It seems that Detroit has dodged the bullet. Or perhaps, more accurately, it managed to escape with a flesh wound. Already GM is beginning to make severe cuts in production, and whether or not they survive, there are going to be a lot of jobs lost.
Even if the current $14 billion gets doled out, and is followed by more money in the spring (which is how long that chunk of change is supposed to hold off industrial collapse), there is still a pretty good chance that we’ll lose at least one of our automakers. We need to be thinking in terms of triage: dividing patients into those that will live without immediate help, those that will die regardless, and those that could go either way. Then we focus on saving those that can be saved.
We should be starting to think about a plan B. The first idea that I’ve considered in past posts was to look at some sort of employee buyout. That might work in a situation where a company was only marginally profitable, but the auto industry is bleeding money to the point that this approach would merely shift the final headache to the employees. This was recently demonstrated in the Tribune Company bankruptcy.
Another possible approach could be to create some sort of cooperative that includes different kinds of stakeholders, including but not limited to employees. This perhaps a bit more realistic than trying for an employee buyout of companies which might very well be doomed.
There are a lot of suppliers, municipal governments, port authorities and chambers of commerce that have a huge stake in the auto industry. This could be awkward (or even in violation of contracts) but I think that all these companies need to be developing contingency plans for an auto industry collapse.
The notion of governments joining a cooperative might seem a bit wacko, but it is hardly without precedent. For example, the beautifully named Western Area City County Cooperative (WACCO) helps 37 local governments in Minnesota to meet their common needs through everything from training to purchasing to equipment sharing. Port authorities already invest in businesses, and it certainly would make sense for these public entities to run their business dealings democratically.
Let’s assume that GM liquidates. That would remove the reason for existence of a great many manufacturing companies. These companies collectively have the capability to make all or most of a car, and would benefit from the creation of a new automobile company, perhaps focused on creating hybrids or electric cars. There would simultaneously be a lot of car designers looking for work, and a lot of idle auto plants and inventories available on the cheap. There might even be federal government support for launching this initiative, which lies at the intersection of addressing the immediate symptoms and deeper causes of the financial crisis, which encouraging green business. It might not kill two very large birds with one stone, although it would hopefully make them think for a minute.
If a group of GM suppliers could get organized quickly enough, they might be able to purchase a plant and any necessary patents, and start an entirely new, relatively green car company. Once they had one plant up and running, making one model, they could start to expand, for as long as the market supports their growth. How cool would that be?
Of course, this is just an idea from some guy in California. The only way this will work is if there is at least a handful of such public and private entities that are interested in this. So if any of my readers can think of someone, please pass on the idea. I will be in Detroit in a few weeks for a book tour, and would be happy to talk with someone further.