Auto Makers closer to a Package

As we open the trading day it looks like the auto makers are set to receive funds from the Government.  Given the current economic environment it is important from an employment situation, that this help is funded by our government.

It appears there will be significant strings attached to this funding and that the Big Three have been called to attention from a profitability standpoint and likely will not get many second chances.  Given the current environment there are several  fixes that are in order of importance.

1. Cut costs: It is absolutely necessary to cut costs, either through UAW negotiations, streamlining or slimming of employment (natural run off through lagging replacement of retirees would be good) or increasing productivity.

2. Grow sales: The automakers made a decision several years ago to become the low cost provider by establishing zero percent financing, and slashing top line prices. Similar to the airlines a few years back, the auto makers need to bite the bullet and reset the bar at a price level that allows for profit and again allows for an increase in sales. 

3. Change the image: Now is a super time to begin a campaign of US backed sales to our citizens, BUT and this is an extremely important item, the US automakers must establish themselves as a quality alternative with a good product.  Domestic cars reaching high mileage points are considered dead while foreign autos are considered mid life.  Now is the time to again reset the bar, and allow for a better quality alternative with a longer life. 

The merit of this bailout is certainly debatable given our capitalistic government, but the alternatives are very slim and would result in an extended negative growth period of time for our country.  JK

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