Saving The Detroit Three

In the magazine business it sometimes happens that you end up writing something other than what you expected to … and this is one of those times. As I write this, the CEOs of the three major domestic auto manufacturers have just been grilled by a U. S. Congressional committee about their request for US$25 billion dollars of bailout money and I’m — to put it politely — disgusted. All three CEOs collect staggering paycheques while their firms go in the tank, then fly three separate private jets to Washington to beg for tax dollars. When asked which of them would sell their jet, none volunteered. Compare their greed to Lee Iacocca in Chrysler’s 1979 bailout. Iacocca, creator of the Mustang while a Ford exec in the Sixties, offered to work for an annual salary of one dollar while he turned the company around. This is called leadership, meaning someone who takes a personal stake in their job and their career before asking their employees to take a hit in the paycheque. The real reason why corporate heroes like Lee Iacocca can be so successful in the car business while the current Detroit Three management team drives GM, Ford and Chrysler into the ground is that Iacocca is a car guy, not another cookie cutter exec from Procter and Gamble or Boeing. The current crop of managers seems to think that selling laundry detergent or paper products is the same as running an auto manufacturer, a theory that’s being proven wrong right now, as you read this. Want to save the domestic industry? Here’s my plan:

1. Make the three major brands marketing companies and buy the vehicles from a commonly owned fourth company that designs and builds the vehicles. This would share technology as well as R&D money, making new product development faster and more efficient.

2. Start standardizing basic components. MAF, MAP, TPS, coolant and ambient air temp and other sensors should be standardized to get economies of scale. While you’re at it, make a universal engine chassis and body controller hardware set, and use software to differentiate between makes and models. Bulbs and fuses are standard, so could be the other electrical components.

3. Use common core chassis/engine components. Differentials, transmissions, clutches, CV joints, wheel bearings/hub units, brake system components, even cooling system parts could be standardized. The cost savings would be huge, in engineering and parts cost. Engines, chassis and bodies could still be unique to each manufacturer, but many components that the customer doesn’t see could be common.

4. Establish a joint-owned finance company to handle vehicle financing/leasing. Consumers have never cared who loans them the money, as long as they could afford the payments.

5. Renegotiate CAW/UAW contracts. Get labour costs in line with North American import plants, but add a share ownership plan to make up for the lost hourly wages. This costs the company nothing, democratizes the workplace and lets workers share in the success of their operations.

6. Restrict upper management bonuses/ salaries. Multi-million dollar salaries have to go down in lock step with assembly line wages to preserve management credibility. There are legions of capable managers who will run a corporation for a fraction of the value of current compensation schemes.

7. Lobby hard for tariff barriers against any imported products made under unsafe/ unethical labour conditions. The clothing and shoe industries are rife with horror stores of debt slavery and child labour … every auto manufacturer globally should fight on a level playing field and let the consumer decide.

Will the Detroit Three get their houses in order? I hope so. I’ve owned, raced and enjoyed vehicles from GM, Ford and Chrysler, and would like to see these brands go forward. In this market however, there isn’t room for three domestic full-line competitors and plant capacity is excessive, so whatever happens, the domestics will get smaller. But that doesn’t mean they can’t get smarter.

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Iacocca, creator of the Mustang while a Ford exec in the Sixties, offered to work for an annual salary of one dollar while he turned the company around. This is called leadership