Let Detroit Go Bankrupt: Brooks, Krauthammer

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Food for thought…: Premises It is a strategic imperative of the USA is to minimize and eventually eliminate the need for fossil fuel-based forms of energy within the shortest period possible. The impact on our standard of living, national security, and the environment would be profound. The US-originated automakers (the Big 3) have been hampered over past decades by a number of factors, both external and internal, that have resulted in a chronic performance malaise, particularly when compared to key competitors. The current financial crisis has aggravated these root causes to the extent that the very existence of these organizations as currently constituted is genuinely in question. The collapse of these organizations would carry catastrophic human and economic fallout and adversely affect US interests. A cash injection (bailout) of any amount will not realistically address the root causes of the Big 3 malaise. The current situation nevertheless offers the USA a unique opportunity to provide one means of addressing the stated strategic imperatives of energy self-reliance. An alternative approach to addressing the current malaise could be taken that reconstitutes and harnesses the considerable resources of the Big 3 to focus exclusively on developing the New Generation mode of transportation and in the process creating a linchpin organization of our New Energy Economy. Actions Within the context of a USG financial takeover of the Big 3, put a Right Person in charge of the three entities combined with complete authority to act, reporting to joint Executive & Congressional committee whose fundamental role is more to enable than to oversee. The Right Person must be experienced in corporate workouts and be savvy with respect to alternative energy forms. The Right person will direct all combined talent and resources (including that as may be required from outside of the Big 3) in expediting the development of New Generation vehicles and forms of energy. All employees, both management and union, will resign as of a specified date and be re-hired at the pleasure of the Right Person under new, innovative contractual arrangements. The benefits of all retired management & union personnel will be honored in full. The benefits of all management & union personnel who do not participate in the New Generation organization will be honored within the framework of existing contracts. Those who do not continue their employment will receive fair separation packages and extended assistance in finding alternative employment, including education & training as it may relate to the New Energy Economy. Summary America needs a national flagship in this strategically vital industry, whether as one "last man standing" company or as an entity comprised of the Big 3. Driven by imperatives critical to our nation at a time of deep crisis and uncertainty, the profound difficulties currently plaguing our Big 3 automakers could be turned into a major opportunity to catalyze the development...

It is clear that we cannot continue the current approach in respect to the American automotive industry. The loss of this industry would have a devastating impact on the entire world economy and reduce American manufacturing to a historical foot note. The current options under consideration are merely Band-Aids on an industry that needs major surgery. We have lacked the courage and vision to move beyond the simple “throw money at the problem” to resolve issues deeper then money. The financial conditions are symptoms of failures at all levels of management, including government oversight. We have allowed the growth mantra and the “economies of scale” discussion to dominate the economy in unsustainable patterns to the point of jeopardizing our way of life. It is time for vision and courage if we are to change our course and preserve the American way. Simply put I propose we take a note from Judge Green in breaking up AT&T and breakup the three Auto companies into smaller, more agile companies that can respond to market demands and technological advances in a timely and cost effective manner while keeping the majority of the workers employed. In addition we need to take an example from the Japanese and create a National Auto-Mfg R&D Lab similar to the US Post Office. This R&D Lab would be formed from the R&D labs of the three auto-mfg companies and would own the technology patents held in trust for the cost of the restructuring (primarily the debt and liabilities). Each company would pay for access to new developments and royalties for exclusive use of the current patents. After 3 to 5 years all patents held would be open for use in any of the surviving auto mfgs. The financial arms would be spun off into a true credit/financial companies that would behave like typical financial institutions with a focus on financing consumer and business automotive purchases. Additionally we need to consider some constraints such as: - Unions have a seat on the boards of all the companies with accountability for financial performance of the company - All Union contracts are re-negotiated with a percentage of all workers pay based on performance of the company - All trading of Automotive company stock be suspended until formula for redistribution of stock in the separate companies is created and acted on - Current corporate execs are not eligible for employment in the new companies - Current Division heads are eligible for employment in the new companies - Created companies are barred from merging or purchasing auto companies for 10 years - Created companies must be self-sufficient in three years - Cannot enter new markets for five years - Use the triple bottom line method for measuring success - Divest all non-auto related businesses - Sell off expensive corp headquarters and valuable assets that do not have direct business benefit and apply the monies to the cost of fixing this industry Since we are using public funds and risking the American economy we need to...

Very good points. I applaud Brooks, Krauthammer!