Thursday, November 13, 2008

Tom Friedman agrees with me

It doesn’t happen very often, but in opposing a blank check bailout of Detroit, NYT scribe (and best-selling author) Thomas Friedman agrees with the WSJ. His column today specifically endorses the Paul Ingrassia plan I cited Monday. This perhaps the first and last time that both Friedman and I agree, and that I’m on the record ahead of him.

His lead is highly personal:

Last September, I was in a hotel room watching CNBC early one morning. They were interviewing Bob Nardelli, the chief executive of Chrysler, and he was explaining why the auto industry, at that time, needed $25 billion in loan guarantees. It wasn't a bailout, he said. It was a way to enable the car companies to retool for innovation. I could not help but shout back at the TV screen: "We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?" If we give you another $25 billion, will you also do accounting?

How could these companies be so bad for so long? Clearly the combination of a very un-innovative business culture, visionless management and overly generous labor contracts explains a lot of it.
Unlike Ingrassia or my column, he also blames politicians, in even more scathing terms than Monday’s WSJ editorial:
The blame for this travesty not only belongs to the auto executives, but must be shared equally with the entire Michigan delegation in the House and Senate, virtually all of whom, year after year, voted however the Detroit automakers and unions instructed them to vote. That shielded General Motors, Ford and Chrysler from environmental concerns, mileage concerns and the full impact of global competition that could have forced Detroit to adapt long ago.

Indeed, if and when they do have to bury Detroit, I hope that all the current and past representatives and senators from Michigan have to serve as pallbearers.
Consistent with his latest book, Friedman wants to add green car restrictions to the new Detroit Three — something not mentioned by Ingrassia and exactly opposite what the WSJ editorial argued. In particular, he demands cars that “can also run on next generation cellulosic ethanol.”

Friedman wants to micromanage — rather than manage by objective — which is a mistake on principle. But it’s also a mistake in practice, as Detroit needs to spread its bets between electric vehicles, hydrogen cars, hybrids, diesel, ethanol/biomass. (And within electric vehicles, bet on capacitors in addition to lithium-ion batteries). That’s what a free market does — place bets on various technological trajectories to see which one works out to be a winner. Five years ago, hydrogen fuel cell cars were touted as the ne plus ultra, but today firms that bet solely on hydrogen have nothing to bring to the market while hybrids, plug-in hybrids and diesels are sold to energy conscious consumers.

Friedman is a big thinker and a pundit, not a business strategist or executive. This is manifest in his final paragraph, where he offers the (IMHO silly) suggestion Steve Jobs leave his Palo Alto home to spend a year in Detroit in the name of national service. (I suppose if President Obama called Jobs it might happen, but given how long Jobs took to remake Apple in his own image, it would take a multi-year commitment).

Still, the pragmatic realism of his overall conclusions are encouraging. Given the political leanings of the House, Senate and next White House, the question of a Detroit bailout is not if but how. With a convergence of ideas from right and left, perhaps this bailout might be different, and maybe even this time failure will have consequences. If we’re lucky, a failed presidential candidate (who decried wasteful spending and has no auto plants in his state) will lead the charge for protecting taxpayer interests in this latest bailout.

1 comment:

adam hartung said...

GM needs new leadership that is not committed to old Lock-ins if it is going to ever be a viable competitor. Only someone from outside the industry will be able to implement necessary Disruptions and create White Space that will allow GM (or Ford or Chrysler) to address long-term shortcomings. I don't know why Jobs would take the job, but someone who is Jobs-like is necessary. Read more at http://www.ThePhoenixPrinciple.com