Too Big To Fail: Auto Industry Edition II

I recently posted my thoughts on bailing out the auto industry. In brief summary, I said that a well-tailored government solution would best serve all parties. However, I feared that no such government solution was possible, and it might therefore be better just to let the market take its course.

In today's NY Times, the author of "The World is Flat" and "Hot, Flat and Crowded", Thomas L. Friedman, agreed with me. Nothing like validation by a Pulitzer-Prize-winning journalist to make one smile. Here's what we said:


Just as I pointed out that the automotive industry was pushing dead technology via an outmoded business model, Friedman similarly stated that both automobiles and the automobile industry are "un-innovative." He went on to highlight GM's resistance to innovation on all fronts: a GM executive said hybrids made "'no economic sense,'"; this exec also referred to global warming as a "'total crock of [expletive]'". Additionally, GM gave no support to a national health care program, even though it cited rising health care costs as a major source of its economic troubles. Finally, GM chose to make money by selling "gas-guzzling SUVs and trucks" rather than "innovating around fuel efficiency, productivity, and design."

Given this institutional bias against innovation, Friedman was stunned to hear that Bob Nardelli, CEO of Chrysler, wanted $25 billion of taxpayer money to "retool for innovation." Indeed, this is stunning to hear. Since when does a worthwhile business need outside stimulation to innovate? Isn't that the driving force behind a capitalist economy - the need to find the next big thing? That is precisely the point Friedman and I made: the auto-industry is not a worthwhile business.

He counsels (as did I) against issuing a blank check to the auto industry, and instead called for stringent limitations on any government assistance. Specifically, he wants automakers to develop that next step in transportation technology that I spoke of - something more efficient (and not just in terms of fuel economy) than the cars we have now.

We did differ on one point. If a suitable government bailout can't be put together, I recommended just letting Porsche come in and take over, given their extraordinary automotive and business credentials. Friedman recommended calling Steve Jobs, the king of innovators, so he could develop the iCar. Either way, it's a win-win: we all get Porsches, or we all get iCars. What a bright morning in America that will be, don't you think?

Thanks for agreeing with me Mr. Friedman, and please call if you need help on your next book.

The end.