In the grand economic scheme, that is the critical, urgent topic du jour. I am profoundly conflicted on this one.

On the one hand, I agree with Michigan Senator Levin who, on “Meet the Press” this morning, said that more than 3 million American jobs are at risk if we don’t do something to help the three American car companies. I agree with Levin that this is a main street issue, and that no other country in the world would just let its auto industry die.

On the other hand, I tend to agree with the opposing (mainly Republican) point of view, which is that the US car manufacturers brought these troubles on themselves by longstanding mismanagement, poor designs that nobody wants, questionable quality for too long, etc. I also agree with the position that if you bailout the big auto companies now, where does this end? Are the airlines or aircraft manufacturers next? Or the big retailers who, except for Wal-Mart, are bracing for the worst Christmas shopping season since the Depression era?

What do we do? My view is mixed, and so are my prescriptions to fix this untenable situation. First, I do believe that the US auto industry is an important part of our dwindling manufacturing base and we should not just let it die. And, if we were willing to prop up the struggling financial sector, then we should also be ready to give a helping had to a major American industry like auto manufacturing.

This blog is principally about marketing and branding, so where do these concerns fit into this bailout discussion? I don’t think I know of a soul who thinks the branding and marketing of the US auto firms has been any good for too many years — perhaps forever. In terms of branding, there is a depressingly large number of US auto brands that today should no longer exist because they are weak, undifferentiated and essentially have no future. These brands include Buick, Pontiac, Chrysler (BTW, Dodge is only just hanging on in trucks…their cars are DEAD), Mercury, Saturn (what does that brand now stand for??) and Hummer (don’t even get me started on this dinosaur brand). Even the once proud Jeep brand has been dangerously diluted because of Chrysler’s gross mismanagement of its brand portfolio.

I am not the only observer who has pointed out these brand deficiencies. But, how many US auto brands have been actually weeded out in the past generation or longer? Just two that I can recall — Oldsmobile and Plymouth.

The marketing for all of these brands is also pathetic, and I don’t just mean the truly terrible US car advertising (incidentally, I think the entire auto industry advertising, foreign brands included, is bloody awful with just a few exceptions). The American car makers just don’t know how to build value and demand in their products, and thus they can’t price them effectively to succeed. It is rebate every time, all the time. No wonder people don’t put much value in these products. Regarding the advertising, the big advertising agencies and their mega holding groups that have been turning out this dreck for the US auto manufacturers during the past fifty years (and making tons of money in the process), should have their auto gravy train derailed immediately — bailout or not.

Now, what to do regarding the current auto industry crisis? I believe we need to do something to shore up the rotting support pillars of the auto business. If the US government had to do it all over again, I would bet they would not just let Lehman Brothers fail like they did a few months ago. Everyone agrees that Lehman’s bankruptcy was the straw that finally broke the back of the financial system. If we had bailed them out, things might have been different. Perhaps. But, maybe not. Who really knows?

All of that said, if we do decide to help the three American auto manufacturers, I think the pre-conditions mentioned by the supporters of this lifeline need to be even stronger and more tilted to the American taxpayers, whose hard earned money will be used for the bailout. I think the management of every auto maker that accepts bailout money has to go. Rick Wagoner, GM’s CEO, cannot expect to keep his job (and neither should his board), if he gets money from the taxpayers. Chrysler and it’s private equity owner Cerberus Capital, should also be forced to have new management and a new financial structure. Cerberus bought Chrysler hoping for a financial windfall in a few years. They should now be forced to give up a big stake in the company to get government assistance to keep them afloat. Ford has done a comparatively better job, but like the other two companies, they cannot expect to get money and just keep the same governance in place. You want the money, you give up control. That is the capitalist way and it should apply in government bailouts, too.

The unions and suppliers will also have to take their hits, and agree to major changes to ensure the survival of the industry. Everyone in the system has blame in the car industry’s failure, and they all have to accept some of the pain going forward if they expect help from the US government and the rest of the American public. That is only fair.

Finally, as President-elect Obama has made clear, if they get money, the auto makers have to totally re-engineer their product lines to emphasize fuel efficient cars and trucks. That has to be a non-negotiable. For too long, US auto makers have fought the fuel efficiency and safety standards. No more if they want the public dough. We own you now. It’s our way or the highway.

I am a true and loyal car guy. I have also been sadly and deeply critical of the US car business for years because of its insistence on building crappy products that usually fail in the marketplace. While I don’t think we should reward that incompetence, I do feel that the US needs to think hard about letting a major part of the economy just die on the vine.  If the big three US auto companies accept the kind of tough conditions I outlined, then I think it’s worth giving them a hand. If not, then President-elect Obama and the congressional leadership should let them sink into oblivion and let Toyota, Honda and Hyundai divvy up the spoils.

For the car companies, it is now fish or cut bait time. If they want the money, they must essentially give up a lot of control and do things very differently. That is probably their only chance at this point. They should take it. If they choose not to, then I have no sympathy for them.

 

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