GM & Chrysler

Dear Victorious,

It seems foolish to bail out American car companies. Yet we are spending a vast amount of money. If you were president of the U.S., what would you do about GM and Chrysler?

Toyota Fan

Dear Toyota,

I don't think most Americans can appreciate the economic impact the "big three" American car companies have. Losing them would be catastrophic. They've driven much in the way of jobs in America, to say nothing of the technological innovations they've helped usher in. Simply put, making cars in America has been very good for America.

Each of the "big three" American car companies seems to have caught up with their Asian counterparts --- and is manufacturing very high quality these days. It used to be that there was a wide gap between the quality of American cars and the quality of Asian or European cars. That gap has all but disappeared - so they are each churning out high quality products.

Keep in mind that each of the "big three" American car companies also have big overseas units. GM's Holden brand in Australia and the Vauxhall brand in Europe are both market leaders. Ford and Chrysler both sell under their brands in many countries. Chevrolet and Buick are top sellers in China. While these companies have lost market share in the U.S. to the Asian car companies --- the same is not true outside of the U.S. They each have respectable market share in other markets and have been able to hold onto it. Those are profits that come back to America.

So what would I do if I were president and they asked me for a bailout? I would do one of two things. First, I would force them into bankruptcy (Chapter 11) to reorganize. This would break the unions' and their strangling hold on the manufacturers for salaries, retirement and health care. In the Chapter 11, I'd bust up the pension plan and replace it with a 401K matching plan. In short, I'd use bankruptcy to put these manufacturers on equal footing with their foreign counterparts. Then I'd let them proceed in the open market.

Consider, for example, that Delta airlines did something similar. After emerging from bankruptcy, it acquired Northwest and is now the largest airline in the world - still based in America and still successful.

The second option would be to force Toyota, Nissan and other foreign car makers to buy GM and Chrysler if they wanted to continue to sell cars in America. Over time they could rationalize those acquisitions and even make the brands disappear if they wanted. But they would have to commit to manufacturing here and providing jobs for Americans in their operations. In other words, I'd hand the problem of maintaining and auto industry in America to the people who want to sell cars in America.