Should We Continue to help the Big 3 - Now and in the Future?

In a global economy where competition, especially from efficient global players can kill a competitor, the Big 3 have been essentially sleeping giants. Unfortunately, not getting stronger, but weaker from the inside out. And when they woke up, they were too plagued to even stand on their feet.

Thus unfolded the drama the world has been seeing over the last few weeks. First a very ill managed PR debacle during the Round 1 of their ‘begging campaign’. Then came a more subtle and humble ‘begging campaign’ Round 2. But this time around, similar to the first, Congress took a very hard stance against once seemingly indestructible executives.

As another round of the high stakes drama unfolded in the Congress, foes of the current administration, surprisingly Senators from their own party knocked down Detroit’s Big 3 Bailout Plan. With that the plan moved on to White House we may see TARP (Troubled Asset Relief Program) money spending plan assume a new direction.

The $700 billion that was originally set out to save the economy and in turn the world was first used to bailout big banks and financial institutions. As we see now, bailing them did not help much, as this only rewarded those who got us here in the first place, with no relief for those on main street.

Then came a new direction, ‘lets try and bailout the people’ resulting in twist #2 in the globally watched crisis. But we do not see any money coming to those who need it- namely small and medium business and individuals alike.

Now to twist # 3. White house wants to help the auto makers. Before we do that lets ask - can Detroit's Big Three really get out of this mess if they get financial support? This question unfortunately can not be answered without skepticism. And this, my readers is a problem.

The white house wants to bailout the big 3 with $14 + billion dollars (as of Dec 14th, they are still finalizing the actual amount). I doubt if that $14 billion will be sufficient, because they originally wanted $34 and chances are they will soon come back asking for more. Additionally, as I mentioned in my previous post on this topic, they have been losing billions every quarter, at time every month. Supporters of Big 3 bailout say that this money will get them through March of 2009. But then what? Are the big three taking any major initiatives to survive after March 2009, so they do not come back begging for more? I think the bigger question is: can they actually do something that will show results in three months (by March 2009)? I have not heard anything that strongly indicates this. In fact, I believe that the 3 amigos are going to take the money and will likely invest in new processes and operations, that will take years to payoff, but at the same time will cut costs by laying off people and closing some of their large plants. So, the feared scenario, the big 3 going back to feds looking for additional tax payer dollars, may not be inevitable after all.

I do not see any immediate relief. If they get the money, the problem has only been kicked off for the new administration to deal with. Bush of course does not want to be associated with yet another catastrophe in his presidency. He has enough to put him at the bottom of the presidency pile in terms of liking.

So it basically it comes down to Obama and team to deal with this mess. But what can they really do? May be give the big 3 more money if they come begging again? Yes, to me that seems very likely.

I think the current and next administration need to hold the automakers accountable, push them very hard for strong reforms within these companies. They need to be pushed to take drastic measure to increase efficiency, eliminate plants, decrease production of SUVs and Pick-ups and most of all make what people really want, like what their rival auto makers have been doing for decades. And mind you none of this can be achieved in months or even a year, it will take years. They may also have to finally jump in and navigate the choppy waters of UAW. Union workers should be willing to take major cut backs in privileges and may see a new beginning where retired employees may not be entitled to more benefits than working employees. They may see their clout reduce and will likely see a paradigm shift in how and what they can command from their management.

If the big three can not get their act together and show progress by end of March 2009, they should essentially file for bankruptcy and reorganize and possibly come out stronger. I believe that these 3 should not receive any more money beyond the $14 billion. Not a really bad option at some level in my opinion. Yes, I hear all those skeptics that say bankruptcy is not an option, who will buy a car from bankrupt automaker and such… That is exactly what I was talking about earlier- these firms need to reinvent and make what people want. If they can show that they are committed to their promises from their begging sessions in front of the Congress and are actually delivering on those promises, always resilient and second chance believing Americans will surely give them a second chance. There is no shortage of patriots and believers in this country, the questions is can the big three deliver without betraying the trust of the very people they are serving?

Cultural and Societal Differences between the US and India

I was recently invited by my graduate school Professor to deliver a guest lecture to the MBA class at Sacred Heart University, CT. The topic of lecture was “Cultural and Societal Differences between the US and India”. India, approximately 1/3 the size of the US with 3x the population, has many difference with the US, but I chose to narrow them down to 16 important elements that in my opinion are the most prominent difference between these two very diverse societies.

I tried to inform students of not just professional differences, but also the societal/ lifestyle differences. My objective was to discuss elements that form the very core of the Indian culture and at some level are still dominant in that society. Of course some of these are slowly changing due to western influence, predominantly US, but many are still present and followed as they were ages ago.

The lecture was a great experience and the class was very engaging with great questions, I believe driven by genuine inquisitiveness about a new culture. Some questions even got me thinking hard. So I would like to thank the class for being so active and for their questions.

I would also like to thank my Professor for giving me this great opportunity. It was a true privilege.

To give you a brief overview of what I discussed I have included my lecture slide here: http://ksajjan.blogspot.com/.

If you have any questions or are interested in getting more information on the cultural differences between the US and India please contact me.

Thanks.