Why Detroit Can't Be Trusted to Handle a Bailout

Toyota introduced the Prius in 1997. 11 thoughtful years later, GM brings us--the Hybrid Escalade.

This level of cluelessness--culminating in private CEO jet flights to Washington to beg for money--is hardly random. It took 50 years of really bad management to get here. Both bankruptcy and bailout offer the same dismal prospect: a zombie-like return of the same poor thinking that made Detroit the East Germany of American business.

Consider one simple example--the way Detroit counts cars.

Ward's Automotive Yearbook, the Bible of the US industry, used to annually publish US market share statistics. Every year, Wards tracked 50-60 US car models. But each year it lumped together Rolls Royces, Toyotas and Volkswagens into one catch-all category--"imports."

In 1963, "imports" totaled only 386,000--still, 5.1% of the US market.

By 1967, "imports" were 7.3%--still combining Nissans and Maseratis in one category, while giving the AMC Rebel its own market-share line on the chart.

In 1968, "imports" hit 9.3%; in 1972, 12.6%. The market share table listed 59 separate US passenger car models that year, yet the 1.2M "foreign imports" were still grouped in just one line.

"Imports" soon nearly equaled the entire output of the Chrysler corporation; exceeded all of American Motors production; exceeded all of the Lincoln-Mercury division of Ford, not to mention Pontiac, Buick, Oldsmobile and Cadillac. Of the Big Three producers, only GM's Chevrolet division and Ford Motor Company's Ford division sold more cars than "imports."

Yet Detroit suffered from automotive racism--those "imports" somehow just all looked the same.

Not until the 1992 issue of Ward's--when the market share of "Imports" had passed 31% in 1988 and 1989--did the table break out "import" statistics to distinguish a Honda Civic from a Mercedes.

Over the years, Detroit management blamed the following: a "surprise" shift to small cars in the late 70s; US tax policy; the used car market; Japanese industrial policy; dumping; unemployment; US engineering education; a pro-Asian faddish cult of style in California; poor technology; labor costs; health care costs; pension costs; the UAW; suppliers; dealers; government regulation. Now it's the recession.

The self-description of an industry says a lot. It declares to one and all, this is how we see the world, and this is how we will succeed.

Detroit's self-view was--and still is: we are the lords of an impregnable market, definitively defined by geography alone. Those "others" will never be important because their defining characteristic was--their very un-American-ness. By definition, only Americans win; because they are American.

Swanson, the original "TV dinner" failed to capitalize on its first-mover advantage. As one magazine said, "It was one thing to have missed the trend toward Thai; it was quite another to have missed Italian."

Missing the relevance of "imports" for over 30 years qualifies as "missing Italian."

There can be no rescue for an endemic mindset like this. It must be broken up. Incompetence on this scale and depth demands nothing less. The suppliers and workers of the US auto industry are the biggest victims here--but we cannot afford to use the sclerotic bureaucracies named GM, Ford, or Chrysler to be the agents of rescue. They just don't know how.

We need bold new thinking here. We need to get way past "bailout vs. bankruptcy." Here's a few starting thoughts:

• Give Toyota $10 billion to hire US workers, buy former US brands, and develop a US auto industry de novo; limit repatriation of earnings for political palatability, but get people running the industry who are not mentally compromised;

• Retrain former execs--for work outside the auto industry;

• Bail out workers and retirees through massive infrastructure programs and assumption of pension liabilities;

• Build up Michigan tourism (as a former Michigander, I'll testify to the State's beauty and resources);

• Ban from the industry anyone who used to have his name on a reserved parking slot;

• Move marketing HQs to coastal locations like Miami or Los Angeles;

• Give US visas to 5,000 auto execs from Asia and Europe; get 5,000 US engineers visas to work in Asia and Europe;

• Require all marketing execs to speak at least two languages.

I don't have all the answers, but it's going to take something this drastic. Trust destroyed this badly cannot be recovered by those who lost it.

Read More:

Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In

Follow Charles H. Green on Twitter: www.twitter.com/charleshgreen

Comments

[ADavid52]

I think everyone here is missing the real problem. Why are we buying automobiles anyway? Or at least why are we buying so many automobiles and why so many SUVs and trucks. Where is the argument for mass transit? My family owns a truck, motorcycle, a small and a midsize automobile. I would love to give up my two cars...the truck is for work...but we can't because there is NO other form of transportation available to us. We would love to have the ability to hop on a train or subway to go to work or move around town. Mass transportation would solve problems of oil consumption, overbuilt roads and bridges, urban sprawl, high insurance cost, traffic congestion and a host of other related problems. We are all at fault for this mess we are currently experiencing. The auto companies, unions, the public, and congress. ALL OF US! We demanded the gas guzzling SUVs and trucks. No one was interested in economy cars until gas hit almost $4/gal. Of course the auto companies were eager to comply because they made more money on each gas guzzler. The unions and CEOs saw the huge profits and demanded more money and more benefits. Furthermore Congress cannot seem to come up with a viable energy policy to help us out of this mess. We are all a part of the problem and we all need to be a part of the solution.

[Oldbuck]

The position that the Big 3 Auto industry is in is not entirely their fault the past administration including the Clinton Administration has let big oil hook Detroit on big autos because until oil sky rocketed the past two years big Cars and SUVs and Pickups made them more money why would they make smaller fuel efficient auto's and the congress had to change to Democratic before they would even past a mandated rise in fuel economy . You can tie a lot of this back to electing two oil men to the White House. There should be a increase in gasoline tax several years ago and we would have been forced in small more fuel efficient auto by now. Just as right now they need to develop alternative fuels but will not do it as long as fossil fuels are available.

[geezer68]

My dad & uncles were all drivers. From buses & trucks to steam engines & trolleys. At family get togethers the men would talk about how the GM monopolys in rail engines had run ALCO & other Co's out of business . GM bus div. got rid of trolly lines(we could use them now). As long as greed is the motive we aren't gonna go to far. I'm retired now and I was just thinking, of all the jobs I've had in my life at least 99% of them weren't much better than being a serf or something. Talk about waste, I just drove down to the store in my Dodge car wearing a 10 gallon hat and my hat didn't touch the ceiling.

[johncando]

Kick GM Ford and Chrysler out of the USA and send their sorry asses to Canada we get rid of our draft dodgers and think all the money grabbing UAW workers gon too . Canada is a good option NO bail out and think American could have all the imports it wanted without thinking. No thinking is good No bail out No unemployed workers and rid of the biggest War Weapons builder on Earth . This is good we could import Tanks as required and not worry about health care for UAW workers becayse Canada would give them that too.

[FreetoBme]

With all this talk about the US auto industry, I don't understand why no one mentions the EV1's.
Wonderful electric cars and trucks (with limited milage to be sure) but they worked, they would have been just fine for running around town, going to school, shopping, etc.
The U.S. auto manufacturers refused to sell the EV1's, only leased them, and when the leases were up, they quietly recalled them and crushed them.
They could have been so far more advanced by now if they had followed the good path that they had.
What America (and the world) needs is an affordable (not $39,000), dependable (Toyota does this well), and well built (built to last more than 3 years) car or truck. Who ever builds something like this can sell all they want. Make a little on a lot, it's the only way out of this mess.

[dragonfur]

Why are we even talking about giving GM, with assets valued at about $3B, a bailout "loan" of $18B? If you own property worth $20,000, could you get a loan ANYWHERE for $120,000? If they were really serious about staying in business, they would be restructuring the company from the top down. Instead, they are planning to lay off thousands more employees. And that's if they DO get the bailout! Many small businesses are being allowed to go under with no government assistance at all. The "too big to fail" is governmental BS for "They give too much money to my campaign fund to fail."

A financial expert on NPR yesterday, who has read their proposals, said the proposals had nothing to do with where the CEOs were planning to take their companies. The proposals were only on how to GET the bailout money, not what they would actually DO with it.

Honda and Toyota have opened factories here in the US. GM, Ford, and Chrysler have sent jobs out of the US. Who do YOU think we should "bail out"?

[johncando]

restructure my but get out of here go to Canada and give Americans what is theirs IMPORTS everything. China is trying to tell you to wake up but it is falling on deaf ears.

[TomBrentwood]

The Big Three are due for extinction. How can GM sell more autos then anyone in the USA in November but still lose over a billion? The entire executive management group needs to go away.
They also need to agree to and comply with some progressive increases in miles per gallon standards. Now that Dingell is pushed aside that should not be hard.
They need to focus on what Toyota and Honda have done to kick their ass every year now for over
a decade as does the auto unions. Get a clue boys, chnage fast or you are all going to work for Toyota or Honda if you even have a job. They do it better. Evolve or die.

[Grit]

As long as the same greed driven blue blood bone heads are left in charge nothing will change but money from taxpayer pockets to theirs. In other words what is happening in the financial sector right now. BUT thats wall street and the money going to it will not benefit anyone, middle class down. So its ok. I mean after all look at the number of jobs Citicorp's buyout of a bankrupt Spanish construction company for 10b will create. Using the part of the 25B taxpayer money . And the bonuses and perks must come from somewhere or these companies will lose these wonderful failures. And one of them Paulson is in charge of handing out the money. The racketeers of the past had nothing on these boys.

[Plank]

Toyota's value-add jobs will never be brought to the US. Engineering, R&D will always be in Japan. Don't kid yourself. The money they make will always be used to build Japan's infrastructure, schools, high speed trains, etc. As far as the domestic auto industry, you may want to update your knowledge about innovation and the auto industry. The prius is not as glamorous as you think. It's still generates a fair share of CO2 emissions.

[KillTheMessenger]

Detroit does not have value added jobs, only cookie cutter engineering.

Japan invests in high speed rail AGAINST the interest of its automobile companies, not with their help. Bummer

And a Prius generates a lot less CO2 than any car Detroit ever made, including the ones that will go directly from the factory to the scrap while we shut it down.

[Plank]

Why don't you move to Japan then?

[johncando]

Right on America don't need them send them to Canada let them put up with the bull and then all of us will get imports of what use to be made in America R&d and the 6 plants running pilot Kick them out now Canada won't see this coming Screw us all ,DO it now before any ones catches on save us from the bail out might send us some UAW workers too because shipping all the exports to the USA we might need help.

[jackwaddington]

The automobile as we know it is way out of date.
It's too wide.
It's too heavy.
It's too complicated.
It's too dangerous.
It's too polluting.
It's too congesting.
It's too expensive to buy.
It's too expensive to run.
It's too expensive to maintain.
It's too expensive to insure.
Anyone out there with any ideas to implement any of this?

[KillTheMessenger]

Barbie Doll sized people!

:-)

[jasbunny]

http://auto.howstuffworks.com/hy-wire1.htm

Check out the URL above. GM has had the Hy-Wire concept car for a number of years now - only not for sale to the public yet. The car has a "skateboard" chassis where everything to run this FUEL CELL car is located. You can actually snap off the entire passenger compartment and change from, say, a van to a sedan or a sportscar. The car engine is entirely electric (run by a fuel cell - only produces water vapor). The "Hy" part is hydrogen as in fuel cell, and the "wire" means that the car is controlled by wires and state of the art electronics, instead of the steering wheel, driveshaft, etc. of current cars. (The electronic control system is very similar to ones used by modern fighter jets and many commercial planes.) In other words, it totally rocks! Please do check this URL out.

[johncando]

Send them to Canada ,help with this campain and you will see the 6 pilot cars GM is building shipped across the border as Imports an American dream.

[Mildmannered]

"• Ban from the industry anyone who used to have his name on a reserved parking slot;" I agree

[Dugwood]

GM's novel solution for the bail out is to sell Saturn and Pontiac. These are the only cos. that are evenly galactically close to innovation that GM has produced in the last 20 years. Unfortunately, the incompetent's at GM's top couldn't handle consistent innovation management and Saturn and Pontiac's creative potential was never realized. US auto management still think innovation means more cup holders with more or less wrinkles in last years sheet metal. Very sad performance record - especially for the big buck shyster management..

There are also other side benefits from getting rid of US auto manufacturers: 1). The symbiotic relationship they have maintained with the oil companies will be reduced as well and then maybe fuel efficiency will improve. 2). There has been little or no automotive innovation outside of the big three in the last 20 years because - the big 3 squash anything they can't own or parasitize. If the field were cleared of the big 3 influence, perhaps we would see some real American innovation in the automotive industry and 3. We could finally get some cost effective public transportation across the country.

These over paid parasites have had their chance and then some. They continue to ignore what the public wants in function, utility, design and value. Just tell them we don't need no more stinkin cup holders and send them back to their offices and let market/evolution take its course. I'm a GM stock holder.

[johncando]

No No No build in Canada and let Canada put up with the bail out,yuo get rid of the laid off workers shipping them with their jobs and you get imports like you and a few of the senitors are wishing for. I would if treated like three blind mice get out of dodge ,this is a play on words but my ass would be in Canada.

[kstuff]

KillTheMessenger,

If your car was built in Japan, it was shipped to the U.S.. A process which required an excessive amount of petroleum.

[KillTheMessenger]

One would think so, wouldn't one?

Let's check the facts.

Here are the specs for a car carrier ship:

6400 cars
50.6 t/day fuel consumption
20.6 knots

The voyage from Japan to the US is approx. 6000 nautical miles, i.e. takes roughly 300 hours or 12.5 days. During that time the ship burns roughly 630 tons of oil. Per car that's approx. 0.1 ton of oil or no more than 30 some gallons. Double that for the voyage back. 60-70 gallons. Make it somewhat more for the other energy used to transport the car from the port to the dealer... 100 gallons.

I save 300 gallons of gasoline a year. In other words... transportation shaves 4 months off the car's lifetime of 12 years.

Here is a link to a slightly older and therefor higher consumption ship:

http://kennebeccaptain.blogspot.com/2008/08/shipping-cars-cargo-per-ton-fuel.html

[KillTheMessenger]

Sorry... I forgot to add the link to the first ship:

http://www.ship-technology.com/projects/courageous_ace/specs.html

[johncando]

Have you figured what you win if GM Ford and Chrysler go to Canada and ship CN rail and America has all imports,big sellers in the USA and think with a name like GM Ford and Chrysler it wouldn't be hard to get a dealership going ,getting rid of some of the good old boys would be good.

[kstuff]

Why would Toyota have any incentive to hire more U.S. workers right now? They're not selling cars either, thanks to the credit crunch. I'm afraid I can't trust you to know what you're talking about.

[lorla]

In the years following the Cold War, America was providing military protection to the rest of the world.
When the other countries let us foot the bill for this, they were spending their money developing the products they are selling us now.
The government sponsored "greed is good" campaign, that declared war on the middle class, beginning in the 70's is responsible for opening the floodgates for job loss in the US. It dropped the concept that corporations and labor had to work together.
This is not just about car companies, it is about the destruction of the middle class, and our government is responsible.