What my Detroit Bailout would look like

I’ve been thinking about the auto industry quite a bit lately, as I suppose everyone has been. Some are arguing a for a loan or bailout of the “big three” some are opposed. I have a third way that I believe could revitalize Detroit, create jobs, and solve part of America’s energy crisis.

 

Some are saying that it’s not the government’s job to “choose winners” in this or any economic climate. In many ways I agree, however, the government is charged with defending the nation’s key interests. The use of oil, foreign and domestic is a threat to our economy, our climate, and our national security. It needs to be eradicated for the country to thrive through the 21st century and beyond.

 

Therefore, whatever loan/bailout solution that we come up with for Detroit cannot just be a bridge loan, or some amount of funding contingent upon if they curb executive pay and raise fuel standards 5 miles per gallon within 10 years. This is a crisis and we need a serious solution. Sadly, our national automakers have not been on the leading edge of innovation when it comes to alternative fuels. Thankfully today we live in a global economy, and there are companies that have been.

 

My bailout would come in several steps:

 

  1. License at a handsome profit Honda’s hydrogen fuel cell technology, it’s solar cell to hydrogen technology and it’s at-home hydrogen extraction technology at a handsome profit to the automaker and engineering company that not only has led the way on how to propel their cars, but on how to develop that propellant in clean and sustainable ways.

 

  1. Having licensed this technology, the government, in cooperation with private investors oil companies (that own gas stations), and the big three deploy hydrogen refueling stations across the country to existing gas stations, making the alternative fuel a real possibility for American consumers.

 

  1. Fund Ford, GM, and Chrysler as they retool and rebuild their line to meet the new hydrogen fuel standard. Don’t take deadline extensions for answer. 4 years to build a completely new line of cars.

 

 

  1. In return for this massive cash infusion, the American automakers must be willing to accept high-yield trade-ins of existing automobiles. This technology does us no good if people continue to drive their gasoline powered vehicles. Our national automakers must do their part and make their new line affordable to Americans by accepting their older automobiles as a high asking price (say 50% of original asking) these cars should then be dismantled and recycled back into the material pool.

 

It’s beyond my level of expertise to know what this program would cost, how to fund it, and what the realistic timelines would be. But I do know the country needs to find a new way forward when it comes to automobiles. I also know that the auto industry needs to reset and rebuild. I’m sure other measures such as labor contracts, parts and service contracting and supply chains would need to be hammered out. But my plan is simple, direct and justifies the costs with reasonable expectations from all parties involved. It’s my idea, I hope it’s of some use. 

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Detroit Puts Madison Avenue At Risk

According to AdAge, a disaster in Detroit could also have incredible repercussions on the advertising industry. As it is, reportedly hundreds have lost their jobs at Detroit divisions of major ad firms. Here’s the automotive ad biz by the numbers…

3.3%
of total U.S. measured spending
5.9%
of total U.S. network TV spending
49%
of total (foreign and domestic) automakers’ U.S. measured spending
2.8%
of total U.S. magazine ad spending
8.0%
of total spending in Sports Illustrated
9.2%
of total spending on Fox network TV
2.5%
of total U.S. cable-TV ad spending
6.8%
of ad spending on ESPN

The Future of Detroit

The next political football to get tossed around will be the question of whether or not the big three automakers here in the US should get a bailout or a loan or some other financial help in the wake of the economic crisis. I am of two minds on this, my politically expedient mind knows what’s going to happen. My cold utterly logical side wonders what should happen. 

First political reality. There is no way Washington doesn’t bail out the automakers. It might not be the lame duck session under President Bush. But shortly after inauguration President Obama and the new congress will do something. Why? Because no congress wants to be in power when a million people lose their jobs and nation wide ripple-effect further cripples the economy. Make no mistake, treasury will print money as many times as it takes for as long as it takes to keep Detroit alive. 

Now for the policy wonk in me…is that course of action right? While I respect and fear the economic cataclysm that would occur if Detroit was allowed to fail, I also fundamentally believe in creative-destructive force of capitalism. The airlines were dragged into bankrupcy and it forced them into court to retool their labor contracts shed bad assets and retool. Perhaps GM filing chapter 11 will be the only way for it to retool for the 21 century both technologically but also economically. The bottom line is the Detroit of the 1960’s thru the 1980’s will not exist anymore. But perhaps in the wake of its destruction there will be a workforce a million strong ready to build the economic future of America. 

Perhaps the same workforce that built the cars and trucks of our past can build the solar panels and wind turbines of future. the hydro-electric parts and yes the fuel-cell vehicles of the 21st century. But maybe that will only happen if and when the nation let’s go of a dying industry, perhaps we need the big three to file chapter 11 and come out of the wilderness.