Memo To Congress: Toyota (TM) Already Won

A lot of fat, pork-barreling Congressmen who are supposed to vote on an auto bailout just want to go home for the holidays. Many of them are out of work. They were caught doing things that they shouldn’t in airport latrines or taking money under the table for new vacation homes. Some just got beaten like red-headed mules when the Democrats got more votes than the Republicans.

They all might as well book the next flight. The car companies have nothing new to tell them.

Anyone with a grade school education could guess what GM (GM), Ford (F), and Chrysler will say. The Ford plan even got leaked to The Wall Street Journal, probably by the auto company’s PR department.

Each company will march in and sit at a big table surrounded by Congressional assistants and TV cameras and say they will build small cars, take salary cuts, and try to get the UAW to allow them to fire more people. They may throw in that they are trying to get bondholders to trade their paper for equity, a notion that assumes investor stupidity on a herculean scale.

None of it means anything. The companies are still supposed to fund their UAW VEBAs. They still have to pay suppliers and probably are many months in arrears. Retooling plants and designing new models will take a year or two.

What is lost in most of this is that Toyota (TM) and Honda (HMC) have 20% of the domestic car market. That could easily be 25% or better by the end of the decade. Consumers buy their cars because they don’t break down and they get 40-miles-to-the-gallon. The firms also build nifty hybrids. Toyota has sold well over one million of its Prius model worldwide.

The Japanese are not going to stand still while the Americans fix all of their problems Japanese cars will be even better in two years. Toyota and Honda have balance sheets that will allow them to weather a downturn while keeping up product development and the launch of new models. In short, today they are where Detroit will tell Congress it can be in two years.

To really "fix" the American car companies, they would need to borrow the HG Wells time machine, return to the 1990s and do things right.

The Japanese may have perfected time travel, but The Big Three have not.

Douglas A. McIntyre