Monday, November 17, 2008

"Bailing out" Detroit automakers provides an opportunity

A consensus has been building among Republicans that Detroit automakers should be cut loose and allowed to fail. I disagree and I think that the current crisis provides Democrats with an opportunity to reform the management of these companies.

Republicans argue that the big automakers business model is to blame and for this reason there should be no bailout. But the cause of the current crisis isn't something within the control of the automakers, or even really something on their "radar," so to speak. Making too many SUVs is something the Big Three's management can be faulted for, but it is hard to see how they are responsible for the subprime mortgage crisis or the resulting crisis in consumer credit.

The current crisis provides Democrats with an opportunity to extract concessions from the management of these businesses. Detroit's biggest obstacle is poor management that spends far too much time thinking up extravagent pay packages for themselves and not enough time building value for shareholders and consumers. As a price for the bailout they are requesting, Democrats can force the "greening" of Detroit's output, eliminating the many tax incentives for building SUVs and slapping significant taxes on any vehicle that doesn't meet aggressive miles-per-gallon fuel efficiency standards.

The Detroit automakers can be saved, made more efficient, better managed, and can provide Americans with the fuel efficient, hybrid, and plug-in hybrid vehicles they will need in the future.

The Big Three can be

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