Big 3 – To Be Or Not To Be?

Just a quick opinion here on the Big 3 need for cash.

Based upon your possible view point, you may see their request for cash as a ‘Bailout’ or an ‘Investment’. On the one hand it’s a bailout if you think it’s a pure credit contraction issue within the industry to which the Big 3 can no longer obtain credit and hence do not have enough cash on hand or free cash flow to self fund business as usual operations over the next 24 months. So the bailout is just a means to provide cash flow, smoothing variations to regain footing and await the economic upturn. On the other hand, you’ll see it as an investment if you believe the cash will go toward pre-determined and measured targets of business as usual operations and R&D projects which will drive future cash flow better than today.

Unfortunately, both hands are not without challenges to the corporation’s (employees and management) and the global economy either way. Good industrial/engineering product corporations will increase R&D during economic downturns so to provide new products to market upon the economic upturn. Clearly, economies are based upon the investment growth of technological changes, innovation, and product enhancement. If economies do not invest in technology there would be less economic growth and the living standards would pace less than other economies; without consideration to commodity centric economies. They have diversification issues.

The real threat to our society from this large industry failure is the fact that a lack of investment in technology associated with automobiles will have long term affects to our society; if we let the auto industry die on the vine so to speak. So, the industry within the USA needs to be planned into consolidation and internally re-organized in a decentralized fashion so to spark greater awareness of internal competition and external competition. In the event a particular division cannot compete within competitive standards then it should be shutdown and services purchased from effecient providers. This along with a complete rework of the service, supply, and sales channels needs to occur so to leverage cost efficiency and consumer savings.

Now is the time to rework the entire business model and not blink to the fears of change to come. Let’s face it, we should not be throwing $25Bln + another $25Bln of taxpayer monies at an industry and calling it an investment when their product depreciates before it’s even sold to the consumer without carefully looking at making the American auto industry leaner, competitive, and best in class for the world!

Let’s take it from Big 3 to Best In Class!