Let’s Electrify Detroit

This is the big week for deciding whether to bail out American auto companies. The media’s point-counterpoint delivery has oversimplified the discussion into these two camps:

  • Chrysler, Ford, and General Motors are too big to fail because their collapse would leave millions of Americans unemployed. Bailing the companies out with taxpayer dollars will be cheaper than cleaning up the aftermath of their disappearance.

  • The three companies are dinosaurs that failed to innovate as the auto industry changed, and should be allowed to collapse. Their models are broken and keeping them barely alive on taxpayer dollars will only postpone their inevitable demise.

Lost in that characterization of the problem is government’s failure. The government acts as though it has never had any responsibility to its auto industry. That’s a view that other countries don’t share.

Japan is Detroit’s fiercest competitor. Here in Japan, a country of only 120 million people, there are nine domestic auto companies. Nine! They thrive while U.S. firms whither because the Japanese government helps them out. One of the main reasons the Japanese are farther ahead in the electric car category is that the Japanese government pays for a good deal of the research and development of superior batteries.

America’s car companies pay too much for labor. Unions are then often blamed for being overly demanding, but what are they really demanding? Fair pay for hard work, if we believe their spokespeople. Let’s give them the benefit of the doubt. A big portion of that “fair pay” happens to be for healthcare coverage. Japanese firms face nothing near the mountainous expense of Detroit’s labor force healthcare coverage. Why? Because Japan offers socialized medicine that picks up the tab for the bulk of worker health coverage. Toyota doesn’t pay for trips to the hospital. The Japanese government does.

In Germany, government involvement is even more overt. Did you know, for instance, that Volkswagen is 20% government owned? It was created by the Nazi government in 1937, later became part of the German postwar state, and is now 20% owned by the government of Lower Saxony. That probably comes in handy when negotiating tax rates, labor compensation, and import/export regulations. We’re not talking about a neighborhood enterprise here. Volkswagen is Europe’s largest auto company and the third-largest in the world.

Japan pays for automotive R&D; and labor healthcare, the government of Lower Saxony owns a fifth of Volkswagen, but Uncle Sam pays for nothing. America’s auto companies are entirely on their own, trying to turn a profit for Wall Street, trying to support a work force that the government admits is so vast that it can’t be allowed to go unemployed, all while facing competitors who enjoy a cheaper cost structure thanks to the support of their home governments. American auto companies are competing with other nations, not just other auto companies.

“Nobody wants American cars,” somebody is bound to say. Really? Then how to explain all those SUVs on the road? Somebody wanted them. American auto companies created the truck and van market, and they still dominate it. The big three have not been entirely out of touch when it comes to the market. They’ve seen sales drop more than they’ve dropped at major imports, but every auto company is suffering in an 11-million-unit market. Nissan North America, for example, saw a 33% decline in sales last month. There’s just not enough business to go around. Government support that started long ago will help foreign auto companies survive. Government support that has been so far absent will be needed to help U.S. auto companies survive.

When it comes to answering the question of whether Detroit can innovate, I have one word: Malibu. It’s the most stunning midsize car in America. Fully decked out, it’s less than $28,000. The U.S. workforce can still deliver, even in basic categories like midsize cars. The appeal of U.S. products in truck and sports car categories has never been questioned, which is another idea to keep in mind.

Here’s what I think should happen.

Uncle Sam should acknowledge that foreign auto companies have had an unfair advantage in the U.S. market because of their governments’ involvement, and that it’s time for the U.S. government to step up and do its part for that labor force it considers so important.

Next, it should offer immediate reprieve to Chrysler, Ford, and GM by making their entire work forces government employees on military pay scale with all military personnel benefits for a pre-determined period, say five years. Paychecks would come from the U.S. Treasury. Healthcare would be covered by Uncle Sam. Retirement would not be covered, so the auto companies would need to keep restructuring that legacy cost on their own.

Next, the government should commit to creating an entirely nuclear power grid that would be operational in a decade. The massive infrastructure development would spur the economy by providing jobs. Lots of people need them.

Finally, the government should provide financial support to Detroit tied to a time schedule for offering completely electric fleets at reasonable points in the future. Tiny companies like Tesla and Zenn are not far from offering cars that will work for 90% of commuter needs. Surely, with government help, the well-developed business structure at the big three can catch up in five or ten years.

Enough with coal-burning power plants. Enough with claims of sufficient oil in the Bakken Formation to sustain the country for another five decades of carbon-burning nonsense. The planet can’t take many more years of carbon pollution at current rates, much less decades.

The only reason we’re not making electricity with no-pollution nuclear power plants is that the coal lobby doesn’t want such a system. The only reason we’re not driving electric cars that can be conveniently re-charged at home at a regular outlet is that oil companies don’t want such a system.

Now is a fabulous opportunity to break through the lobbies, embark on a bold path toward a cleaner transportation system, and save America’s car companies all at once. I’d love to see it happen.

Do I think it will? No.

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