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How to deal with big three

(From Mike Hughes) This is a VERY complex issue, and it is likely impossible to separate the auto industry out of the fabric of the economy. Many small parts suppliers likely achieve a survivable income statement because of their auto sector work. They use up their other capacity in other areas and in total make money. Take away the core of their business, and they likely all fail, and then the economy goes into a dive.

Without the Big 3’s volume, do the smaller outfits survive to supply to the remainder?

I’d like to see a couple of things happen:

  • Some inspired leadership on a gain-sharing program to get the IAW total comp into a format where there is a more level playing field amongst all the manufacturers. Neither Toyota or Honda would have the financial results they have if they had GM’s labour contracts.

  • a better aligned comp framework for the C-Suite of the Big 3 as well: aligned to the reality of the current situation. Maybe if they only made $250,000 a year until this was fixed, there would be some incentive to fix it.

  • some insightful leadership on the CCA to encourage comnpanies to buy more efficient vehicles. Independent of, or perhaps in concert with the fall of oil prices, the demand for new pickup trucks is said to have dropped to almost zero in Alberta with the revised Oil Royalties. How about a vehicle program that allows close to 100% write off in the first year. This is how the Americans have rejuvenated the small airplane industry - first year depreciation allowance is about 93%, and people are buying North American made airplanes at the highest rate in the past 20 years.

  • a more objective view of the industry. There is actually not much wrong with any of the manufacturer’s cars, and much of the REAL innovation still happens in the Big 3. People seem to forget that folks move around in the industry, and ideas travel with them. All of them have directly or indirectly received taxpayer supports in one form or another over the years.

I own vehicles from Ford, GM, VW, and Toyota, and have owned Chrysler, Mazda and Triumph. They all have had their share of good and bad features. Haven’t had the pleasure of owning many other brands as yet, so can’t speak to them. It seems that all of them at one time or another lead one or more classes of quality surveys from JD Powers, but none of them lead them all.

Anyways, if the Big 3 fail, it will be the worse for everybody. I’d just like to see bridge financing come with a few conditions to help incent a restructuring and levelling of the playing field.

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