Saving US Auto Manufacturing

I found this article linked on a tech blog I read, and thought it was worth sharing:

If people don’t buy cars, there is no amount of bailout that will save the millions of US jobs in and related to car manufacturing. If they’re not making cars, the manufacturers won’t recall workers or order from their suppliers. It’s as simple as that.

But there’s a pretty simple solution as well. The US government should order a complete replacement for its vehicle fleet to be delivered over the next four years. The new vehicles must be either plugin electric hybrid, pure electric, or possibly natural gas. Obviously retooling both at the manufacturers and suppliers is required to deliver this order so the government should be willing to prepay a significant part of it as it does for new weapons systems. That gets money into the system fast and creates/saves jobs almost immediately. It lets the suppliers retool as well as the final assemblers.

Ideally all auto companies ought to be able to bid. Maybe we only offer prepayment when there is a certain percentage American content although I hate be even that protectionist. Certainly the companies with Japanese names that build cars using American labor in the US ought to be on an equal footing with Detroit. American jobs are American jobs whether unionized or not.

Some infrastructure money needs to go into recharging stations. Good project to be doing as well. Also the electric grid needs work.

The objective is not to assure that no auto company goes bankrupt; the objective IS to keep Americans working on making America a better place. The manufacturers and their suppliers that win the bids to supply the US government with a green, fuel-efficient fleet, will then be well-positioned and retooled so that they can sell these products to the rest of us and the rest of the world once we start buying cars again.

If we simply shovel money into the weakest companies like Chrysler and GM, we’ll have to also bail out relatively strong Ford to keep it from being disadvantaged. If we subsidize our car industry, the rest of the world will respond with competitive subsidies. The net effect will be something less than zero, especially if no one is buying cars. But, if the rest of the governments emulate us and order new green fleets for themselves, the world’ll be a better place.

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And here’s a neat “companion” article from the New York Times:

How to Fix a Flat
By THOMAS L. FRIEDMAN

Published: November 11, 2008

Last September, I was in a hotel room watching CNBC early one morning. They were interviewing Bob Nardelli, the C.E.O. of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn’t a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: “We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?” If we give you another $25 billion, will you also do accounting?

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.

Nothing typified this more than statements like those of Bob Lutz, G.M.’s vice chairman. He has been quoted as saying that hybrids like the Toyota Prius “make no economic sense.” And, in February, D Magazine of Dallas quoted him as saying that global warming “is a total crock of [expletive].”

These are the guys taxpayers are being asked to bail out.

And please, spare me the alligator tears about G.M.’s health care costs. Sure, they are outrageous. “But then why did G.M. refuse to lift a finger to support a national health care program when Hillary Clinton was pushing for it?” asks Dan Becker, a top environmental lobbyist.

Not every automaker is at death’s door. Look at this article that ran two weeks ago on autochannel.com: “ALLISTON, Ontario, Canada — Honda of Canada Mfg. officially opened its newest investment in Canada — a state-of-the art $154 million engine plant. The new facility will produce 200,000 fuel-efficient four-cylinder engines annually for Civic production in response to growing North American demand for vehicles that provide excellent fuel economy.”

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.

Indeed, if and when they do have to bury Detroit, I hope that all the current and past representatives and senators from Michigan have to serve as pallbearers. And no one has earned the “honor” of chief pallbearer more than the Michigan Representative John Dingell, the chairman of the House Energy and Commerce Committee who is more responsible for protecting Detroit to death than any single legislator.

O.K., now that I have all that off my chest, what do we do? I am as terrified as anyone of the domino effect on industry and workers if G.M. were to collapse. But if we are going to use taxpayer money to rescue Detroit, then it should be done along the lines proposed in The Wall Street Journal on Monday by Paul Ingrassia, a former Detroit bureau chief for that paper.

“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.

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.