So who am I to think I have a better plan for saving the American auto industry?  Why not?  After all, the plan on the table calls for $15 billion dollars (oops, now its down to $14 billion) in taxpayer money to be sent straight down the bail-out rat hole.  But it certainly won’t stop there.  Recall the original request was for $36 billion.  Does any thinking American really believe that that $14 or even $36 billion will do anything other than delay the inevitable bankruptcy of the Big 3?  Bankruptcy is the first step towards the creative destruction and re-building of the American auto industry.  The sooner this painful, yet unavoidable, step is taken, the sooner the industry returns to viability –albeit at a much reduced size.
So what role should the federal government play in this destruction/re-building process?  For starters, Uncle Sam should put his checkbook back in the “last resort” cubbyhole from whence it came.  Then, Congress needs to respond to the Big 3’s groveling with a plan of their own –one that might actually work, while putting far fewer taxpayer dollars at risk.  It starts with the planned bankruptcy of all three American automakers leading to their subsequent reorganization into one newly capitalized entity.  That’s right…from three to one.
American Motors
Perhaps the “American Motors” (AMC) name could be resurrected for this momentous occasion?   How cool it would be to see the name of the maker of my first car back in the limelight.  Yep, I still get misty-eyed thinking about my 1960 Rambler American –a gift from my grandfather.  With fully-reclining bench seats, my black and white beauty was a veritable love machine.  I can still hear Mac Davis singing “baby baby don’t get hooked

1960 Rambler

on me”, as my now father-in- law peered through the thoroughly fogged over windows in search of his daughter –my lovely bride of 32 plus years.   I’ve been hooked on her ever since.

Bob Nardelli

OK, thanks for allowing me that little cruise down Nostalgia Lane.  Now let’s get back to saving the auto industry.  Obviously, we’re going to need some real leaders to pull it off.  And, it should be equally obvious that the current leaders of the Big 3 need not apply.  Better yet, no current or past (a.k.a. Lee Iacocca) automotive executive should be considered for the top job.  Just as when Lou Gerstner took over the reins of IBM (1993) when nobody but an unaffected outsider could have saved Big Blue from singing the bankruptcy blues, so too the  American auto industry needs a mega dose of outsider perspective.  Chrysler got it half right when they brought in industry outsider, Bob Nardelli.   But, apparently the search committee didn’t notice the $200 million golden parachute that landed Gnarly Bob safely in Detroit after taking Home Depot shares down 20% during his five year flight to nowhere.  Maybe GE will oust Jeff Immelt and give Nardelli the top job he thought he deserved before leaving in protest?

John Chambers

Surely Cisco CEO, John Chambers, is tired of wandering in the wilderness far below the peak of Mt. Dot Com?  Since reaching the summit in March of 2000, Cisco’s stock has lost 80% of its pre dot com bubble bursting value.  Few blame any of this precipitous fall on Chambers.  In fact, many believe (me among them) John Chambers to be the most capable CEO in the world today.  What could possibly lure him to take the wheel of a born again American Motors?  How about a challenge of epic proportions?  A payout that could make him a billionaire many times over?  Perhaps most importantly, a prominent place in history for having performed miraculous surgery on the backbone of our economy.  Moving the executive suites from Detroit to San Jose wouldn’t hurt either.  And if that’s not enough, tell John I’m available to carry his bags anywhere his mission of saving the American auto industry takes him.

So, now that we have one reorganized U.S. automaker led by the best CEO in the world, we still have a few challenges.  First, we need to capitalize AMC to maximize their odds of long term success and fairly reward those who take the risks to achieve it.  As a free market capitalist, I can’t advocate the government taking equity stakes in private enterprises.  Under special circumstances, I can support the federal government providing loan/bond guarantees provided there is sufficient equity in the firm to make the risk of such guarantees manageable.  That said, why couldn’t AMC go to the equity markets with a debt offering on deck, backed by the feds, but contingent upon raising a specific amount of free market capital?  The “Buy American” marketing

"Buy American" button

possibilities are endless and should make this the most oversubscribed stock offering since the dot com crazy days.   Next, we need a plan for re-training several hundred thousand unemployed former auto workers.  Did I mention that the UAW no longer exists at this point in the story?

Henry Paulson & Ben Bernanke

That’s right, if Uncle Sam wants to make a meaningful long term difference, then he should invest in the re-training of the American auto worker.  It wasn’t that long ago that our rich uncle thought buying up $700 billion in bad mortgages was a great idea.  Why not make the mortgage payments of displaced auto workers for a few years while they get back on their feet?  There are currently less than five hundred thousand UAW members.  If half of those are displaced while having a mortgage payment of $1,500, then Uncle Sam could cover every former UAW member’s mortgage for two years at a cost of $9 billion.  And, for another $6 billion, American taxpayers could pay to retrain every displaced worker, assuming it takes $1,000 per month for two years to get the job done.  Well, what do you know?  That totals up to $15 billion…the minimum the Big 3 say they need to survive.  Hmmm…

These simple ideas are not meant as “end all, be all” solutions.  My hope is to offer some perspective on what positive progress could be made toward a brighter future for the American auto industry, provided we first admit that what we currently have is broken beyond repair.   The amount of the bailout is really beside the point, as any amount is certain to be too little too late to save the Big 3.     There is no pain-free way out of this mess.  We either pay now or we pay much more later.  And, if it’s too much later and too much more, we won’t just be talking about a bankrupt industry…we’ll be talking about a bankrupt country.
Hello John, have I got an opportunity for you…