Marketplace Scratch Pad

Drive ’em into the ground

Scott Jagow Mar 3, 2009

The latest car sales numbers just came in, and they truly are bad enough to make a grown man cry. GM and Ford sales fell by half in February. At the current rate of sales, Detroit is doomed. That leaves two choices: bankruptcy or nationalization. Or both.

My first instinct is to say bankruptcy all the way, forget the stomach-churning idea of nationalization. But I read an interesting take yesterday from Larry Kaufman, a former railroad executive. He argues that the US Railway Association, which was set up to handle bankrupt railroads, is a good model for saving the car companies. Instead of letting them restructure on their own in bankruptcy, he says a government agency could take the steering wheel:

“Management of bankrupt rails were spectators. They could not fix their own companies. Similarly, expecting auto manufacturers’ management to fix their own companies reminds one of the definitions of insanity: the same people repeatedly doing the same things but expecting different results.”

It’s hard to argue that point, but it’s easy to argue that the government wouldn’t run things any better. What do you think?

You know what GM thinks, but the company’s argument against bankruptcy is laid out clearly today in this post on GM’s Fastlane blog. Tom Wilkinson, the Director of GM News Relations (love the title), does make a rational case against Chapter 11. Unfortunately, it still hinges on people buying cars, and that is one loose hinge.

By the way, you know who’s benefiting from the lack of car sales? The people who sell car parts. Today, AutoZone said profits were up more than 8% last quarter. When gas prices were super-high, people were putting off repairs. Apparently now, they’re doing the repairs, so they can drive their cars until the wheels come off.

Makes me think of my dad. He kept a 1980ish Toyota Corolla until there were holes in the floorboards. This wasn’t that long ago. You could’ve driven that thing Flintstones-style. Although we teased him mercilessly at the time, it’s one reason I’m not too worried about my parents surviving the recession.

Of course, if I were a carmaker, I’d be terrified of a nation of people like him.

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