Tuesday, December 09, 2008

Bailout Blues

Congress did right by denying $25 billion in bailout money to U.S. automakers unless they presented rescue plans detailing how the money would be spent. (Too bad lawmakers didn’t hold Wall Street to the same high standards before approving $700 billion to shore up financial institutions that were finally experiencing the consequences of their own unethical practices and rampant greed.)

Properly chastised for showing up on Capitol Hill (or Capital Hill—from the CEOs’ perspective, either term applies) in their corporate jets, the Big Three’s CEOs failed to make their case and went away empty-handed. A few days later, they were back, this time riding in on the latest in American automotive hybrid technology. Once again, they pitched their case, only this time the price for their bailout had risen from $25 billion to $34 billion. Once again, they were rebuffed. Now, it seems that the Big Three are about to get a bailout package, after all, but significantly less than they’d asked for and under conditions that have real teeth.

It’s increasingly hard to justify saving Detroit’s Big Three when they’ve done little more than churn out crappy products for more than 60 years. The U.S. auto industry chose to ignore numerous warnings from numerous sources, instead hitting the snooze button at every wake-up call. Making business decisions based on what’s good for investors during the current quarter and possibly the next while steadfastly ignoring the necessity of making long-range plans to ensure long-term profitability is not a strategy for long-term success.

Instead of heeding Alvin Toffler’s prophecies (Future Shock, 1970; The Third Wave, 1980; Powershift, 1990) regarding sweeping changes about to overtake entire societies, economies, and governments, the Big Three pursued about-to-become-extinct technology while Toyota, Honda, Tesla and Karma (among others) got the jump on them.

While tempting, letting the Big Three fail is not something we should seriously consider. Too many other businesses and industries are tied directly or indirectly to U.S. automakers; allowing the Big Three to fail would impact these and send a ripple effect across the broader economy, ultimately costing taxpayers many times more than the amounts proposed for an initial bailout package.

However, any bailout money forthcoming should have some serious strings attached. Without incentives, corporate CEOs have no reason to change and past bad management practices will continue. Government, rather than making cash loans or gifts to the Big Three, should buy up all the common stock in those companies, nationalize them, kick the CEOs out of their corporate jets (sans golden parachutes), hire new managers, redefine corporate missions and rewrite corporate charters, and chart a new course for each company that best reflects the changing dynamics of 21st –century reality as dictated by environmental, economic, demographic, societal, sustainability and peak oil considerations.

When profitability has been restored—and surely it will be—government should divest itself of ownership in these companies and invest ownership in the people who actually manufacture the tangible products. When workers have an ownership interest in the companies they work for, they tend to be happier, more satisfied, more stable and more productive. Everyone wins.

To do nothing to save the Big Three automakers from total collapse would be irresponsible; some 3 million jobs ultimately hang in the balance. But more stilted 20th-century thinking is not the answer, either. That’s precisely what brought the economy to its knees to begin with.

What we need now are radical new paradigms for economic survival, environmental sustainability, and social equity. We need brilliant minds and bold visionaries to show us the way. We need wise and selfless leaders to take us there. But most of all we need the collective will to make it happen.