The Auto Bailout From A Different Angle

There is an article in today's New York Post written by Sam Fox, the president of City Cadillac Hummer Saab in Long Island City.  He is frustrated about what he sees as the bias in reporting the plight of the American car companies.  He refers to the fact that GM has been improving its gas mileage standards and is making cars Americans want.  The Toyota Prius and the smart car, according the Mr. Fox, are not practical cars for American families.  It's interesting that Europe has moved to smaller cars because their gas prices have always been high due to government taxes, but at the same time the birth rate in Europe has dropped below replacement levels.  Generally, the Europeans do not have families that need larger cars.  I personally can relate to what he is saying about the cars Americans buy--I was recently blessed with my eighth grandchild (two of which are local) and there is no way I can fit a second child seat in my car (which is not a compact car).  I will have to drive my husband's van on days I want to take the grandchildren anywhere.  The problem is not the cars GM is making (although I am willing to bet a 'Car Czar' will try to pressure them to make tiny little cars that are unsafe and impractical), but the problem is in the business model and something called 'legacy costs.'  If you manufacture a product similar to the product a competitor manufactures and you costs are $2,000 per unit higher, your business is eventually going to struggle.  I sincerely hope that the American auto companies are forced into a structured bankruptcy (without Congress telling them what to manufacture) that forces them to deal with their operating costs--not their product.