As a business owner this blog will on occasion address business topics from other industries.  This one in particular is very important because it effects all of us, if you are a taxpayer.

The big 3 Automakers have already received approval for 25 billion in bailout money and are now asking us taxpayers to give them another 25 billion!!!

Yes, they are in a lot of trouble these days.  They are heavily in debt and have very little liquidity.  They are on the verge of bankruptcy.  This is not chapter 11 restructuring bankruptcy, but chapter 7, close the doors and start a major ebay account bankruptcy.  Their collapse could cause 2 to 3 million lost jobs.   I don’t need to say how bad this could be with unemployment already at a high rate.

I think the bailout is a bad idea.  I think that the big 3 automakers business model is a poor one and doomed to eventually fail.  I think that their fall will be destructive to our economy and to millions of families.  That makes this whole thing a very sensitive and challenging issue.

Why do I think it is a bad idea?  Well the big 3 auto makers pay much more to American workers than the average company.  The average pay for Toyota motor company is $48 hourly.  The average pay for the big 3 is $73.20.  That is 52.5% more than the market rate.  If you take the average hourly wage across all industries ($28.48 hourly), they are 157% above market rate.  Ford motor company actually has a forklift operator that earns over $80K a year!  The big 3 have let pressure from the UAW union increase their wages to unsustainable levels.  The real crisis here is that, with mass layoffs, millions will enter the job pool used to earning 157% above the norm for their skill set.  Do you think these people understood they were being overpaid and aligned their budgets with average income for their position.  Maybe a few…

Basic business sense tells us that they can’t continue as a company, be competitive, and stay in the black, paying out 52% above their competitors.  I want people to earn a good living.  I think that businesses who want to take care of their employees, and attract the best people to their organization, need to pay people well.  What should a company do?  You don’t automatically give pay raises to employees who do their job well, without moving them up and giving them new challenges.  I have no problem with someone staying with a company for 40 years and working their way up to a nice income, but not in the same entry-level position.  Companies; if you have good people invest in educating them to take on higher level positions.  By spending those extra dollars on continuing education, you prepare your people for growth to supervisor and upper management roles.  I propose that an employee will feel more important and valued to have their company invest in their growth as a professional, than to just use those dollars as extra compensation.

There is no doubt that this is a huge decision and will affect millions of people.  I think that our economy is moving more toward results based compensation.  You see this in the fact that more and more companies are using commission based compensation plans. (this is a another world I will blog about sometime later)  I think we are headed to compensation based on what you bring to the table, not how long you sit there.

My prayers are for those who currently work for the big 3.  I know their futures seem uncertain right now.  I hope that CEO’s, Boardmembers, and business owners start putting more emphasis on investing in their people.  Investment in your people makes them profitable within their work.  I believe profitable employees will lead back to profitable companies.

Wow that was a long post.. sorry…

Let me know your thoughts on this one… ok