Big Three Bailout: TheCarConnection's Plan to Fix Detroit

December 1, 2008
After what was probably the least successful round of begging ever televised, the Big Three automakers are going back to Washington this week in a full-court press for a bailout--yes, a bailout, never mind how it's being couched or gladhanded. GM, Ford, and Chrysler want easy money and low-interest loan guarantees that you and I can't get, so they can hang on to their current business models until the economy turns a corner. That's a bailout by any measure.

The trouble is, no one thinks Detroit is worth saving--at least, no one outside of the Midwest. Bank of America says there's one too many automakers, and that's the most level-headed commentary to come from the talking heads in Congress and on television. Mortgage-industry shill and alleged Sen. Chris Dodd blames the car companies for everything--when CAFE is the real culprit. (Ask Dodd about his preferential treatment for an industry he's actually interested and has a stake in.) As a nation, we've lost respect for an industry that is part of the foundation of industrial America, and some of us are willing to write off what remains to the Japanese, German, and Korean car industry.

There are still ways to fix Detroit, though. Difficult, wrenching fixes but long-lasting changes that could give Detroit a new footing and a new way to compete. It's not quite a nuclear solution noncar guys want: uberblogger Seth Godin would have the dealers wiped out and promises an "orgy of innovation" as a result. It's going to take humbling in the boardroom, in the halls of the UAW, and in your driveways, but it's doable.

So as they caravan to Washington for tomorrow's epic round of fundraising, the leaders of the Big Three bailout mission--GM's Rick Wagoner, Ford's Alan Mulally, and Chrysler's Bob Nardelli--we give you these five ideas that can save the U.S. car industry for future legislators and executives and workers and Americans alike:

Bailout Step One: Pre-Package Restructuring


There's just no other way to get Detroit out from its crushing pension and health care burdens short of bankruptcy--something that may have worked for airlines but probably would kill all the progress the domestics have made on quality and reliability. Even Chrysler CEO Bob Nardelli says Chrysler won't survive a bankruptcy filing--and there's reason to think GM will not, either. The way to go? Cut costs in a prearranged deal that finances a massive right-sizing of all the domestic brands. The UAW has helped costs by cutting future labor costs, but new pay rates coming in 2010 are too far off. Detroit needs pension relief, health care relief, and pay relief. And it needs it today, not in two years. Sorry, Tesla, but vaporware doesn't qualify for this kind of federal funding.

Bailout Step Two: Axe CAFE and Enact an Energy Tax


Why was Detroit singled out with colossally bad CAFE legislation in the 1970s? Because they built shitty cars then. When Congress signed off on CAFE, though, they willingly gave away Detroit market share because they didn't have the stones to enact an overall energy tax that hit every oil-using sector of the economy, from airlines to makers of plastics. Detroit took one for the team--now it's time for every other energy user to take their turn in the barrel.

Bailout Step Three: Don't Give Away More Market Share


Any bailout plan that involves restructuring is going to cause massive pain--first in Detroit, then in the tsunami everywhere else. Suppliers will go out of business, and all domestic car plants could face shutdowns that could cripple production. While the industry works through the implications of the restructuring, Washington has to enact some auto sales cap that keeps import manufacturers from grabbing sales while Detroit's guard is down. It's anti-capitalist, for sure--but we don't need to make another CAFE-sized mistake and guarantee Detroit's demise.

Bailout Step Four: Split Up Chrysler Between GM and Ford


There's almost no business case that predicts an independent Chrysler--so it's time to save the best pieces of the company, its people and its best products. GM gets Jeep; Ford gets the minivans and Viper. Caliber? Done. Avenger/Sebring? Finished. Charger, Challenger, and 300? Probably no place for them in a 35-mpg world anyway. Dodge Ram? Pretty wonderful, but shutting it down would give the F-Series and Silverado some breathing room. Chrysler jobs are spared here, something that can't be guaranteed otherwise.

Bailout Step Five: Streamline GM into Chevrolet, Buick, Saturn/Opel, GMC/Jeep, and Cadillac


GM is Chevrolet and Cadillac; Saturn/Opel bridges the gap between them and Buick is GM's future in Asia. GMC is profitable--and would get more products if it absorbed Jeep. Everything else is a business case waiting to be studied. Take the dramatic situation at hand and use it to prune brands that take too much money and brainpower, and use the moment to shut down the thousands of dealers and car lines GM needs to shut down to focus its business.
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