11.14.2008

How to Bail Out the Auto Industry

I don’t want to bail out the auto industry. I don’t like the concept of government bailing out private industry. And I particularly don’t like the idea of helping companies that are on the verge of failure not only because of economic conditions, but because for too many years they made bad decisions about how to operate and what to manufacture.


I believe most people agree, but then take the view that some companies are too big to fail. Automotive News recently suggested that “the view in many Detroit offices” is that “Like falling dominoes, the collapse of GM or Chrysler would force many suppliers out of business. In turn, those bankrupt suppliers would knock out Ford Motor Co.”


On the one hand, if that is true, the desire to prevent such a collapse is understandable. On the other hand, the only way GM or Chrysler will survive at this point, even with government money, is to close plants and lay off thousands of people. So how much worse would a collapse be? In fact, some people are arguing that bankruptcy would be a good option, as it would force a restructuring in the face of real market conditions without the crutch of government help.


Whether a bailout will be passed in Washington is uncertain. The most recent news reports indicate opposition is growing.


But the idea is not dead yet. So if we’re going to do it, let’s think about how to do it right.


I’ve read a variety of columns arguing that any bailout – excuse me, rescue package – should come with conditions. I’ve seen calls for everything from the government getting equity to kicking out current management and appointing a government trustee.


I inclined to agree with all of that, and I propose a new condition. Any company getting funds must make a deep commitment to lean production, possibly hiring a lean expert to oversee operations. It’s something the automakers should have done on their own years ago.


Don’t get me wrong: At this point, I don’t believe even a rapid lean transformation will ease much of the pain the U.S. automakers are suffering. But it couldn’t hurt.


Your thoughts?

1 comments:

sirbeef said...

Bankruptcy would be ideal. However, automakers counter with the claim that no consumer is going to purchase a car from an automaker that is currently in bankruptcy.

What to do?