Harsh words today for U.S. automakers and the Democrats (and Repulicans) who are lining up to bail them out. An excerpt:
How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it. It led to a situation whereby General Motors could make money only by selling big, gas-guzzling S.U.V.’s and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, G.M. threw way too much energy into lobbying and maneuvering to protect its gas guzzlers.
This included striking special deals with Congress that allowed the Detroit automakers to count the mileage of gas guzzlers as being less than they really were – provided they made some cars flex-fuel capable for ethanol. It included special offers of $1.99-a-gallon gasoline for a year to any customer who purchased a gas guzzler. And it included endless lobbying to block Congress from raising the miles-per-gallon requirements. The result was an industry that became brain dead. . . .
The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago.
But Friedman’s solution doesn’t seem to make a whole lot of sense (emphasis mine):
“In return for any direct government aid,” he wrote, “the board and the management [of G.M.] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver – someone hard-nosed and nonpolitical – should have broad power to revamp G.M. with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company … Giving G.M. a blank check – which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant – would be an enormous mistake.”
I would add other conditions: Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.
Wrong. First of all, Ingrassia never brings up anything close to a government-mandated product line. Second, Honda, Toyota, etc. are winning because they make products that Americans want to buy and GM hasn’t. Will the federal government’s visible hand shoving hybrids down GM’s throat actually help GM become profitable? Doubtful.
But here’s the craziest idea of all from Friedman:
Lastly, somebody ought to call Steve Jobs, who doesn’t need to be bribed to do innovation, and ask him if he’d like to do national service and run a car company for a year. I’d bet it wouldn’t take him much longer than that to come up with the G.M. iCar.
Just what America needs — an overpriced, but pretty car that has a touch screen.