on the American auto industry and the 21st century

Much has been made lately about whether American auto makers deserve a $25 billion federal bailout. If that means giving the money to the auto companies, without any guarantee they are going to make deep, substantive changes in everything from the executive suite to the way they sell their product, I say forget about it.

Detroit Free Press columnist Mitch Albom (he of "Tuesdays with Morrie" fame) makes an emotional, but flawed, plea in the Nov. 22 Detroit Free Press for the federal government to ante up. The gist of his argument is that since the federal government is giving $700 billion to Wall Street with very few strings attached, why can't the auto companies have the same deal?

Reading Albom's column reminds me of the story of the kid who kills both his parents. When he is tried for the crime, he throws himself on the mercy of the court because he is an orphan.

Remember, Detroit did this to themselves. Detroit has known since 1973 - the first oil embargo - that it should be building smaller, fuel efficient cars. No one said they couldn't build trucks also. Toyota builds the Tundra after all. That gets 17 mpg. But it also builds the Yaris. That car gets 35 mph. 

Why couldn't Detroit build a car for both ends of the market? Well, they will reply they do now. But I am not talking about just now. Why weren't they doing this in 1995? Because they were selling thousands of gas guzzling SUVs and trucks to the American public. They were like drug addicts. They were so caught up in the high of making that money, they didn't bother to consider what would happen when the high ended. 

In 2000, Ford Motor seriously considered ending car production. Trucks were so profitable the executives thought they should concentrate on building them. Seemed like a good idea at the time.

This is the same group of executives who for years resisted higher fuel standards. Why - because they were too short-sighted.

Even Mitt Romney said in a New York Times opedit last week that the bailout should not happen unless there is radical restructuring. Besides being a successful businessman in his own right, Romney is the son George Romney, who once headed American Motors. 

This is what Market Watch had to say Nov. 21st: It's hard to know what to make of the sad spectacle offered this week by the top executives of the country's carmakers begging for money from the government.

For the carmakers, you have to wonder how they could be so out of touch with the zeitgest. Sure their cars are not as bad they once were, and sure, millions of people buy them every year. But it beggars belief to hear General Motors Chief Executive Rick Wagoner earnestly tell a house committee that the problem is customers can't get loans to buy cars. Chrysler may be a private company these days, but sending Bob Nardelli to Washington to ask for money was a huge public relations blunder. One could imagine a member of Congress simply telling Nardelli that if thinks Chrysler needs money so badly, the former Home Depot CEO could lend some of the more than $200 million he pocketed when he ran that company.

And then there was the corporate jet moment, when it was revealed that the three had flown separately to Washington on three corporate jets. These companies have legions of public relations people on staff. You'd think at least one of them could spend some time looking after the image of their executives. But it's probably too late for that.

Personally, I think Pulitzer Prize winning New York Times columnist Tom Friedman had it right in a Nov. 12 column when he noted that the Big Three were asking for the government for innovation. He questioned what they had been doing for past 50 or so years. GM's chairman called global warming a "crock of s**t" in a speech in Dallas. Auto executives have quoted as saying the Toyota Previa - the leading hybrid in the world - doesn't make economic sense.

Detroit complains about their high health care costs. So why for the last 60 years haven't they been demanding national health care? That's one of the major advantages the Japanese have in auto production.

As was so ably pointed out in the Nov. 20 blog "China Matters", in 2006, GM spent $4.6 billion in healthcare for 350,000 retirees. In Japan, Toyota pays health care for its retirees for two year after they leave the company. The cost for the 3,000 or so retirees is so small, it doesn't show up on the balance sheet. After the two years up, the Japanese health care system picks up the cost.

Now, GM has shifted some of those costs to the UAW. But how do you think the UAW is going to pay for that health care? By demanding higher wages, which will drive up costs, which will continue to make Detroit's car uncompetitive.

In short, no one in Detroit gets it. I wonder if Steve Jobs would be willing to run another company?