Auto Industry Needs Revolution, Not Bailout

By our watch, President-elect Barack Obama's honeymoon ended Monday afternoon when President George W. Bush turned aside his suggestion for a joint effort to bail out the American auto industry.

That leaves the industry's problems, which may well be unsolvable, squarely in Obama's lap. No Democrat can afford to leave an industry — one that accounts for 3 million U.S. jobs, many of them blue-collar — to the vagaries of the marketplace and the mercy of the bankruptcy courts.

But neither can a president who campaigned on "change" countenance spending upwards of $50 billion to underwrite more of the same self-destructive management and union practices that helped bring the industry to its knees.

Detroit doesn't need a bailout. Detroit needs a makeover. Detroit doesn't need money to tweak the taillights and grilles on its old models; it needs money to finance a complete re-tooling, not just of plants, but of attitudes. Whatever federal help is sent to the Big Three, it must be tied to fundamental restructuring of the industry.

In other words, "Chevy, an American revolution" needs to be more than a slogan.

There's no question that the need is dire. General Motors Corp. acknowledged Monday that it may run out of cash by year's end and that that casts considerable doubt on its "ability to continue as a going concern." Without federal help, GM is likely to seek shelter in bankruptcy, foisting pension obligations onto the government, shuttering plants, laying off tens of thousands of workers and emerging in a few years as a much smaller company.

Neither Ford Motor Co. nor Chrysler is in much better shape. The Center for Automotive Research, an industry-funded think tank in Ann Arbor, Mich., estimates that if the government allowed the Big Three to fail, it would cost 3 million jobs in the first year alone, a loss of $150 billion in personal income and $25 billion in lost tax revenue.

The industry has pleaded for help for retooling its plants to make fuel-efficient cars, which indicates why it's in the trouble it's in.

Any well-run organization would have been planning and budgeting for retooling years ago, but instead, Detroit fought improvements in mileage standards and milked big trucks and SUVs for profits as long as it could. The autoworkers union was content to ride the wave as long as salaries and benefits weren't cut too drastically.

Now comes the industry saying, in effect, save us from ourselves.

Congress should consider help for the industry, but not in the form of a blank check. At least one of the Big Three, probably Chrysler, the smallest, may have to merge with GM. The managers and boards of directors should be pushed out the door, and not with any federally financed golden parachutes strapped to their backs. Existing labor and supply contracts should be renegotiated, and that includes pension guarantees and benefits for retirees.

Every federal dollar should be directed at producing new generations of fuel-efficient vehicles. It would be an abomination for tax dollars to underwrite gas-guzzlers. Detroit should be forward-looking, aware that it has to compete in a global marketplace in an era of diminishing fossil fuel resources.

If the auto industry is so crucial to the economy - and it is - Congress should consider creating an Office of Automotive Recovery, headed by a "Car Czar" with the mission of managing the bailout program and getting the industry back on its feet in accordance with national economic policy. If the Big Three wants federal money, it should come with federal oversight.

Given the power of corporate and union lobbyists, we're not optimistic that Congress will have the backbone to insist on revolution. Members are far more likely to beat their breasts, and then only throw more money at the problem.

That's where Obama comes in. If this election was about change, this is where it starts.

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