Next chapter for automakers: Number 11

Next chapter for automakers: Number 11
11/12/08

[donation]

By Joel Thurtell

Longtime readers of JOTR won’t need me to remind them how offended I was by all the triumphant high-fiving and self-backslapping the Detroit Free Press did when Detroit’s former mayor and current jailbird, Kwame Kilpatrick, finally fell off his high and mighty perch.

Well, forgive me, but I’d like to do a bit of self-high-fiving right now. I was reading Tom Friedman’s New York Times column today, November 12, 2008, and I kept having these feelings of deja vu.

As in deja read that.

No, actually, as in deja WROTE that.

“How to Fix a Flat,” was Friedman’s topic, and the flat tire, metaphorically, is Detroit’s Big Three automaking companies — Ford, General Motors and Chrysler.

My first inkling of an echo came as I read Friedman’s line, “How could these companies be so bad for so long?”

Okay, I’ve written about this, but so have others. One of the best books on how self-congratulatingly terrible the Big Three are, in my opinion, is David Halberstam’s “The Reckoning, A tale of two cultures as seen through two car companies,” published in 1987 and amazingly prescient as a warning of the cliff towards which the automakers — and our whole American society and beyond whose well-being depends on it — were driving. Halberstam examined Ford and Nissan, but in so doing, he turned a microscope on the Big Three compared to the Japanese auto industry.

The second really good car book is Micheline Maynard’s “The End of Detroit: How the Big Three Lost Their Grip on the American Car Market.” Maynard’s book came out in 2003, so it’s almost current with today’s issues, and like Halberstam’s tome, “The End of Detroit” describes an American auto-making culture so ensnared in waste, arrogance and rampant stupidity that a crash seems inevitable. Both books make it clear that no matter how much cash is thrown at these companies, they have so lost track of their primary purpose — designing and building top-quality vehicles Americans, rather than rental companies, want to buy — that they will still ultimately be rendered irrelevant, meaningless and hopeless losers by the foreign car makers whose managers and unions do get it.

So where’s the deja vu?

It seems, according to Friedman, that the Wall Street Journal on Monday, November 10, 2008, published a column by its former Detroit bureau chief, Paul Ingrassia.

This is where bells started ringing for me.

According to Friedman, Ingrassia wrote in the NOVEMBER 10 Wall Street Journal, that “in return for any direct government aid, the board and the management [of GM] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver (my italics) — someone hard-nosed and nonpolitical — should have broad power to revamp GM 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 GM 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.”

Powerful thoughts, powerful words. Yet they came a tad late. Two days late.

Had you been reading JOTR, this is what you would have read the morning of Saturday, NOVEMBER 8, fully two days before the WSJ weighed in:

Now we’re hearing that they are not only too big to fail, but GM CEO Rick Wagoner claims even filing for bankruptcy would be devastating — who would buy a car from a bankrupt automaker?

Good point. Something Wagoner might have thought about long ago, when GM was churning out high-profit, gas-guzzling Suburbans and Hummers instead of catching a hint from Honda down there in Marysville, Ohio with its fuel-efficient Civics and Accords. Somehow, Honda, Toyota, Subaru and a flock of other foreign-owned automakers are still afloat and not begging for handouts.

Anything to be learned there, Rick?

Nah. Nothing to be learned when you reward continued failure with merit raises and bonuses.

Here’s why I think a Chapter 11 bankruptcy could be a good thing for Detroit and Dearborn.

There would be no infusion of free money that current managers could throw away on more bonuses for buddies.

Instead, the top guys at Ford, GM and Chrysler would be out. A federal judge would appoint a creditors’ committee to oversee rebuilding the business. A judge might appoint a monitor who could act as a receiver, with power to make and break contracts including agreements with suppliers and, yes, gasp, unions.

In that column, I followed with a discussion of the good things a court-appointed receiver achieved in the 1980s for the bankrupt city of Ecorse, Michigan.

Paul Ingrassia is right. Tom Friedman is right. And so is JOTR:

If we donate billions of dollars to Detroit’s clunker car makers, they’ll blow it like a drunk turned loose in a casino.

And then, because their stupidity is matched only by their audacity, they’ll be back wanting more.

Don’t believe me?

History is my proof. It’s named Chrysler.

Drop me a line at joelthurtell(at)gmail.com