead and like the streets of Detroit, it's full of potholes.