What to Do About the Big Three?

Well Tom,

We need those companies, like we needed them in 1941 when they stopped building cars and started building tank, planes, guns, amo, ships, engines, the works. This complete turnover took our fathers a few month to achive and it stopped Nazi Germany and Japan in their tracks.

Now we are at war with ourselves and the enemy is our economy. This is an even harder battle to fight and we need all ablebodied and ableminded men and women to fight it. The technology is in place to radically green up the economy, free us from carbon use and free us from sponsoring dictatorships that turn their own people against us (remember folks those terrorists did not come from Irak or Afghanistan).

So stop making cars and start making photovoltaic systems and put them on every roof available (using Thin Film Technology). Start harvesting the power of the wind on the great planes by building massive arrays of rotors (and yes it spoils the landscape but so does desertification). Start harvesting the power of the sea by investing in tidal- and wave energy. As Tom puts it, America has lead us (the world) into this "Schlamazzel" then it should also lead us out. Take your responsability and point the way into a greener economy. And don't hessitate just do it! And use GM, Chrysler and Ford as production facilities, use the dealers to sell the stuff and use a rigorous Cap and Trade or even better use a even more rigorous rationing scheme in combination with easy credit (can banks finally do something worthwhile for our society) scheme for those investments.

Greetings,

Ed Kuipers

Greetings, Ed Kuipers

If you know anyone (especially anyone that lives here in Michigan) in the market for a vehicle, please pass this on to them and encourage them to Buy American!!

I am writing this because I am saddened by the current state of the economy in Michigan and the future we are leaving for our children here. I am also upset with the number of people ignoring the fall of the U.S. auto industry and only pointing blame for the actions they are being forced to take – as if its collapse doesn’t affect them. I guess if you or your spouse isn't physically sitting on the curb with no job, you just don't care. Well, I have news for you. If you live around here, it does affect you!! We’ve had family and friends lose their jobs recently – almost everyone has. If we wake up, there is a chance to save our future here and provide our kids with a great place to live.

Top Reasons to Buy an American Car Today:

1. Our History

The southeastern Michigan region has depended on the auto industry as its central hub for over 100 years. It has provided our area with countless opportunities for growth and prosperity over many generations. Many of us have grandparents (and some of us even parents) that uprooted their families and moved here for the job opportunities and hope for a better life for their children. The auto industry also was critical in defining the middle class for our country. Without the auto industry, this area has little to depend on. 7 of the top 10 businesses in Michigan are auto-related. In 2000, one out of every three people in the state of Michigan had a job dependent on the auto industry. By 2007, that number was down to one in four. The number must be far worse today. Let’s respect the hard work of our families and buy the products of the companies that gave us the lives we have here in Michigan.

2. Our Future

The population of the United States has increased over 7% since 2000. The population of Michigan has only risen 1.3% in that same time frame – and has actually decreased the past two years. The people and jobs are fleeing and we need to think about the future generations when we are making decisions. If our children are lucky enough to find jobs here, will they even want to stay? They should be given the same opportunities we were – we cannot ignore the future generations. This is a beautiful area and we are letting it crumble. Home values are down 40% in the metro Detroit suburbs and 80% in the city itself. The average home in Detroit sold for $7500 in December, 2008 and you can find some as low as a few hundred dollars. With numbers like these already upon us, what does the future hold? I hate to think what the bankruptcy of one or all of the big 3 will do to our state. There is a study available that predicts some of the effects of the scenarios. It is very sobering:

http://www.cargroup.org/documents/CARPressRel...

3. Quality and Fuel Economy

The U.S. automakers make great products! My husband and I have driven only American cars for the past 16 years. Among them are a Dodge Neon (80,000 miles), Jeep Cherokee (140,000 miles) and a Ford Escort (100,000 miles). When we sold all of them, they were still running great. We currently drive a Chrysler Pacifica and a Dodge Grand Caravan. We have been proud of our vehicles and have found them to be very dependable and have very high quality. The foreign automakers have halos. They are believed to produce superior vehicles with higher quality and better fuel economy. This may have been the case at a point in time (15-20 years ago), but review the data yourself. The gap has closed. Compare the quality of head-to-head competitors at the following location (note the brand with the highest dependability – measured for 3 years in service reliability – is Buick!):

http://www.jdpower.com/autos

Fuel economy numbers are also available for head-to-head competitors at:

http://www.fueleconomy.gov/

The data is out there. You can review specifications, test drives and more. And, if a ½ star rating deficit does exist, just think about the thousands of dollars less you’re paying for an American car. You may site that your foreign car has a higher resale value. This is only because the demand for your car is higher right now (more people buy them). Note that this is a pretty selfish, short-sighted view. You are overpaying in the first place, shipping the profits to Japan, and losing far more money in the equity of your home and other investments in the US while you get your couple thousand dollars back in resale value. Wouldn’t it have been better to support America in the first place and avoid this scenario?

4. Jobs

One of the most obvious and visible impacts of the fall of the auto industry is employment. The job loss in Michigan is staggering:

· Assembly and parts manufacturing accounted for nearly 7 percent of total Michigan payroll jobs in 2000, but was down to near 4 percent in 2008.

· About a THIRD of the state's employment was concentrated in the motor vehicle sector eight years ago, but that dropped to 26.5 percent in 2007 according to the Bureau of Labor Statistics

· Motor vehicle and parts manufacturing in 2000 accounted for $35.8 billion of the state's gross domestic product in current dollars—about 10.6 percent. It dropped to around 6.8 percent (or $25.4 billion) in 2005, the most recent year available from the Bureau of Economic Analysis.

· Michigan has had nine consecutive years of increased unemployment, the longest stretch on record. The January 2009 unemployment rate in Michigan was 12% (the highest in the country). The city of Detroit currently has an unemployment rate of 22%. You can research a ton of economic information about Michigan at the Department of Energy, Labor and Economic Growth website (it includes historical data and forecasts, that you can customize with specific parameters):

http://www.milmi.org/cgi/dataanalysis/?PAGEID...

· Michigan has lost about half its lucrative auto sector jobs that paid an average $72,505 salary in 2006. A small portion of the loss has been made up with education and health services jobs, but those paid an average salary of only $38,543.

Motor Vehicle Manufacturing jobs in Michigan:
2000 -- 97,800
2001 -- 92,500
2002 -- 85,600
2003 -- 78,800
2004 -- 74,100
2005 -- 67,600
2006 -- 60,400
2007 -- 57,800
2008 -- 47,800
Jan 2009 -- 26,700

Motor Vehicle Parts Manufacturing jobs in Michigan:
2000 --227,000
2001 -- 203,000
2002 -- 191,700
2003 -- 177,800
2004 -- 169,800
2005 -- 158,700
2006 -- 146,400
2007 -- 130,400
2008 -- 111,100
Jan 2009 -- 80,100

TOTAL Manufacturing jobs in Michigan:
2000 -- 898,400
2001 -- 823,100
2002 -- 763,500
2003 -- 719,700
2004 -- 700,700
2005 -- 680,000
2006 -- 650,800
2007 -- 620,100
2008 -- 575,300
Jan 2009 -- 484,300

These 400,000 lost jobs in manufacturing alone are striking – Michigan’s total population is 10 million.

Here are the current foreign automakers and suppliers employees in Michigan (note that Honda, Toyota, Nissan and Kia have ZERO assembly plant or manufacturing facilities here):

Research, Development and Design Facilities:

Company/Facility Employees

Mitsubishi Tech Center 67

Nissan Tech Center 757

Hyundai Tech Center 153

Toyota Engineering Center 497

Toyota Design Research <20

Toyota Design Studio 25

Subaru Research & Development 20

Isuzu Engineering & Testing 125

Isuzu Engineering 40

TOTAL 1,684

Manufacturing Facilities

Company/Facility Employees

ASMO Manufacturing (DENSO) 303

ASMO Detroit (DENSO) 33

DENSO Manufacturing 2405

Automotive Compressor (DENSO) 1022

Paper Products (DENSO) 96

Systex Products (DENSO) 203

TOTAL 4,062

This is a total of 5,746 employees in Michigan for foreign automakers and suppliers. Wow – this will really help offset the hundreds and hundreds of thousands of jobs we’ve lost in the past 8 years!!!

5. What really is American?

Some people claim that a foreign automaker car that is built in the U.S. is more “American” than a U.S. automaker car built in Canada/Mexico. This is definitely not the case. The final assembly location of a vehicle is a very small part of the entire process of designing and building it. Let’s look at Honda, for example. Its headquarters is in Japan – with the bulk of its workforce (designing, engineering, testing, part manufacturing, etc.) as well. All of the Japanese automakers combined employ 100,000 Americans -- with less than 6,000 in Michigan. There are 5 MILLION autoworkers in Japan. That’s a whopping 2% of their workforce located here. The small number of people employed at an assembly plant in the U.S. barely put a dent in their finances – and they were given huge tax breaks to bring their products here in the first place. Yet Toyota sells twice as many cars in the US as they do back in Japan. Honda sells four times as many here as they do in Japan. The profits of every car sale go to Japan. We import nearly $53 Billion worth of vehicles and parts from Japan, while they only import less than $2 Billion worth of vehicles and parts from the U.S.. You can review the statistics at:

http://tse.export.gov/NTDChart.aspx?UniqueURL...

What is American is to support a company and people that are your neighbors – supporting America the most you can.

6. Pride

Whatever happened to American pride? Shouldn’t we stand behind our country and buy its products because they’re great? If we aren’t looking out for the U.S., I guarantee you no one else is. Please buy American and proudly drive American!!!! This is the industry the metro Detroit area depends on -- and we are ignoring it!!!!

We need to realize that we are becoming a nation of CONSUMERS, that don’t PRODUCE anything. How long can an economy survive like that? We are making selfish, short-sighted, uninformed decisions as a country – and it needs to stop!!!

Mr. Friedman, I believe we should not bail out all of the big three. The era of the multi car family is passing into history. The money proposed to bail them out should be in a large part spent on turning one or two of them into green economy manufacturers. I propose that one or two of them should be turned into wind turbine manufacturers.

The USA will need to build HUGE numbers of wind turbines for the next 25 years. The auto companies have a well trained work force and the physical facilities to manufacture wind turbines. I would think a shareholder vote with no proxies allowed would likely see at least one company willing to do this. The prospect of decades of profitable work would be an enticement.

This would also be an effective economic stimulous as people secure in their work future will be more apt to spend money.

Thank you for all of your effort and I hope this idea finds favour.

I think the government has a big opportunity here. They could "buy" the most economical Hybrid cars that the big three produce against a strongly reduced price. Basically the big three give the government a certain amount of Hybrids in exchange for the bailout.
These cars are then used to enable people with gas guzzling SUV's to trade their cars in and pay a very favorable price on top of that for one of these Hybrids.
The gas guzzlers will be recycled as clean as possible and the money "made" with the trade transactions can then be used to invest in renewable technologies.
This way, the demand for oil will also go down which will decrease the dependence on foreign oil. This will also make it easier for Obama to impose higher gasoline tax and efficiency standards.
I loved the book!

The US administration could simultaneously achieve both goals with respect to climate change / Foreign oil dependence and saving the US manufacturing base (read: Detroit & the big 3), by imposing the regulatory framework that stimulates demand for new energy efficient cars. Why not structure a self funding scheme of incentives and rebates, where super efficient car users are subsidised by the gas guzzlers, and at the same time, demand as part of the bailout that new targets on number of efficient cars be met?

Desmond Kingsford

The problem that all car companies have right now is that not enough people want to buy cars, period. Everybody's sales are down, a lot. So giving a car company money to sit around while their cars do not sell does not make sense. The US Government should use its financial resources to buy cars. Specifically, energy efficient cars (hybrids included) for its own vehicle fleet renewal, and for transformation of private fleets (like taxis, etc.). Old vehicles out, new vehicles in. Assuming a fleet vehicle drives 45,000 miles per year, the annual saving of achieving a 1/3 reduction in fuel consumption amounts to at least 20-million barrels of oil per year, for everyone 1-million vehicles. At $50/bbl, that's a $1-billion reduction in oil imports, per million vehicles, not to mention a substantial GHG emission reduction. The USG cannot make consumers buy fuel efficient vehicles, but by massively purchasing them it would allow the companies to re-orient at least some of their production and get better at designing and producing fuel efficient vehicles.

Ford has hybrid technology and could lease it to GM and Chrysler, the same way that Nissan gets it from Toyota. Also, the USG does not have to give these vehicles away to the private fleets. It could simply on-sell them at a discount (since buying a million vehicles might cost $30-billion, e.g., it would be quite expensive if it was a total give-away). But between its own vehicle needs and sales revenue from private fleet operators, the required subsidy might be less than $10-billion (and if the vehicles lasted five years on average, the economic benefits generated just on imported fuel saving would exceed this).

The total value of the Big 3's stock is supposedly less than the value of the bail out. Is it possible common sense prevailed in the senate over allegiance to the Big 3 and UAW?

A number of other nations have benefited greatly as hosts of manufacturers of parts, components and even complete assemblies for the Big 3. Read - Canada, Japan, Mexico and others. Why haven't we asked them to participate in the bailout? Maybe it is time, with future business or tariffs contingent on their response? I think it is time for hardball.

When the next round comes, and it will, the Treasury and/or congress through DoC should be working Japanese and other car makers to buy the stock inexpensively and set US auto on a new course. US management has failed for decades and UAW is their accomplice not their adversary. Throwing money at this problem won't help long term and enough thrown down the Big 3 "black hole" will help weaken the dollar and possibly extend the recession.

Clean autos under some schedule within reason can be a condition of foreign manufacturers benfiting from this stock fire sale. The whole US market thrown open to them. I hate making such a suggestion but what I hate worse is the continued failure of the Big 3 with no change in sight regardless of the money thrown at them.

The problem with the Big 3 is really a problem with our society as a whole. We need to rebuild this industry (if it's even worth saving) by restructuring.

What I mean to say is:

I'm a college student and I can tell you firsthand that students are worried about making money when they get out of school. Our society doesn't value pushing their children to study mathematics, engineering, or the physical sciences like they should. We lack a drive in this regard, instead choosing to focus our studies on other areas.

Math and the sciences aren't valued in our society like they are in other cultures and that's why we lack the ability to innovate - and also why our jobs keep getting exported. (If they are valued in our society at all, they are only to get jobs in medicinal fields. Whilst this is important, we need to encourage students to focus on technology as well.) The problem needs to be fixed from the bottom up.

How to do this? Incentives for math and science. Scholarships for people who choose to focus their studies on these. Programs in elementary school encouraging gifted math and science students.

Another major way to fix this, and something that President-Elect Obama can do, is to increase carbon emission standards.

How will this solve the problem?

It's commonplace to import our cars from Germany, Japan, etc. Have you ever heard of citizens of other countries importing American cars? Of course not. (It may or may not happen... I'm just saying that it's uncommon.)

Problem number 1: it wouldn't even be legal. Every other developed nation in the world has higher fuel emission standards than the U.S. - our cars can't even be sold there (without being modified)! Of course no foreign citizen is going to be an American auto customer!

If we can get laws that even put us on an even playing field with other countries, we at least have half a fighting chance of expanding the consumer base. This would also lead to new innovation within the American auto industry.

Thanks a ton for reading!

Tom,

Bailing out the big 3 is going serve to prolong the inevitable for several reasons. This has to do with the pace at which technology is evolving and how quickly the big 3 can harness that technology (or more traditionally, not). Basically the integration of change management, and the scalability of technology. Further, I believe the big 3 represent a corporate culture which is dying. The arrogance of companies who have a "monopoly" due to barriers of entry into a market is going to be the straw the broke the camel's back. Technology is removing these barriers and throwing my money at the big 3 simply is throwing good money at bad money. Couldn't agree more with your comments on Face The Nation of 12/07. Keep up the good work.

On What to do with the Big Three.

I suspect that the government will probably need to provide some money to the Big Three short term (i.e.,over the next six-twelve months until a real strategy can be developed and fixed upon, and the Obama team can get things moving).

I agree with the principles you’ve outlined in Hot, Flat and Crowded, specifically that we need to STOP creating CO2 (or alt least getting it to a bare minimum). Petrol fuel efficient cars and hybrids are just interim steps, and we shouldn’t stop there. I’d invest in battery power and hydrogen, both long and short term.

While I’ve heard “it’s too hard” to do (both hydrogen and batteries), it simply has to be done. I’ve read of some potential hydrogen-production processes, especially one using aluminum, which is abundant and recyclable (the “cradle-to-the-cradle” concept), and I personally believe hydogen-powered vehicles are feasible, we just need to discover the way. (Before I retired, I was an engineer in R&D who learned that many of the “impossible” problems just needed to be challenged as doable from a different perspective.) And there very well might be other non-polluting approaches I don’t know about.

Back to the Big Three, I think the Chevy Volt is a great idea. I know that GM, Honda and BMW have hydrogen powered prototypes. I suspect others do as well. These need to be developed, but the sourcing (creating the hydrogen) and the infrastructure (getting the fuel to the filling stations) issues are the killers and will take government support and probably industry (Big Oil, etc.) to pull it off. For this, President Obama must be behind it.

We’ve been shocked with $4/gal gasoline, now it’s down to ~$1.70/gal in Ohio. This drop is due in part to a shift in consumer choices which has led to less consumption. I’d set the price at $2.50/gallon (increase the Federal tax to $1/gal) to fund this development and others, with the support of the citizens, get the public focused on conservation, the auto companies on fuel efficiency and emissions. Your book, Hot, Flat and Crowded, provides the rationale--this is a BIG WIN. The current recession can provide the incentive for the country to get off it’s focus on materialism and living on credit, and get to being part of something that can change the world for good before it’s too late. We’ve taken our eyes off real progress and the challenges we have before us. [I think there is an essay titled “While You Were Sleeping” which would capture what I’m trying to express here.]

President-elect Obama is right on it in that we need to build up our neglected infrastructure, focus on job creation, shake our “addiction” to oil, take global warming seriously (for what it is) and get America to take charge of its future. The rest of the world is ready to follow our lead. (I personally don’t trust the rest of the world to do what needs to be done.) When Americans set their mind on a goal, especially an “impossible” one, they get it done.

My career as an engineer in research focused on new product development (getting products to the consumer/customer), not just technology development and was not typical. Besides working with teams to find ways to get products into the market, I also worked on (1) learning, developing and using techniques to get teams challenged and moving to solve technical problems, and (2) on the psychology of the American worker (and consumer) to understand first hand that Americans are uniquely “programmed” to go after impossible challenges, are motivated by frustration, have a “just do it” approach and attitude. Just get us focused on a problem and see the goal and the rewards/benefits, far beyond the money, but to the bigger impact our efforts can have for all, there’s little that can stop us. Americans are up for this challenge!

Q: Is it just me? Why does it seem like the country is attempting to make the Big 3 solve all the ills of the national energy crisis? Where is the outrage for builders and buyers of homes that are much too large [high carbon sheltering]? Where is the outrage for online shoppers that get overnight shipping [high carbon shopping]? By the same twisted logic that places blame on the auto industry for energy, we ought to place blame on Toll Brothers and Amazon for high carbon sheltering and shopping.
It is much more productive to work on these problems as a system and value chain - where all parties have collective responsibility to improve the entire system. Right now, we as a nation want to impose our will on the Big 3 to not only remedy energy issues but also holistically fix social issues like legacy healthcare, retirement, etc.. while other parts of the "free market" do very little to re-balance the transportation energy value chain and social issues.
In what type of country do we set up rules where we have huge incentives to continue to building more and more assembly line capacity, more and more retail space, more and more housing - all without any sort of plan except "let the free market do what it's gonna do". When these uncoordinated incentives run their course we get disruptions like mortgage crises, automotive transportation supply crises, and other energy economic displacements. Everyone including government needs to get over ourselves and create a coherent strategy and plan.

The Big 3

You can’t solve an the American automobile industry problem with more money, until the BOD fixes the leadership problem. Globally, there are fossil fuel issues to resolve. and you have to make short term decisions that flow into a midterm strategy, which ultimately culminates with the right product, mix, features and cost to recover your company, recover your market share, keep your people employed and finally reward your stockholders.

To simply ask for $25 billion, to save the domestic portion of a very important global business, without a plan in your hands, is a further indication of your lack of even the most basic leadership skills. As a leader you are the conductor of the orchestra - your baton, arms and eyes follow a carefully choreographed plan - leading & teaching your team to success.

The salvation of the American Automobile Industry is not a hockey game - with a bunch of players all dressed in padded uniforms, moving to center ice, waiting for the official to drop the puck right in the middle of us, so we can all fight to gain control. No - it requires planning, skill, training, rehearsal and ends up more like a ballet.

Ford and Chrysler from 2006 have placed leaders in each business, with the correct leadership abilities. Nardelli came from GE and many years of 6-sigma. Mulally came from Boeing and the 777. Mulally appears to be leading Ford, but it is difficult to see what Nardelli has done, until Chrysler starts sharing results and operating plans. GM is floundering and for many, many years this has been a problem - 1st effecting worker job security and ultimately the one element of the business a CEO is charged with - protecting the investors.

Using simple arithmetic - They are requesting $25 billion. It is reported 3 million people will loose their job if the Big 3 file chapter 11. $25 billion / 3 million people = $8333 each. If $72 / hour is the correct number and 40 hours equals a work week - there will be enough to pay everyone for roughly 3 weeks. Will this solve a long term problem for the people or even the car industry? I don’t think so!

If you give $25 billion to the Big 3 - Where does it really go?

My vote is to Get the leadership in place, provide $25 billion plus the ability to increase to $100 billion. Focus on short term fixes to preserve existing market share and fight to regain some of what was lost. Then start to develop technology to support the move from fossil fuels - remembering why Henry Ford made the Model T.

“I will build a car for the great multitude. It will be large enough for the family, but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be low in price that no man making a good salary will be unable to own one - and enjoy with his family the blessing of hours of pleasure in God's great open spaces.”

On compensation - No CHAIRMAN OR CEO should be compensated until the investors are. Stockholders equity must increase all the time to earn any money. Plus - a bonus is paid only when Stockholders equity increases along with market share growth, effective introduction of new products and year over year sustainable business savings are achieved, without the need to layoff any employee. If the Chairman and CEO just conduct their orchestras to the above - everyone involved with the business will have a great life.

I believe that the big three should get a line of credit only if strict controls are in place as to how the money can be spent. All expenditures should be transparent and governed by a team of experts in the fields of transportation manufacturing and new energy solutions. This team should be put together by Mr. Friedman, if he has not already been tapped by the new administration for Energy Czar. In that case he could appoint someone.

I would rather see Mr. Friedman implementing his entire plan, as laid out in his newest book, than just overseeing one aspect of the energy plan.

I would leave it up to Mr. Friedman to decide what type of fuel different vehicles should use. If it has to be combustble at first, I could see using CNG from the U.S. If anything is salvageable from the Volt program perhaps that could be used.

It seems as though letting all the infrastructure already in place, belonging to the big three, to go to waste is just that, waste. Having to build something somewhere else, is also a waste. Why not put to use the idea of teaching kids how to weatherize buildings, install alternate energy systems and recapture any energy that is escaping from the plant to power the plant. One last thing on this, in order to be able to bring down the price of the vehicles, which I feel is imperative, the pay structure should be adjusted so that everyone in the company makes the same amount of money, has the same benefits, and gets the same perks. (Performance based of course).

I've been going back and forth on whether or not to "bail out" the big three. I've seen good arguments on both sides of this debate. The con arguments lean toward the theoretical (sending wrong signals, creative destruction, etc.). The pro arguments are rooted in both practicality (almost 3 million people are gonna get the shaft) and economic jingoism (the prestige of having American automakers).

Most of these are strong arguments (except the prestige ideas), but for me, practicality is winning out. I think we should find a way to help the big three, plus foreign manufacturers who build here and need help. But I don't think we should should have an industrial policy (too few people have to know too much - it hasn't worked that well for Japan), and I think there should be big strings attached to whatever assistance is given (it should be loans).

Creative destruction is a good argument, one that's too often overlooked as we debate the economy. If one of the automakers gets into trouble so deep that it can't keep going, it should go into bankruptcy and be dismantled so its parts can be put to work by other firms. But when it's the whole industry, that's different. First, that many parts couldn't be absorbed fast enough by the remaining industry to prevent a major economic catastrophe NATIONWIDE (it's really national, not just regional). Second, the rest of the industry is in trouble, too, and the cash that they would need to purchase the assets is in short supply (at least in credit markets, where they'd have to go to find it).

Although I'm not an economic jingoist, there are better reasons than prestige to have automakers with roots in the US. Despite occasional lapses of judgement, they are marvels of large-scale manufacturing. They proved their value in this regard during WWII. In early 1942, they turned quickly to stop building cars in order to build what the nation needed. Most of the engines on B-17's and B-24's were built by Studebaker under license from Wright. GM built most of the Avenger torpedo bombers and Wildcat fighters for the Navy so Grumman, the designer of those aircraft, could focus on the F6F Hellcat. Grumman showed GM how to work with aluminum, while GM showed Grumman how to build a lot of stuff fast. We can't depend on foreign-based companies to do things like that out of national interest.

As I mentioned, all of the auto manufacturers are having problems caused by tightening credit, including the companies we think will give us the fuel-efficient cars we need, like Toyota and Honda. Why not help them, too?

What kind of strings? The assistance should be loans, not grants. Federal guarantees of private financing, if at all possible, but direct financing if necessary. Another alternative would be for the government to buy preferred stock in the company. Either way, companies seeking help would have to present a solid recovery plan, and there would have to be a date-certain for repayment with interest to the US Treasury. And they would have to commit to higher CAFE standards and production of plug-in hybrids by a specified date in return for the assistance.

The government should not be in the car business for any great length of time. We can make the strings so burdensome that we wouldn't need to worry about bad messages being sent. The only reason the companies would take the help is for their survival, and future management would alter their behavior to keep from being placed in that position again.

I know it's onerous to have the public saving companies from their own mistakes. But sometimes it works out well for both. Chrysler used its bailout to restructure its management and to produce smaller, more fuel-efficient cars to give it the highest average fuel economy of any of the big three. Combined with the invention of the mini-van, which replaced monster gas-guzzling station wagons, this put Chrysler back in the black, made it an innovator, and saved a ton of jobs. And they paid the loans back early - At a profit to the taxpayer. Everyone won.

Sorry this is so long, but there's no simple answer to this question. Thanks for doing this, Mr. Friedman.

We have just seen the economic equivalent of a forest fire. We still have some hot spots out there and the auto industry is one of them. The issue with the auto industry is that it was a corner stone of the economy. It is still an important sector but is pivotal on a regional level, not a national level.

The forest fire is destructive, scary and potentially deadly but it revives the forest and allows for new growth that restores the forest. Bankruptcy is an economic cleansing process that allows for the natural destruction and orderly restoration of the economy and the entities that make it up. If the auto industry is to fail, the government can no more save it than the forests of southern California. The taxpayers have been bailing out the auto industry for years. It’s time to stop and let nature take its course. Either the industry will cleanse it’s self and recover or be replaced by another viable entity.

The government will maintain a motor vehicle manufacturing infrastructure with their purchases alone. We have several viable transportation manufacturing entities in the country that can and will gain at the expense of the loss in market share of the big three. The government can provide funds targeted to the effected regions that support the investment needed to promote the transition to the “Energy-Climate era” and retraining to help the former auto employees build the new America.

The path to a clean energy and climate friendly world will force us to make many really tough decisions. Allowing the big three auto companies the opportunity to cleanse themselves in bankruptcy is the only progressive decision that can be made. An industry bailout serves only to maintain the past. But for Congress, it’s the safe choice for now.

Tom,

Don't know if you got my previous POST as my computer hicupped before I submitted but there was a link to an open invitation from GM @ http://fastlane.gmblogs.com

I was suggesting that you might want to take Michael Porter, Harvard U Business Week 11/10/08 (Why America Needs An Economic Strategy) and have a look see so that Congress is not in the position of passing judgement on a business of which they know very little.

I also mentioned that I have just written an item (I am planning to put out on a blog) on the case for saving I'd love to share with you, as you certainly have a much greater reach than I, should it make sense to you. I also have an outline for a plan

I do hope you got my 1st submission as this is basically a summary. Love your work.

It strikes me that one of the problems in going green for the autos is knowing they will have customers for what ever new models they come up with.

Here's a novel idea rather than new regulations or taxes, perhaps the Government (Federal and State) can act as the large consumer of cars and trucks that it is.I do not know the exact numbers but would guess that the current government fleet of autos is in the millions when states are included. Simply put out an RFP- In 5 years, the governmennt will convert the entire fleet of vehicles it operates to either hybrids or electrics.There will certainly be some exceptions, but this should be a large enough order to drive behavior.

If the big three can't meet the challenge than they should fail, If Toyota or Honda can meet the task then they win. The only stipulation should be that the car must be built in America.

An order of this size should also create some economy of scale and lower the cost of both hybrids and electrics - It will also make it economically sensible to retrofit factories and build out the infrastructure for electrics as there will be demand.

I understand this will not solve GM's short term cash need - bankruptcy is the only viable solution I see for that.

The best thing for GM and for the citizens is for the govt to do nothing - this way GM first goes bankrupte, can now renegotiate all those unreasonable labour union contracts, dramatically cut cost and reorganised and taxpayers don't need to pay for their mistake. Economically speaking this is the soundest option.

If the govt want to lessen the blow on a social level, let them go bankrupt but also negotiate a deal with say, Toyota or Honda (or any other competent, efficient, profitable car makers), give them money to buy out GM. Surely they're blowing away money on this, but at least, the govt have capped their exposure, and they're giving money to good management instead of throwing money into the bottomless pit of bad management.

Yes...In addition to this hypocrisy, Friedman is also a 5 minute know it all on all subjects. This is what often happens to people like this. They win an award and gain the admiration of pundits and fans. They then lose themselves in the adoration, and then gain an inflated sense of themselves, losing humility, and thinking that they can extrapolate their brilliance to solve all other problems, no matter how complex. Unfortunately, they are usually only qualified to give advice in the field of expertise for which they won the original award and/or accolades. In the particular case of professional opinion givers, it is an especially slippery slope into megalomania, because the task is simply to give advice to others on how they should do things. Since, they are not responsible for the implementation of their advice, they have no real feedback to reinforce humility, appreciate complexity, or allow them to recognize that they are often wrong. This is why we get people like Bill O'Reilly, Rush Limbaugh, Tom Friedman, and others in the media, and programs like 60 minutes and Dateline. Fortunately, they usually appear in the editorial or opinion section or equivalent, which is a big warning sign that they may have not checked their facts or have any real expertise. The 5 minute know-it-all types like Friedman are particularly annoying and sometimes dangerous, as they are often articulate enough to take minimal numbers of loose facts and spin them into weird moralistic stories, pitting evil vs good, that seem fairly convincing to readers who don't have much knowledge of the subject matter. This is why they get religious followers. All the more reason to be suspicious of what you read or watch I guess.

Dear Marle Germain,

In response to your caustic reaction to my post..."slicing and dicing the details" does matter when you are trying to solve a problem. Understanding what the tradeoffs are and how to quantify them does matter. It is indeed the way that humans establish the "big picture". Working together and trying to understand viewpoints that may be different from your own are also a big part of coming up with solutions. I agree with you that fossil fuel use is not sustainable..so how do we come up with a solution? Can you take your electric vehicle examples and come up with some estimates that quantify the benefits in terms of the reduction of fossil fuel based CO2 emissions. These estimates should be done on well-to-tank and tank-to-wheels basis so that we understand clearly the CO2 emissions implications of electrical energy generations. What fraction of the electrical power will be "renewable" and what fraction will come from power plants that burn fossil fuels? What are the most economical ways to install renewable energy power plants? What are the implications for land and water use? How much renewable power can we expect to derive from solar, wind, and nuclear sources and how does that compare to our energy needs? How should we transition to renewable energy sources? If we come up with more sustainable biofuel resources, are EVs still a good solution? What are the costs to produce EVs? What are the operating costs for EVS? How do these costs compare to more conventional vehicles and hybrid electric vehicles? What are the operating characteristics for EVS? What range can we expect and how long does it take to recharge them? How many folks will be able to afford EVs and will they suit there transportation needs? How should we create markets that support both the consumers and producers when we develop alternatives?

These are some of the types of questions that need to be considered and we need lots of folks who are capable of slicing and dicing these details to figure out the real answers. Given that, its probably useful to avoid slandering and stereotyping large groups of people. They might be the very ones that are actually in a position to help you. Its also useful to have consistent methodologies, philosophies, and principles that you use when developing a position. It helps to build credibility and trust. Its useful to do the hard work to find and come up with the unbiased facts, data, and analsyses that you use to develop your conclusions. Its useful to let others critically review them so they can help find issues you may have missed.

Mr. Friedman,
I am about 3/4 of the way through your book, and it is very inspiring.

In regards to the Big 3 bailout, I am disgusted that this is even being considered. The Big 3 is so far behind in the ball game that the bailout could only act as a small Band-Aid. I have yet to hear a compelling plan that leads me to believe that making an investment in any of these companies would be wise. I would not invest any amount of money into a company when the main selling point is based on fear tactics.

It may be a bit early to determine whether the Wall Street Bailout was successful, but this bailout has not freed up any lending. Currently, banks are just as cautious with lending as they were prior to the bailout and American business owners are still struggling to get financing for their projects. As the banks are waiting for the coast to be cleared, businesses are folding in every direction that you look. I don't think these results are what our congress had intended while discussing the Wall Street Bailout. I am hoping that this can be a lesson for our congress men and women in future bailout considerations.

I am curious to see how the public will react to today's gas prices if they are sustained over the next 6 months. I hope that we have all become wiser even if it is at the expense of the Big 3.

I am disappointed in U.S. auto manufacturing. Ever since the Mustang, I've been waiting for an innovative new car that I would actually WANT to drive. Well, American manufacturers aren't alone with that lack of imagination -- at least in MY price range. :) I also think about the reason Henry Ford started paying his workers so well way back when the first black car rolled off the assembly line (a new innovation, by the way). If people did not have the money to buy the product, what good would it do him to make them? He wanted his workers to earn enough to buy what they made. It made sense then, does now. But growing up in the shadow of a Ford plant and seeing the difference in wages between a Ford worker and a steel worker -- way back in the 50s, 60s, it was easy to see there was something askew there. And as for the workers being lazy or dolts, well, I wouldn't say that. But I would say they weren't driven to work up to their potential. They worked tons of overtime, but the people I knew working at the Ford manufacturing sites did their jobs with little thought, mostly a repetitive motion that left them free to think about their favorite sports teams. I know that is a generalization and simplification, but it is fairly typical. The janitors made more money than most other jobs in the area.

As for innovations. Does the auto industry -- like NASA or other technology based businesses -- add anything to the world at all? Ford brought us so many innovations when he first set up his business. The assembly line, as I previously mentioned. But what else have they contributed to the common good? NASA at least brought us digital cameras, all kinds of medical technology, no-flush toilets, and well, the list goes on.

If we, and I suppose we will, bail out these big three, they need to stop wool gathering and get back to business -- the business of not just paying greedy CEOs -- but the business of making a product that they and all of us can be proud of and yes, dream about. What a shame they have been allowed to coast for so many years without oversight or direction.

Tom, Tom Friedman was hoping you would contribute ideas. I don't see one idea in your post. Thou protesteth too much. And you miss the big picture. When the debate circles around the details it takes attention off the real problem. The problem is that the big 3 have been producing huge, gas guzzling cars for too long with no vision of the future. For goodness sakes GM impounded and crushed evs in the 70s. Why? Because they could charge more for hefty gas guzzlers. End of story. And since they colluded with the oil barons--perhaps the latter should bail them out.

The big 3 leaders have been receiving hefty salaries and bonuses despite a lack of leadership or innovation--or results.

America is about to be out of the auto business with 3 million jobs in check. Defending unions and quoting a pay rate is just obfuscating the problem. Granted borrowings are difficult and have stressed sales.

Fossil-fuel combustion automobiles are just not sustainable--we are running out of the stuff worldwide at 3 times the rate of discovery. And it is contributing to greenhouse gas--if we increase one more degree, the climate may change irreversibly. If you can't visualize what life in North America will be like in less than ten years, try to imagine life without fuel.

Do some of you not get that this is not about who is an idiot, who is a victim--but rather what we must do. The deal if made must be about transitioning away from fossil fuel as fast and as much as possible even if it hurts. Of the big 3, only the Volt was to be available by 2010--this is a sham. A disgrace. I could not even find a hybrid plug-in within 100 miles from my home. Too little too late.

Frankly, I have little confidence in the Big 3's interest in mass producing evs or even plug-in hybrids. There are too few plans to make them and I am loathe to hear about them in their pleadings. As stated by the many it seems we would be throwing money after bad. i have no confidence in the big 3 developing a business plan that offers more than incrementalism or tokenism. We will be back in the same spot within less than one year.

Please let's get real and not slice and dice the details. It is the greed of the big 3 leaders, their lobbyists and the bureaucrats who were bought that have put the jobs of 3 million people--a whole industry in America--on the block.

There are lots of suggestions that we need to make these proposed loans conditional with tougher measures on fuel efficiency standards and the like. If we somehow collectively agree that we need to reduce are dependence on oil and to develop alternatives, then the surest way to drive all of the manufactures to better fuel efficiency is to tax gasoline so that the cost is shared in a rational way between the manufacturers and the consumers. This will give the manufacturers a real incentive to produce more fuel efficient vehicles since the consumers will either be willing to pay for the additional technology, or they will be more interested in buying smaller vehicles. The worst thing the can happen to the auto industry (and this includes all producers, not just the domestics) is an assinine continuation of the CAFE and emissions laws that seek to place all the responsibility on the manufacturer and none on the consumer. In particular, these fuel efficiency standards that our government has enacted for the past 30 years have been completely ineffective. This is because the producers have taken a large fraction of the gains in ton-weight efficiency, which could have been used to improve mileage, and they have used them to make either (1) larger vehicles with more comfort features that achieve the same mileage, or (2) higher power-to-weight ratio vehicles that have the same mileage. You can find several reports which document this with real data by visiting the DOT and EPA's websites. Why has this happened?...because this is what the customers want when fuel prices and therefore basic operating costs are low. Some folks really need or want the bigger or higher performing vehicles, but many would change there buying or driving habits if fuel prices were higher. If you want a market that supports more fuel efficient cars, then call your congressman and tell him to support an increase in gasoline taxes together with a repeal of the CAFE legislation.

All of this talk from Friedman about which manufacturer or technology is more innovative or better is a lot of bunk. If you don't believe me, look at the product offerings and fuel economy ratings of all of the manufacturers, and you'll find some pretty low MPG ratings on Toyota HIghlanders, Tundras, Nissan Titans, Porsche Cayennes, and Lexus SUVs to go along with the Ford Expeditions, Cadillac Escalades, and Dodge Rams.

"In lieu of bailing out the Automobile industry in a cart blanche fashion give them a mandate to deserve our tax dollars. Might I suggest a collaborative effort to make our county and perhaps the world, the car of the future? One that is reliable and fuel efficient utilizing any of the developing technologies such as Fuel Cell or Flex with the goal of weaning us off of foreign oil within a decade. Kennedy challenged us to walk on the moon…. Challenge them! It may trigger job growth and national security to bout. Our leaders need ideas and innovation to pull us out of this crisis, not throwing good money after bad."