Since the age of 16, I have driven American cars and trucks: multiple Chevrolets, a Jeep, and even a Ford Ranger made in St. Paul. At the time, it was my way of showing my patriotism, of supporting my neighbors, and honoring my father whose union job paid for my upbringing and college education (one which made me much more conservative than him, I might add). In the ‘80s it became clear that the Japanese cars were better-built, more efficient, and competitively priced. But I still bought American. That is, until three years ago.
As my wife and I were shopping for a new minivan for our growing family, we could not ignore the simple fact that both Toyota and Honda made products that were vastly superior to anything coming out of Detroit. And the Japanese brands were assembled in the good old USA by American workers who had learned a new level of quality-consciousness from their Asian managers. Our decision became even easier when my dad abandoned the Buicks he had driven for decades and drove home a new Toyota instead.
Fast forward to late 2008. The economy is in dire straits. A prolonged recession may be unavoidable. Auto sales dropped off a cliff in October, as Americans suddenly stopped spending money they didn’t have in the first place. Perhaps this was largely due to the credit crisis whereby the banks, now freshly infused with future taxpayers’ money, refused to lend it to just about anyone.
It is in this climate that some are calling for a bailout of the auto industry. $25 billion has already been approved for the retooling necessary to build higher-MPG cars. Automakers are requesting another $25 billion in emergency loans to keep them operating for the next 5 months. But that’s just the tip of the proverbial iceberg. Everyone seems to believe that it will take an additional $50-75 billion to keep them solvent through 2010 when a scant few of the new fuel-sipping vehicles will hit the showrooms. Without these bridge loans, they say bankruptcy for General Motors is imminent, with Chrysler and Ford perhaps not far behind.
How did they get into this mess? Partly by delivering a poor product mix that over-emphasized large trucks and SUVs while ceding the small car market to the foreign-owned brands. GM’s decision in late 1999 to acquire the Hummer brand shows that management had no intentions of producing efficient, eco-friendly vehicles. In fact, while great strides were made in improving engine power-to-weight ratios, the average power of engines nearly doubled in the last 25 years, while fuel economy has remained relatively constant. Instead, designers could have used the new technologies to create smaller engines with the same power, but twice the mileage! Detroit’s Big Three also ignored the trend of lean operations. Expenses were way out of control, including development costs, marketing budgets, union labor, health care, pensions, and yes, executive compensation.
Congress seems committed to pass some type of rescue package for the domestic automakers. Given GM’s current “cash burn” rate of $2.3 billion per month, they will run out of money very early in 2009. This is putting pressure on politicians to act sooner, rather than later.
Congressional Democrats have rightly observed that at least 250,000 jobs are directly dependent upon the survival of the U.S. auto industry. Estimates are that another 2-3 million jobs will be in jeopardy indirectly. Like the Republicans, I am hesitant to grant a bailout to an industry that has failed to act responsibly, to make any real progress in the last 25 years. Today, it’s the domestic automakers, but tomorrow it will be some other industry. The Oregon manufacturers of children’s wooden arrows already got their tax break as part of the $700 billion financial rescue package passed in October … I rest my case.
Perhaps the auto industry needs a painful shot of bankruptcies. The time and ability to restructure would be beneficial in the long run. But would you buy a car from a bankrupt company? Many of us would not.
Some have suggested that a bailout be conditioned upon replacing the Big Three’s current management with teams more responsible and accountable. While I ordinarily think that government should not get involved in the daily operations of companies, these are not ordinary times. Perhaps this idea merits further consideration. A Detroit outsider might be capable of fostering a new era for the industry. Someone who understands the urgent need to produce cars that are energy-conserving, environmentally-responsible, and still safe to drive. Someone who could build a new partnership with the unions to obtain the concessions necessary to trim labor costs, and one who would not demand a fat salary himself. Someone who could connect with potential buyers in a reassuring way. A true consumer advocate.
So who would that be? I can think of one person who could restore my faith in U.S automakers. One person I would trust not to squander billions in bailout money. One person who successfully challenged the Big Three to make major safety improvements, including seat belts in the ‘60s and air bags in the ‘90s. One person who has pushed for reform in numerous environmental and consumer causes. Ralph Nader.
And why not? He has all of the qualifications listed above, plus he’s available and it would be a huge opportunity for him to make a lasting difference. Another presidential run seems unlikely. (He would be 78 years old in 2012.) But he’s still got a few years left, long enough to forever change the culture of Detroit, and it would be a chance for him to prove himself, to “put up or shut up” so to speak.
So if we’re going to save American jobs by giving GM a massive loan and replacing its executives anyway, let’s make it conditional on Ralph Nader taking over the top job. Then I could be persuaded to buy a snazzy new Chevy Volt hybrid when it rolls off the assembly line in 2010; otherwise, I’ll be buying a Prius instead.
