To get perspective on the current situation of the Detroit 3, along with some ideas about what to do, I had a long e-mail exchange with Dr. Dan Luria of the Michigan Manufacturing Technology Center. Luria is an outspoken critic of public policy regarding manufacturing. He is also associated with the Manufacturing Extension Program, which I have mentioned many times as a positive force for small-to-medium sized businesses
Luria began our exchange by debunking the idea that Toyota, Honda and other foreign manufacturers could somehow replace the Detroit 3 in the U.S. That outcome would result in a lot less domestic output and a lot fewer jobs. He also argued that the problem wasn’t really with labor. To use his words, “If all UAW labor worked for free, it wouldn’t be enough to staunch the cash outflow at current volumes.”
Although he didn’t have kind words for the executive cadre of the Detroit 3, he implied that the situation would be virtually impossible for anybody to manage. “Even Toyota can’t be making money in a 10-million U.S. market.” But, if they were to fall on their swords, eliminate bonuses and other perks, that might be an incentive to get the UAW to accept a deferred compensation agreement.
In the short term, he favors raising federal gas taxes to help pay for a federal bail-out, resulting in permanent partial nationalization based on the model of Renault/Peugeot in France and most national airlines. While this idea flies in the face of free market economics and the survival-of-the-fittest, he argues that the current situation proves “there’s nothing magical about markets and private ownership.” The other plus to nationalization is the we taxpayers get a share of the benefit if there’s a turnaround in the future.
In my view, these are very interesting ideas, although some – particularly a gas tax hike – would almost certainly not fly. But the idea of partial nationalization does have some appeal. The fact of the matter is, we have to do something to keep the industry alive. That goes without saying so far as I’m concerned, because of the disastrous effect that its death would have on suppliers.
Between the lines, Luria seems to be accepting the idea that some plants will close forever.
So, even with a bail-out, we’re looking at difficult times. How will you face them? Please take a moment to post a comment. We need a dialog here, because like it or not, we’re all in this together.