Thursday, December 4, 2008

The Psychology of Bailing Out Detroit

Once again, we taxpayers have a chance to deal with three more prodigal sons who have wasted decades and want to once again enjoy the succor of our parental embrace.

Do these Big Three automakers deserve our money and comfort?

The angry parent in me says let them take their lumps and find out what the airlines discovered after 2001. You need to downsize, provide better service and run a tighter ship. You may have to let go thousands or tens of thousands of employees. You may have to slash their salaries and health care. Survival is job one.

Then again, the compassionate parent in me says:

``What you did is behind you. You hurt all the people who depended on you, of course, and you made some selfish, greedy decisions based on what everyone saw at the moment. Like most human beings, you were not blessed with the gift of foresight, even though some of the smartest people in the world were telling you the competition from Japan and Europe would eat your lunch because you weren't keeping up with worldwide energy trends. You made many mistakes, but if you ask for forgiveness and promise to reform and accept myriad sacrifices, you can have my blessing once again.''

Like so many looking at this situation from an economic perspective -- we need to do something after devoting trillions to even-greedier bankers and insurers -- I am conflicted. Could we let just one carmaker go under? If so, which one? I can't say I have any favorites in this Hobson's Choice. They have been all been equally bad vehicle producers. I own two Toyotas and would be hard-pressed to buy anything that didn't come up to the high standards of Japanese or European manufacturing. I'm not a snob; I just like my cars to start and not break down in the middle of winter.

So here's my modest proposal, which isn't going to be pretty.

1) If the companies really don't have enough operating cash, let them file for Chapter 11 bankruptcy to restructure their debts and corporate structures. GM might have to deep-six Pontiac. Ford may have to dump anything that's not a mid-priced sedan or truck. Chrysler may just only save the Jeep brand.

2) If the companies want to retool to build green vehicles -- and I include vans, trucks and buses in that mix -- then they can apply for federal loans that will be repaid to the US Treasury over a set period of time. Moreover, the government should create a pool for ALL manufacturers for retooling and job creation, not just automakers. This is the "not favoring one child policy."

3) Should the government commit to green transporation, it should be part of a national mission with set goals, i.e., 10 million no-carbon vehicles on the road by 2020, etc. No open-ended lending with no strings attached. The banks may have made off like bandits, but we have another chance to save manufacturing and we need to take our time with this program. Morever, if we own these shops, we will demand world-class quality and low prices. I'm not going to buy a $40,000 electric car! It should be $10,000 or less and we should be able to sell millions of them in China, India, Brazil and any other place where even a $20,000 car is out of the question.

4) If the companies refuse to file for bankruptcy, the only other recourse is for the government to buy the outstanding shares of the Big Three (or controlling interests), put them into national trusteeship, fire all of the top execs and board directors and start over with new, outside management. I hate this idea of nationalization, but if you use Conrail as a model, it could work. That's when when Congress consolidated an array of nearly defunct eastern railroads in the 1970s, beat it back into one company, then sold it off. Maybe this isn't the best model, though I sure don't want government running manufacturing for more than a few years. The prospect of profit sold cars in the 90s and it can sell them in this century as well.

5) None of this will work without a national health care program that reduces costs and has universal coverage. Let me repeat that: NO bailout without health care for all. There should not be any more health coverage linked to employment. A single payer can efficiently buy services and drugs at the lowest-possible cost and pool risks. It makes no sense for each of the Big Three to have their own health care trusts -- nor for any employer or worker to be out on their own in a fractured, inefficient free market, which never existed in the first place. You can scream about the unions all you want and miss the point. The reason about $2,000 is built into the price of a new GM car from health care expenses alone is the fact that our system is both inefficient and cruel. Solve national health and you eliminate segregating costs for medical care. It's a problem that impacts more than 40 million and every one of the more than 300,000 small businesses. Universal health care IS one form of economic liberty and it should be a constitutional right.

This is my platform and I call it COMPASSIONATE CAPITALISM. I would love the automakers to be successful, make profits and re-employ millions of people again. But none of that will happen without a massive public and private investment in retooling, enlightened management, research and health care.

As a responsible parent, you have to be cruel to be kind. We need a time out on this whole subject and consider a pure cash bailout. That would enable our addicted children to hit the street again and set them up for another, even more colossal failure.

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