Contrary to cable news opinion, the automakers don’t want a bailout. The want to make and sell cars. The problem, of course, is that their capacity to make cars grotesquely exceeds their ability to sell them. The economy is bad, so consumers have stopped buying (they will be back when their cars wear out). Their businesses got too big not to fail.
Whether it is their fault or not seems an almost silly debate. Was it the dinosaurs fault they became extinct? Sure, the were too big when the meteor hit that brought on the ice age and they couldn’t find enough food. Same thing is going on now. Big change, though, when Dino died, there weren’t people around to try to say they are cute, appreciate their diversity and save him. But based on the movies I’ve seen, I think we are pretty lucky that they didn’t all make it. But I digress.
The working plan in Detroit and in DC is for the industry to get very lean and mean. We, the government, make their current cash flow, while the industry cuts overhead, workers, benefits, suppliers, dealers, investors and lenders, such that their capacity is realigned with demand and they can sell the cars they produce at a profit. The problem, okay, the problems include the incredible cost to the taxpayer to provide this soft landing; the punishing pain to their stakeholders that only delays the inevitable demise; the lack of funding for re-tooling; and that once scale is reduced, the auto industry won’t make enough cars to make enough money to be globally competitive.
So just how do we help Detroit survive, re-tool to make innovative new vehicles that people actually want, have adequate capital to manufacture, inventory, sell and generate a profit? Send out an RFP. I propose that we send out a request for proposal for purchase of a new fleet of vehicles for use by federal, state and municipal government – a couple of hundred thousand a month (no one knows how many we buy at all levels, but if the total cost of the Detroit bailout is $130B, that would buy 200,000 $20,000 cars a month for almost three years). Not the $300 million golf carts the stimulus bill called for, but highly efficient cars that get 50 to 100 mpg and use alternative energy. High tech. Low maintenance. Small cars. Light trucks. And vans. Similar in concept to the joint strike force fighter program. Accept the contract that gives us the best ratio of price and efficiency (cost of vehicle divided by fuel and five-year maintenance cost works for me, but there may be a more complicated and better formula). Offer the incentive to pre-pay part of contract to help with tooling and provide working capital. Require that most of the jobs are here and weight the deal as fairly as possible so that our dinosaurs have a chance at competing with other worldwide dinosaurs. Watch the consumer markets to ensure that we are benefitting from innovation and lowest cost. Coordinate this RFP with our allies around the world, hoping that they will buy in and increase the scale and the worldwide effect. Let the companies answer it the way they think is best and let the best ideas and the fittest companies survive. What we’d have left are industries producing clean, modern transportation products that we need and should want.