If you don’t have the capability to lead, the vision to look more than six months down the road, and the guts to make tough decisions… it must be someone else’s fault, right? That’s presumably the opinion of the Detroit Three as the get read to ask for what is effectively a bailout by the government. No, let’s clarify that: a bailout by you and I, the taxpayers.
The supports pushed by General Motors Corp., Ford Motor Co. and Chrysler LLC would represent the biggest intervention of this kind by the government in the auto sector since Washington’s bailout of the former Chrysler Corp. in 1979-80. But the differences between the Chrysler rescue and the latest proposal are substantial, starting with the scale. This time, all three of the unionized Detroit auto makers plan to work together to secure direct loans from the government, giving the federal government a massive new role as a major lender for three of the 11 global auto makers building cars in the U.S.
To be fair, the last one didn’t turn out so bad, even though the premise was still wrong in my opinion.
The Chrysler rescue, which ultimately returned a profit to the Treasury, involved just one company and $1.5 billion in government guaranteed loans, or about $3.7 billion in today’s dollars.
But let’s also take note of a key phrase in the original quote: "…three of the 11 global auto makers…" Somehow the Detroit Three (GM, Ford, Chrysler for those of you unfamiliar with this shift from the term "Big Three" which technically includes Toyota) consider themselves different from everyone else.
The auto industry, crippled by high fuel prices and consumer trends away from SUVs, bristles at calling the program a bailout similar to the Chrysler deal. Still, in 1979, much like today, Detroit was reeling from skyrocketing oil prices, competition from foreign auto makers and a souring economy, said Robert J. Barbera, chief economist at the research and trading firm Investment Technology Group.
No, the entire auto industry is not crippled. The Detroit Three are crippled. Although sales have slowed for the likes of Toyota, Honda, and Nissan, years ago they began the shift toward smaller and more fuel efficient vehicles, including massive investment in new technologies such as the Prius hybrid.
This time, Detroit is making the case that the loans will help advance the country’s energy-saving goals by offsetting some of the estimated $100 billion it will cost Detroit to comply with tougher fuel-economy standards enacted as part of the energy bill. The loans would allow the auto makers to borrow money to retool for more-efficient vehicles at significantly lower interest rates — likely between 4% and 5% — than if they got the loans on the open market.
So let’s see… the U.S. government will be subsidizing business costs for the Detroit Three, while foreign auto companies have to foot the bill themselves. I bet the supporters of this bailout include some of the same jokers that complain that foreign governments are subsidizing costs for their domestic companies, making it more difficult for U.S. companies to compete. Anyone want to look around for some black pots and kettles?
I want the Detroit Three to succeed. Really I do. But rewarding a stunning lack of leadership vision removes the accountability that helps create excellent leadership. Similarly tough times have a way of stimulating excellent leaders to find innovative pathways out of the maelstrom.