Success and tenacity go hand in hand.
Dave Cunningham / November 16, 2008
Like all complex problems, there are no simple solutions to the crisis in the U.S. auto industry. It is too easy to say, “Let the market drive itself. Do not throw good money after bad with government intervention.” It’s also an oversimplification to say that help to the industry is a necessity to save our manufacturing base as well as an untold number of jobs. Both arguments have merit. Both are right and both are wrong. Let’s look at it more closely.
Some argue that in this free market economy, our success for the past sixty years relied upon a “survival of the fittest” philosophy that supports constructive competition and a laissez-faire philosophy. This brings ever-improving products to consumers. For example, competition from foreign car makers has forced improvements among Detroit’s Big-Three. Competition in a free-market is fundamental, and we should avoid doing anything to undermine it.
Yet, for decades the U. S. has enjoyed unprecedented economic growth based on the work ethic and purchasing power of a strong middle class. As we lose jobs in this country, we also forfeit the purchasing power represented by a middle class that can afford to buy the cars they produce. We must not allow this trend to continue. Therefore, the only viable solution is in government loans to our auto industry to support the middle class.
But, some would argue that it is better to allow the market to self-correct through the path of Chapter 11 Bankruptcy & Reorganization processes. This will force the changes necessary to re-create an industry that can compete successfully in both the U.S. and world markets. Changes likely to occur include new management, new boards of directors, and new agreements with strong unions.
However, we can’t afford to add another painful economic downturn at a time when domestic and worldwide economies are already struggling. We also can’t wait the six to eighteen months it will take to get through a bankruptcy. Consider this – who would buy a car from a company in bankruptcy? A new car is a major purchase which includes, not only the shiny new vehicle, but service after the sale. The fear of limited or no service at all would push car buyers to consider alternatives like Honda and Toyota.
I propose a best approach which incorporates the positives and minimizes the negatives from both sides of the debate.
We learned from recent mistakes made with the government bank bailout. Billions of tax dollars went out with unclear expectations of how they’d be spent. We know now that the banks are not making the stimulus business loans we were promised. In my proposed plan we will not repeat this mistake.
So, before government commits any funding, the car makers will provide a comprehensive business plan outlining what they will do with our money. The plan will be transparent to all and will include projected benchmarks for market share growth including target dates. It will include a specific payback plan including dollar amounts and due dates.
Considering management change, Einstein’s definition of insanity, “Doing the same thing over and over again and expecting different results,” is applicable. Auto makers will not solve problems using the same kind of thinking that created them to begin with.
The business plan that I require for funding must include succession plans for choosing new management with new ideas. These will be benchmarked, time specific. They will include re-examination of the industry to determine the skill sets needed over the next twenty years to make U.S. carmakers dynamic and competitive.
Plans will also require use of government funds for “green” initiatives like using enviro-friendly materials and recycling old cars into new products. These will coincidentally create new business opportunities and jobs for Americans.
Further, my plan restricts big bonus payouts to executives. There is no reason to reward failed performance with cash rewards paid indirectly by taxpayers.
During his campaign and since the election, Barack Obama has committed his presidency to strengthening the middle class. My plan supports this with bailout dollars contingent upon commitments from the car makers to maintain constructive talks with trade-unions to include them in the process. This provision supports the maintenance of a middle class with good jobs, good incomes and, consequently, the ability to buy the cars they make.
Let’s remember that oversight will be key to obtaining a return on this taxpayer investment. We need a smart business person with political skills to represent taxpayer interests. I suggest Mitt Romney for this job. He knows business. He knows the Michigan auto culture. He’s been a governor. He has credibility in industry and government. He will have the confidence of Michiganders.
In closing, here’s an encouraging thought. I was surprised to learn recently that the best selling car in the world is not Toyota or Honda. It is Chevrolet. We can rebuild our car industry and support our middle class around strong brands like this one. This is not the time for one economic purist to prevail over another. We will succeed with collaboration among all the people with the best ideas.