Should GM Fail?

All this talk about bailing out the American auto makers really rubs me the wrong way. Did they happen to show up on Congress' door because handouts (with conditions or not?) are being made? Has anyone bothered to look at why American auto makers are in the condition they are? Doing so just might prevent them from getting even one cent of taxpayer money.

Let me share with you a story from when I was a kid that has biased me to Japanese cars to this day. When I was around 12 years old, my parents bought a Datsun 810 Maxima (now the Nissan Maxima). The car was essentially a four door sedan with the Datsun 280Z engine. Quiet, powerful, and would tell you with a voice your door was open. I recall the price was around $11-$12K. One night the car was parked outside and we had guests who pulled up in their red 2-door "K-Car" and parked beside the Maxima. I began to compare them (seeds of an analyst) and looked at style and how the doors closed--which is what really got me. The Maxima doors closed with ease and even seemed to seal the passenger compartment. The K-Car was like a tin can--literally. Then I found out the cars were about the same price--I couldn't believe it!

From that point forward I could not help but notice the stark differences in quality between American cars and Japanese cars. Very soon after that the Honda Accord became the top selling car in America. Toyota, Datsun/Nissan, and Mazda weren't that far behind. The Ford Taurus was in the mix at some point, and may still be at times. Why in the world could America not produce higher quality cars? Why would they not make changes? I've got one word for you: unions.

For a time in America, unions served an important purpose for ensuring America's work force was not abused and taken care of. With such leverage with companies, these organizations realized the power they gained by being the collective advocate of the workers to the employers. Over time, two things occurred: union power got corrupted and employers learned to take care of their own. American automakers have been at the mercy of the unions--to a point to where their coffers are almost dry from making up the difference of losing money on every car sold. Non-unionized auto production plants, like the one in Smyrna, Tennessee is not unionized and votes away the United Auto Workers every year. Why? Because Nissan apparently takes care of its people, and still manages to turn a profit.

Nissan was not always turning a profit. In the 1990s, Nissan was running in the red and close to shutting down. I doubt going to any government to ask for a bailout ever crossed their minds. What did they do? They got some consulting help, retooled their strategy and their image. Sales increased, and now Nissan sits as one of the more innovative automakers in the United States. Since 1995, I've had at least one Nissan in my garage (at times two) because they are well made, highly reliable, and fun to drive (I love that Maxima V6!). I don't know how I will ever lose that American car stigma, even though I know quality is much better than when I was a kid.

So, should America's automakers get bailed out? Not my call. But I would tell the automakers to retool their strategy, implement innovation more aggressively, and tell the unions the United States would make the best cars in the world without question if they weren't around.