Wednesday, November 12, 2008

Sell the big US automakers to their real owners: the unions

An excellent post from the Lefsatz Letter that normally analyzes digital music comparing big US automakers to the major music labels.  Jake de la Grazia who also writes an excellent blog shared it with me.

I have my own take on what to do with US automakers as the industry seems to be in a death spiral.  I believe that with its pension obligations, the company basically exists for its employees and retirees.  As such, a majority share of these companies be sold to the unions to directly align incentives.  I'm not sure a direct sale is legal, but I am sure some structure can be worked out.

Now, I haven't fully thought through how this structure would work, but it makes a lot of sense if you think about it:
  • It puts the company in the hands of those most incented to see it succeed.  
  • It eliminates the energy wasted and the production declines that come as a result of labor strife.
  • In the long run, it makes the automakers more competitive than they are as presently structured due to increased labor productivity generated by employee ownership.  
  • It provides an exit strategy for investors as the pension funds can afford to buy the companies and inject capital.  
  • Lastly, I don't have to pay tax dollars to bail out US automakers, who at the end of the day, don't really add any value anymore to the global automaker equation.  They also are not likely to become tax payers any time soon.  Check out this image that Greg Mankiw posted the other day.

No comments: