Tuesday, December 02, 2008

Detroit CEOs: Beatings to Continue Until Morale Improves

These guys should not be in Washington, asking for money. They should be in Detroit, making it.

Actually, they should be standing in front of a judge, asking for Chapter 11 protection from the unions bankrupting them. They plan to do some of that, according to this unreliable source, but not enough.

General Motors Corp., Ford and Chrysler LLC said they would refinance their companies’ debt, cut executive pay, seek concessions from workers and find other ways of reviving their staggering companies.
The only thing they need to be asking Congress to do is to drop the stupid CAFE standards and let the naturally rising gas prices influence which kind of cars people buy.

Now Ford is promising to boost fuel economy across its fleet by 14% this year. But they can't keep that promise, because it again depends on which cars people buy. For Ford to make the effort means that they are pursuing something other than the long-term viability of their company, which will inevitably lead to a suboptimal result.

Further, the car companies are expected to put a moratorium on incentive pay for salaried workers. Rather than reward success, the companies are going to punish failure.

And by selling airplanes, restructuring operations, and undergoing other cost-saving changes, they are simply nibbling along the edges of their problem, which is that because of their high labor and tax costs, they can't make money selling fuel-efficient cars..

Selling 14% more of something is not a recipe for success when you lose money selling each one.

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