The Auto Writer

While at the Los Angeles Auto Show last week, I managed to hear plenty about the state of the auto industry. You couldn’t escape it: mostly every product introduction was prefaced by one or more references to the challenges facing the industry. I managed to tune some of that out simply because time was of the essence and I wanted to take in as much as I could in two short, but very packed days on the floor.

On Wednesday, which was the first of the two press days, former Massachusetts governor Mitt Romney, had an op-ed piece published in The New York Times. I didn’t hear about it until late Friday and got to read what the one time candidate for this year’s Republican presidential nomination had to say over the weekend. After reading his article, Let Detroit Go Bankrupt, I found myself in full agreement with him.

Quite frankly, the money that Detroit is seeking from the US government will only put off the inevitable. GM, for one, says that they are bleeding cash at a rate of two billion dollars per month. I’ve heard of various numbers floated for the amount General Motors wants to borrow, but ten billion dollars is one figure that has come up frequently.

So, my question is this: what happens in five months time when GM loses another ten billion dollars? Will that money be gone and will GM come back to the federal government with their hands held out?

Like Romney, I am in agreement that drastic steps must be taken and the sooner they are completed, the better the U.S. auto industry will be. I’m convinced that the only solution for all three automakers is to file for Chapter 11 bankruptcy protection which would force each company to reorganize. In addition, the current management structure needs to be changed and some if not all of the following should take place:

General Motors – Excess brands should be closed down with Cadillac and Chevrolet left as the bookends for the company. Buick can stay as a Chinese only brand, but there isn’t any reason to maintain the rest. Give Cadillac the Buick Enclave (please kill the Escalade) and let Chevrolet have the Pontiac G8 (Impala) and G8SP (which should be promptly renamed the El Camino). The Saturn VUE would move to Chevrolet and most likely everything else would be allowed to die.

Ford — Say good-bye to Mercury, a brand that hasn’t seen an original product in more than a decade. Keep Volvo as long as owning the brand benefits the rest of the company, particularly Lincoln which needs to be rejuvenated or killed off.  I’d almost rather see Volvo live on and Lincoln smoked if it came down to one of the two surviving.

Chrysler — There is no reason for this company to be in business. Period. Jeep should be sold, hopefully a revived GM would buy it. Sell the Dodge Ram to Nissan, the minivans can go to either Ford or GM, and maybe Lotus would be interested in the Viper. The Challenger and everyone else would be retired.

It is inevitable that the Big 3 will not carry on for much longer, so why delay what is bound to happen? I think most Americans agree that loans to General Motors, Ford, and Chrysler will not be enough to guarantee that the U.S. auto industry will come out of this stronger.

Like the airline industry, which has seen its own historic restructuring post bankruptcy, the U.S. auto industry can do the same.  Market share will go to foreign automakers, but a trimmer, better managed industry can emerge, allowing the survivors to fight smarter and with better products that consumers will want to purchase.