Energy Politics

Well, it’s come to this. GM, Ford and Chrysler are crawler to Uncle Sam, begging to get a slice of that $770-billion pie. The companies are asking for a piece of the bailout due to bad fiscal quarters, with concerns that the companies themselves could be in jeopardy if swift actions are not taken.

This brings up the question of whether or not we should be bailing out the auto industry. There’s good arguments for yes and no.

On the no side, this is business, and you’d think a company would be responsible for maintaining itself. If the auto industry was losing money, it certainly wasn’t due to shrinking in demand for automobiles. Too much of the fleet was dedicated to SUVs and the American auto industry was very slow in getting it through their heads that the days of $1 gasoline were over. While Toyota and Honda were hopping on the hybrid bandwagon early, Ford and GM were still slavishly putting out gas guzzlers even as it became apparent they were no longer in demand.

A sacking of the corporate management wouldn’t be too bad either. These guys get paid millions of dollars because supposedly they bring industry insight and have the knowledge to keep the company solvent. They’re supposed to be experienced enough to make at least reasonable predictions about the market. Well, good work guys!

Also, one of the reason why the auto industry is in such dire financial straits is because the union contracts and health benefits are sucking them dry. By filing Chapter 11 and reorganizing, they can renegotiate the contracts into something that’s a little more rational.

And finally, I think the real problem here is lack of diversity in the American auto industry. I don’t want to hear anything about The Big Three. There’s no Big Three, there’s the Only Three. By having only three major automobile companies, it just encourages this kind of problem to happen. Back when Ford, GM and Chrysler also had to compete with American Motors, Studebaker, Packard and others it was unlikely that a bad fiscal year for one or two companies could spell certain doom for the entire industry.

But on the other hand, there is national pride to take into account. The loss of GM, Ford or Chrysler would be devastating to the American psyche. I don’t think any bankruptcy would be long-lived, as investors would rush to buy the tattered remains of the companies and get them working again. But being out of the game for a few years would open the door and allow foreign car manufacturers to grab a larger chunk of the car market.

Plus the fact that the Only Three employ 3 million workers. Imagine putting that many workers out on the street? Think our economy is bad now?

Look, I don’t want to lose the American auto industry.  But we have to have some accountability here. And if we do decide to bail them out, I want them kept on a very short lease. I’m talking about making more fuel efficient vehicles, which is the whole reason so many consumers jumped over to Toyota Priuses to begin with. And no Detroit, 25 miles per gallon is not “fuel efficient,” not when we have the technology to get at least 35 miles from a gallon.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

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