What Government Can Do to Help the Automakers

If you saw any of the coverage of the congressional hearings today you were treated to quite a bit of unintentional comedy. It's no wonder the country is in trouble. With that said, what could really be accomplished to help?

1) Repeal the CAFE Standards
Our government mandates that automakers produce a fleet of vehicles that meet minimum mileage standards. This is a noble cause, but it also means that the automakers are forced to produce a number of cars that people don't want (sub compacts) in order to produce cars that people do want (SUV's). Most of my environmentally conscience friends drive SUV's so if they are not buying the cars that actually get good mileage who is?

Yes, Toyota can thrive in this environment due to the Prius, but that leads me to my next point.

2) Give the Automakers the Money to service their Legacy Costs
What has killed the auto industries and is killing government spending is the high amount of people who are still on the payroll long after they have retired. The Pension system is from another era and does not work in today's global economy. When pensions were in vogue we did not have serious competition from automakers in Japan and Korea.

This allows the companies to honor their commitments to the people who are retired and also frees up cash that they can then plow into research and development. As Toyota does not have these costs they have been able to crush our automakers in this department and have advances like the Prius.

3) Force the UAW to Assist
If we secure the pensions of those who are retired and those employees over a certain age and with enough years of service the UAW needs to help out by giving up pensions to newer employees and adjusting their benefits to a reasonable level. The Big 3 can't survive if Toyota's employee costs are 60% of theirs. So the pensions need to go and the health insurance benefits need to be scaled back.

4) Tax Credits to those who Buy a Car from the Big 3
Why not? We gave out tax credits for the purchase of a hybrid car. The least we can do is encourage people to buy cars from the Big 3. For whatever reason no one seems to want to buy an American car these days. It seems to have something to do with the perception that our cars are somehow inferior to the foreign cars. I've owned 2 cars in my adult life. The first was a Mercury Tracer (which my wife felt was an upgrade from a Ford Escort) and it was just over 100,000 miles before getting totaled in an accident. Aside from basic maintenance and wear and tear replacements like the brakes and tires, I had zero problems with that car. I now have a Ford Taurus that has exceeded 125,000 miles. Not to jinx anything, but aside from usual maintenance I've never had a problem. In other words, our cars are probably just as good as the imports, but people have the perception that they are not and buy a Toyota or a Hyundai instead.

At the end of the day if we give the Big 3 a blank check with no strings attached my bet is that it merely prolongs how long they are able to stay in business rather than solve any problems.