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Why Detroit Can't Be Trusted to Handle a Bailout

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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.

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