So Far Outside the Box

Question: How do we save the American Auto Industry?
Answer: Make Americans buy American Cars

I’ll get to the how later.

And let me acknowledge that I worked for Ford Credit for 20 years so there is full disclosure.

The great thing about having a laptop is that you can work in front of the TV, so I sat there watching the hearings on the proposed GM/Ford/Chrysler bailout. Our esteemed Senators, and the press, have chastised the Big 3 for, among other things: Executive compensation, use of corporate jets, not making cars people want, not having a business plan, etc, etc. These are all smokescreens and have nothing to do with whether or not these companies will survive.

What matters is on the delivery end. The fact that Detroit cars are now mostly comparable to foreign cars is irrelevant to the public. They lost the public’s trust and their products, no matter how many ads they run during American Idol, are not perceived as 1) reliable or 2) cool. The Big 3 could do all the things the Senators want them to do, and it still wouldn’t matter. The only thing that will help the Big 3 is if they sell more cars, and there is no evidence that grounding a corporate jet or presenting a flowery plan to Congress will do that.

The American consumer, and only the American consumer will decide whether or not these companies survive.

The typical Joe the plumber isn’t going to understand executive compensation but here’s the way I look at it: It’s an investment in talent, just like Derek Jeter is. If you owned a huge company that just made a million dollar profit in one year, and there was a potential CEO out there who could increase that profit from a million to a billion, would you pay that guy $25 million? Of course you would. And by the way, if you have to lure the high priced talent by promising him the use of a corporate jet, you do that too. It’s all relative. Exxon made how many billions last quarter? What would you pay that CEO? The problem shouldn’t really be with the public, it should be with the worker – who used to see the leader of his company make 25 times what he makes, but that now has risen to 500 times what the lowest paid worker makes. Now he/she should be pissed!

The dilemma is in the failing. The CEO's still get paid when they fail (see wall street) and that really bugs us, just like when our high priced free agent suddenly gains weight and can’t find the end zone.

So, how do we hold on to the Big 3? The bailout is just corporations doing what people do when there’s a handout – stand in line. If there’s money being given out, we’re “all in” – it’s who we are.

So, no bailout. My plan would be much more effective (and probably way more costly to our government.) Give the American Public an incentive to try American Cars one more time. Remember the typical Gen X er doesn’t even have these cars on their radar – they’re on their fourth Toyota.

So, here it is: I propose the American Investment Act of 2009. Starting on January 1, anyone who leases an American car will be entitled to deduct their lease payment 100%.
The act will go 5 years. The Big 3 must set accurate residual values – no unfair competition – your cars aren’t good lease deals for a reason and you can’t artificially pump them up and take a loss later.
This would mean that anyone who wants to take advantage of the lease savings would probably lease 2 cars during the term of the act – and would either fall in love with the product or not. If the cars are what you say they are, you would have recaptured America. If not, pull the plug and turn out the lights. After 2 cycles, you will have had every chance to hold on to the customer. If you fail, you will go out of business and no one will say you didn’t get a shot.

The argument against this is that it’s not free market. I’ll concede that, but other nations take nationalistic action all the time. I actually think it would help foreign manufacturers as well by goosing the economy. In fact, if you want to take it further, provide a sales tax break on all “made in America” products. The recession would be over by March.

At the same time, we have to keep perspective. This week I took 3 hours to read Newsweek’s election edition cover to cover. It was a fascinating recap of the campaign. I highly recommend it. But the thing that blew me away was a statistic that I’m going to link to my previous “lucky sperm club” comment.

Here are the top 3 world populations:
1 China 1,347,563,498
2 India 1,184,090,490
3 United States 309,162,581

According to Newsweek in India there are 400 million people (that’s 100 million more than our entire population) that don’t have electricity.
400 million!
I’m flabbergasted.
So, let’s keep perspective and be thankful that we’re going to microwave a pizza tonight.
It will be terrible, but there are 400 million people in one country that wouldn’t know a microwave from a TV and would be thrilled to stick a frozen pizza in either – if they could freeze anything.

They should be so lucky as to have to choose between an Audi and a Buick.