A friend of mine were discussing "American" cars at an autocross this weekend, and the discussion eventually turned to the recent automotive bailouts. Specifically, we were comparing the Porsche Boxster S and the Chevrolet Corvette, both similarly priced cars. The Porsche has good power and fantastic handling, the Corvette, at about $10k less, has good handling and fantastic power - and did I mention it's about $10k less? Many car enthusiasts have long considered it the "bargain" sports car, given what you get for the price, and there's a lot to be said for that.
This is about the point in the conversation, however, where I let it be known that I have newfound aversion to GM and Chrysler cars that will probably last me for about a decade or two at the minimum. I feel like these companies have gotten *enough* of my money through taxes, and I have no plans to willingly fork over any more to them pretty much ever. I may work through this feeling in a few decades, but I suspect it will last at least that long - in much the same way that many who loved through the depression vowed never to borrow money again.
Upon further discussion, we both came to another conclusion: Ford, the only of the Big 3 to have not yet received any Federal Bailout Money, is by any objective standards also in pretty bad shape. However, compared to the other 2, it's in substantially less bad shape. Given this state of events, we concluded that Ford might actually be salvageable - but not the way the government is currently going about it.
Our plan to save ford: let GM and/or Chrysler die. If the government is willing to take this drastic action, we think Ford can actually save itself and turn around. Here's why:
1) Ford will no longer have to compete against two other behemoths that have government support in the form of subsidies.
Sooner or later, given the reality of the subsidies, Ford will have to take them as well or face its own ruin. But if its competitors are not getting them, Ford has a chance of pulling through on its own. Its balance sheet is substantially less bad. It's making more cars that people actually want to buy. It has made an actual honest-to-god attempt at innovation by adopting hybrids far more heavily than its American competitors, even if it hasn't reached the level of Honda or Toyota. It's putting out interesting products that can actually hold up against the imported competitors, like the Focus - the souped up models can actually compete against cheap foreign muscle cars, while the normal economy models fare relatively well against foreign economy cars.
2) Watching its competitors die will give top management the leverage to push through middle management and actually change corporate culture.
If the competitors die out, Ford will have actual consequences to hang over the heads of mid-management: follow along with us or join your friends form GM and Chrysler in the unemployment line. "We're really serious this time: if we don't shake things up, we're doomed." The message can carry a lot of weight.
3) Ford will also gain the leverage for true, substantive gains in union negotiations. See #2 above - all the same logic applies.
4) Ford will have the chance to snap up some of the best parts of its competitors at bargain prices.
And some of those parts are worth picking up. The aforementioned Corvette? Branding worth having. GM and Dodge both make fantastic pickup trucks, maybe some of that engineering and manufacturing capacity can be absorbed. What they should pick up, I can't really say, but there's something out there worth buying off of these companies.
It is very possible, perhaps even likely, that only one of Ford's competitors needs to die to accomplish this. However, I am becoming more convinced that the government's intervention in this market is dooming the one company that actually has a fighting chance. The correct policy here should be akin to triage: let go of the companies we can't save, and focus on the ones we can.
