Let (One of) Them Fail

As GM and Chrysler come back for more soup and our political system consideres not if but how we will refill their bowls (again), I am boiling with rage. Not the rage already expressed publicly by thousands and felt by millions that these companies are failures that produced the wrong products, poorly and inefficiently, and because they couldn’t sell them to us willfully are now snatching our wallets in a back alley. Nope, I feel that rage too, but this rage is that all three of them have the audacity to collude, to form an effective monopoly, to hold the American public hostage and our political system allows it because we don’t think of them as individual companies we think of them as the storied American Auto Industry. It’s an interesting take on pride in the American Auto Industry that we’re actually enabling them to continue to sully a 60 year tradition of the best automobiles in the world. It is time to shift our thinking. It is also time to let them fail.

The problem, as is well-recognized, is that if we let them fail, the shockwaves of economic misery will overwhelm our current Jenga economy. The automakers know this, and so they show up, all three of them together, to present their plans. They know they largely share a supply chain and a supporting infrastructure, and they know while they each present individual plans of what money they need and how it will be used, they know their case is stronger because of the two men sitting next to them. And the UAW knows the same thing. And this has been the problem all along, looooong before the current crisis, this underlying collusion allowed the thinking and processes of these companies grew stagnant and moss-covered as they stopped competing in the market and started competing with unions and politicians instead.

www.epi.org/publications/entry/bp227/

Both GM and Chrysler should fail today; nothing would be better in the long term for the American auto industry than to go into Chapter 11, shed their heritage and be reborn as new companies with fresh thinking, competitive organizations and processes, and new contracts. It’s time to reintroduce that threat of failure by understanding that if the economy can’t handle two bankruptcies simultaneously, we threaten them with one. This is NOT the current process of evaluating their plans and rejecting the ones that aren’t satisfactory; this is explicitly stating, “We will only bail out one of you. Whoever presents the best plan will get a bridge loan. The other will fail.”  We put them in the Thunderdome, and we introduce the competition they so sorely need. Nothing breaks up an alliance like the knowledge that one of them isn’t going to make it.

And for the one that is bailed out, we will prop them up temporally for as long as it takes for competition to fill the gap left by its fallen comrade, but if they can’t find a way to compete fairly after that, they too should succumb to the market.