November 16, 2008 at 6:46AM
by Jim DiPeso
When the congressional enablers of the Big Three automakers proposed a bailout for Detroit, I got to thinking about a friend of mine.
He took pity on a female acquaintance with a somewhat chaotic lifestyle and loaned her $200. I told him that he would never see that $200 again.
I was right.
Call me cynical, but I am not sanguine about handing over large gobs of public money to manufacturers with a rotten business model that has exacerbated U.S. dependence on a fossil fuel supplied by assorted crooks, cartels, and despots.
Call me someone who dwells on the past, but its difficult to forget that Detroit and its unions spent years stonewalling and stomping on reasonable legislation to boost fuel economy standards until public outrage at high gasoline prices in 2007 finally shouted down the Big Three and their cant-do culture of complaining.
Call me hard-hearted, but when companies are run into the ground by sclerotic executive bureaucracies that failed to anticipate oil price risks, failed to fix their product development systems, failed to sharpen their brands, and failed to bargain hard enough over labor costs, they deserve to die.
Call me politically naïve, but handing colossal sums of money to failing businesses is a form of moral hazard that rewards the incompetent and encourages stagnation.
We would be on a slippery slope. A remarkable system of enterprise capitalism that, current troubles notwithstanding, has delivered extraordinary prosperity could give way to a dysfunctional system of crony capitalism where success depends on who you know in DC, not how well you do running a business.
Still, if the politicians are determined to splash out our money on rescuing Detroit, there ought to be no-nonsense conditions. No blank checks for this bunch.
Start by taking a fire hose to the executive suites. Can the boards and all the top managers.
Turn the companies into wards of the state and do whatever is necessary to cut out the rot. If that means shredding overpriced labor contracts and closing surplus dealerships, then so be it.
Then, turn Detroits business model inside out and put the automakers into the business of building safe, efficient, high-quality vehicles that will get us off the oil dependence treadmill, not make us run faster on it.
When the companies have been shaped up, put them on the auction block. If that means that Motown gives way to Tokyo, Seoul, Stuttgart, and Wolfsburg, then so be it.
But call me doubtful. Odds are that political interference would muck up such a rescue strategy, the money would be wasted, and that we would be better off letting the automakers go under.
It would be a painful adjustment, but the likely outcome of throwing good money after bad companies would be more so.