Friedman on the Auto Bailout

Thomas Friedman's op-ed today inches toward supporting an auto-industry bailout, with some conditions:

"In return for any direct government aid," he wrote, "the board and the management [of GM] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver - 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."

I would add other conditions: Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.

Lastly, somebody ought to call Steve Jobs, who doesn't need to be bribed to do innovation, and ask him if he'd like to do national service and run a car company for a year. I'd bet it wouldn't take him much longer than that to come up with the GM iCar.


We should definitely not be bailing out the American auto companies. When gas prices went up and people wanted to buy more small cars, they couldn't even convert their SUV and pickup factories to make smaller cars (like Honda/Toyota could with their factories in Georgia and Kentucky), because of ridiculous union work rules and outdated equipment. The Japanese companies will continue to make cars in the US (and thus employ Americans, albeit at lower wages than they'd get as UAW members working in Detroit) because it's cheaper to make cars to sell to Americans over here than it is to make them in Japan and ship them. If the American companies fold, Americans will continue to buy cars, and probably will do so from Japanese/Korean companies making them in the US- so their factories will have to expand and hire more American workers (at least in the short term until Chinese and Indian manufacturers start cranking them out cheap enough to ship them here en masse). End result- not a big net loss to American workers if they car company they work for is owned in Japan or in Michigan.

I also think that the market can handle moving automakers to more energy-efficient means without doing it by government fiat. In fact, the market has been doing that- when oil prices went up, people started buying hybrid and fuel-efficient cars. GM/Ford/Chrysler didn't have those cars, or very many of them, so folks went instead and bought cars from companies who did. Propping up the very companies that have proved that, even with profit motive, they cannot competently convert to fuel-efficient or hybrid vehicles, is a bad move.

Also- Steve Jobs would probably be terrible at running the auto companies, unless people want to drive the Mac version of cars… something that would cost twice as much as a regular car and be incompatible with the roads that 90% of people drive on.