A plan to fix the US auto industry

November 19, 2008

General Motors and Ford have their backs against the wall as they wait for a government handout. But without proper strings and a plan that will help awaken management to the need for a material change, more zombie companies will be on life support funded by taxpayer money.

For decades, it was obvious that Asian auto manufacturers were stealing a significant portion of domestic sales right under the noses of management who apparently did not think it a problem. Maybe it was the long lunches, fat salaries or bloated benefit packages that obscured their outlook and now has them begging.

Even if $25, $50 or $100 billion is approved by Congress, the massive legacy costs for multiple layers of expenses including the high cost for employee benefits, retirement plan obligations and the incremental expense for unions doesn’t help or encourage investor optimism. They need something more than a simple cash infusion. Here’s my ideas to help fix this industry…

Read the full article HERE…

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Written by Andrew Horowitz · Filed Under Economy, Stocks

Comments

1123CommentsA+plan+to+fix+the+US+auto+industry2008-11-19+11%3A45%3A14Andrew+Horowitz to “A plan to fix the US auto industry”

jeflin on November 19th, 2008 9:11 am

I don’t know if having the general public foot the $65 per hour wages for auto workers is advisable. A lot of taxpayers are earning much less than that. And long term, the industry is still not competitive compared to its foreign counterparts.

Jeflin
mike mcphee on November 19th, 2008 12:11 pm

The article is excellent - The US Automakers must adapt or die. They can’t continue to make plant decisions based on the current price of fuel. That said, the automakers will have to be bailed out - to lose this much industrial capacity with in a year or so is like a family of 5 moving from a 3000 square foot house to a 1000 square foot appartment in a week - it would be a disataster for the USA and teh scary thing is: it may lead to more War - as that is one way to force the build of equipment.

The US automakers need to make high profit 100% CNG vehicles for the WORK TRADES industry and the US government needs to “back them up”. Here are the benefits of selling vehicles that can gross $8,000 - $10,000 each:

1) Easy technology for CNG (way easier thatn the chevy volt)
2) Huge jobs for infrastructure build
3) foreign auto builders are not focusing in this area - thus they can’t compete well (we make great V6 and V8’s we suck at high teck 4 cylinder engines)
4) Your target market is: High Margin, High mileage and High Income
5) Reduce the dependeance on foreign oil.
6) All emerging markets are embracing CNG - If a bean fartin high tech powerhouse like Venezuala can do it, can’t the good ole USA??

good luck all
Michael Guzman on November 20th, 2008 4:06 pm

Great article, it really gives a good perspective of the faulty business model of the US automakers.

Not to digress from the article so much but I do have a though as a consumer and a neophyte to the actual business infrastructure issues with the automakers. Maybe what they need to do is assist in reducing some of the cost of owning their products, which should help move more inventory for dealer lots. For example, I live in NYC, where maintaining auto insurance is fairly expensive. If the auto makers financial division and or institutions were to were to purchase bulk policies, making the buyer get their own liability insurance, and add them to the monthly payments should make owning the vehicle a bit lower, since individual full coverage insurance policy purchases always seen to be more expensive. I’ve personally seen some credit unions do this when they find that there is a lapse in insurance coverage for their assets (cars). I’ve run the numbers and Its cheaper than an individual full coverage policy. This is also while the person has their own liability coverage.

Any professional under writers and insurance agents reading this comment, please let me know if my stream of consciousness makes any kind of sense.

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