The Big Three – Controlled Demolition Would Be Best

The best solution to the Big Three’s crisis might be one “American Car Company.” But it would have to deal with the consequences of major downsizing.

It’s not important which nameplate is on it, what’s important is what goes into it. If the U.S. government wants to keep its three major car producers afloat, portions of GM, Chrysler and Ford could survive.

It’s apparent, however, that of the three independent industry icons, only one company would remain after all the painful restructuring – and it would have to remain under government control for the foreseeable future. Considering the alternatives, this solution could well be the best of a bad lot.

According to purely economic conventional wisdom, it would be completely wrong for the government to stave off the collapse of the U.S. automobile industry – after all, their CEOs contributed in large measure to the industry’s misery with their obsolete policies. In addition, the competitive advantage gained by more innovative foreign manufacturers would be partly neutralized by government intervention.

But foreign automobile companies also have a stake in making sure that the three dinosaurs leave at least a skeleton behind after they perish. If the domestic producers suffer complete collapse, the entire American network of dealers and suppliers will go down with them – and that also includes foreign manufacturers with factories in the United States. One single “American Car Company” sharing a common research and development facility and common supplier and dealer networks would give the participants the necessary time to adapt themselves to the new situation.

Given today’s political and economic conditions, an uncontrolled collapse of the domestic auto industry is simply not an option. In November alone, over a half million more people joined the ranks of the unemployed. The question, then, is not whether the government should intervene but rather how.

It’s also immaterial whether the title is “bankruptcy trustee” or “Auto Czar.” What’s important is that a unified company downsizes and emerges as an entity keeping a close eye on accomplishing the mission and justifying the billions it received in assistance. The mission cannot be to ensure the survival of individual companies. The goal has to be the avoidance of a worst-case scenario for the whole economy while spending the least amount of tax dollars to do it.