THE MYTH OF THE “CHEAP CAR”

[Get the latest "Truth With Speedzzter” here]

Here we go again.

Someone in a poverty-wage second or third world country builds a stripped-down, underpowered, barely legal, tin-box, probable death-trap of a “car,” markets it for a used car price, and the automotive press starts spinning out all of the “lessons” Detroit could learn from it.

BusinessWeek has such a story on the Tata Nano.

They say Detroit could learn about engineering-up from a price point (rather than de-contenting), engaging suppliers earlier in the design process, and creating a “less capital-intensive, less integrated, more flexible model.”

They pay people to write stuff like that?

Engineering up from a price point tends to produce dangerous messes like the Ford Pinto.

Price is merely one component of developing a product.

Most certainly, product planners have to identify underserved markets and viable price points. And successful designers and engineers never lose sight of technological meta-trends of miniaturization, simplification, benchmarking, and mainstreaming as they strive to hit the chosen segment or niche with the best bang-for-the-buck. And it’s important to tune into the target niche with relentless focus.

All of the cool features, breakthrough styling, technological innovation, and aftermarket parts support in the world is virtually useless if nobody can afford that big payment book.

On the other hand, cutting performance, functionality, durability, modifiability, serviceability, parts interchangeability and the “a-ha” factor out to hit a cheap price point is a proven loser strategy.

Team Japan was initially successful in the U.S. market through balancing these factors, not just targeting a low price point. For example, instead of building the cheapest, smallest engine they could get by with, Toyota marketed its 1970s Corolla with a higher-performing hemi-head engine. The Toyota SR-5 Corolla also featured “boy racer” styling and performance upgrades, such as “riveted” fender flares, low-profile performance tires, and a five-speed transmission. Mazda’s early 1970s cars were equipped with up-market “a-ha” features unavailable in domestic competitors, such as a power retractable radio antenna. For a couple of decades, Honda has mostly focused on high power density four-valve DOHC engines (even as Ford was still trying to sell obsolete 2-valve SOHCs and Falcon 6-derived 2.3 liter HSCs)

Of course, the genius of the Ford Model T was that it blended performance, functionality, durability, modifiability, serviceability, and parts interchangeability at a price America’s farmers and ranchers could afford. And it lost marketshare when the technology, performance and “a-ha” factor of cars built by Ford-trained competitors made the T look and feel out-of-date.

Even most appliance motorists are value-price sensitive, rather than just price sensitive. Relevance, simplicity, differentiation, believability, credibility and defensiability are all intangible brand attributes which are mostly price insensitive.

Building a vehicle of off-shelf components or with heavy supplier involvement is hardly unknown to Detroit. As the white collar staffs decline, reliance on suppliers and component standardization will undoubtedly increase. (And now that some of them are going to be getting a $5 billion bailout from the Treasury, maybe some of them will still be around . . . .)

Certainly a “less capital-intensive, less integrated, more flexible model” is a hard goal in this hyper-regulated, unionized era. Unitized body construction also reduces model flexibility and increases costs.

It was easier back in the days of Henry Ford, when designs, production techniques, and labor supplies were easier to change rapidly. However, plants such as AutoAlliance’s Flat Rock, Michigan facility demonstrate that Detroit has made progress in lean production systems, quality control, and flexible assembly.

Truth With Speedzzter suspects the real harsh lessons of the Tata Nano are yet to come. But there’s little new to learn from it at present.

AN IACOCCAISM THAT FORD WOULD RATHER FORGET

[Get the latest Truth With Speedzzter here]

March 13, 1980 – A day of glorious infamy in the history of Ford Motor Company.

March 13, 1980, Ford Motor Co. Chairman Henry Ford II announced he was stepping down, the same day a jury in Winamac, Ind., found his company innocent of reckless homicide in the fiery deaths of three young women in a Ford Pinto.

It was the first known criminal trial of a corporation under a products liability theory.

The “glory” is that Ford was not convicted.

The infamy was the excessive bean counting in the Glass House under the watch of Lee Iacocca that was the proximate cause of the fiasco.

As the court found in GRIMSHAW v. FORD MOTOR CO. (1981) 119 Cal App 3d 757:

In 1968, Ford began designing a new subcompact automobile which ultimately became the Pinto. Mr. Iacocca, then a Ford vice president, conceived the project and was its moving force. Ford's objective was to build a car at or below 2,000 pounds to sell for no more than $2,000.

Ordinarily marketing surveys and preliminary engineering studies precede the styling of a new automobile line. Pinto, however, was a rush project, so that styling preceded engineering and dictated engineering design to a greater degree than usual. Among the engineering decisions dictated by styling was the placement of the fuel tank. It was then the preferred practice in Europe and Japan to locate the gas tank over the rear axle in subcompacts because a small vehicle has less "crush space" between the rear axle and the bumper than larger cars. The Pinto's styling, however, required the tank to be placed behind the rear axle leaving only 9 or 10 inches of "crush space"--far less than in any other American automobile or Ford overseas subcompact. In addition, the Pinto was designed so that its bumper was little more than a chrome strip, less substantial than the bumper of any other American car produced then or later. The Pinto's rear structure also lacked reinforcing members known as "hat sections" (two longitudinal side members) and horizontal cross-members running between them such as were found in cars of larger unitized construction and in all automobiles produced by Ford's overseas operations. The absence of the reinforcing members rendered the Pinto less crush resistant than other vehicles. Finally, the differential housing selected for the Pinto had an exposed flange and a line of exposed bolt heads. These protrusions were sufficient to puncture a gas tank driven forward against the differential upon rear impact.

Design changes that would have enhanced the integrity of the fuel tank system at relatively little cost per car included the following: Longitudinal side members and cross members at $2.40 and $1.80, respectively; a single shock absorbant "flak suit" to protect the tank at $4; a tank within a tank and placement of the tank over the axle at $5.08 to $5.79; a nylon bladder within the tank at $5.25 to $8; placement of the tank over the axle surrounded with a protective barrier at a cost of $9.95 per car; substitution of a rear axle with a smooth differential housing at a cost of $2.10; imposition of a protective shield between the differential housing and the tank at $2.35; improvement and reenforcement of the bumper at $2.60; addition of eight inches of crush space a cost of $6.40. Equipping the car with a reinforced rear structure, smooth axle, improved bumper and additional crush space at a total cost of $15.30 would have made the fuel tank safe in a 34 to 38-mile-per-hour rear-end collision by a vehicle the size of the Ford Galaxie. If, in addition to the foregoing, a bladder or tank within a tank were used or if the tank were protected with a shield, it would have been safe in a 40 to 45-mile-per-hour rear impact. If the tank had been located over the rear axle, it would have been safe in a rear impact at 50 miles per hour or more.

Management's Decision to Go Forward With Knowledge of Defects:

The idea for the Pinto, as has been noted, was conceived by Mr. Iacocca, then executive vice president of Ford. The feasibility study was conducted under the supervision of Mr. Robert Alexander, vice president of car engineering. Ford's Product Planning Committee, whose members included Mr. Iacocca, Mr. Robert Alexander, and Mr. Harold MacDonald, Ford's group vice president of car engineering, approved the Pinto's concept and made the decision to go forward with the project. During the course of the project, regular product review meetings were held which were chaired by Mr. MacDonald and attended by Mr. Alexander. As the project approached actual production, the engineers responsible for the components of the project "signed off" to their immediate supervisors who in turn "signed off" to their superiors and so on up the chain of command until the entire project was approved for public release by Vice Presidents Alexander and MacDonald and ultimately by Mr. Iacocca. The Pinto crash tests results had been forwarded up the chain of command to the ultimate decision-makers and were known to the Ford officials who decided to go forward with production.

Harley Copp, a former Ford engineer and executive in charge of the crash testing program, testified that the highest level of Ford's management made the decision to go forward with the production of the Pinto, knowing that the gas tank was vulnerable to puncture and rupture at low rear impact speeds creating a significant risk of death or injury from fire and knowing that "fixes" were feasible at nominal cost. He testified that management's decision was based on the cost savings which would inure from omitting or delaying the "fixes."

Mr. Copp's testimony concerning management's awareness of the crash tests results and the vulnerability of the Pinto fuel system was corroborated by other evidence. At an April 1971 product review meeting chaired by Mr. MacDonald, those present received and discussed a report (exhibit 125) prepared by Ford engineers pertaining to the financial impact of a proposed federal standard on fuel system integrity and the cost savings which would accrue from deferring even minimal "fixes." . . . The report refers to crash tests of the integrity of the fuel system of Ford vehicles and design changes needed to meet anticipated federal standards. Also in evidence was a September 23, 1970, report (exhibit 124) by Ford's "Chassis Design Office" concerning a program "to establish a corporate [Ford] position and reply to the government" on the proposed federal fuel system integrity standard which included zero fuel spillage at 20 miles per hour fixed barrier crash by January 1, 1972, and 30 miles per hour by January 1, 1973. The report states in part: "The 20 and 30 mph rear fixed barrier crashes will probably require repackaging the fuel tanks in a protected area such as above the rear axle. This is based on moving barrier crash tests of a Chevelle and a Ford at 30 mph and other Ford products at 20 mph. [¶] Currently there are no plans for forward models to repackage the fuel tanks. Tests must be conducted to prove that repackaged tanks will live without significantly strengthening rear structure for added protection." The report also notes that the Pinto was the "[smallest] car line with most difficulty in achieving compliance."It is reasonable to infer that the report was prepared for and known to Ford officials in policy-making positions.

The fact that two of the crash tests were run at the request of the Ford chassis and vehicle engineering department for the specific purpose of demonstrating the advisability of moving the fuel tank over the axle as a possible "fix" further corroborated Mr. Copp's testimony that management knew the results of the crash tests. Mr. Kennedy, who succeeded Mr. Copp as the engineer in charge of Ford's crash testing program, admitted that the test results had been forwarded up the chain of command to his superiors.

Finally, Mr. Copp testified to conversations in late 1968 or early 1969 with the chief assistant research engineer in charge of cost-weight evaluation of the Pinto, and to a later conversation with the chief chassis engineer who was then in charge of crash testing the early prototype. In these conversations, both men expressed concern about the integrity of the Pinto's fuel system and complained about management's unwillingness to deviate from the design if the change would cost money.

Lee Iacocca marshaled a broken system which produced an unreasonably dangerous car for no good reason other than to save $20.00 per unit.

Of course, the Pinto was also a disaster in that it abjectly failed to meet the challenge of the Japanese invasion head-on. Whereas Toyota countered the Pinto with a plethora of specialized small car models, such as the Corolla, Corona, Crown, Mark II, and Celica, in a wide variety of useable body styles, Iacocca’s Pinto misread the market and failed to match the Japanese car-for-car. Thus, Iacocca’s model line-up was ill-prepared for the “first” energy crisis which followed the 1973 Yon Kippur War and the Arab/OPEC oil embargo.

These horrible lapses in judgment cost FoMoCo millions upon millions in lost sales. An entire generation's perceptions of the Ford brand were formed by the failures of the Pinto.

These awful mistakes should never be forgotten by any of Ford’s engineers, designers, and managers. Obviously, to stay in business, FoMoCo has to make a profit. But the safety and well-being of the public (and the long-term well-being of the Company) must never be sacrificed again for a per-unit profit of less than the cost of a decent meal.

Iacocca is often celebrated as the “Father of the Mustang” and “Savior of Chrysler.” And he was clever at realizing how to deceptively leverage off-the-shelf parts and existing platforms to cheaply create profitable niche market “sizzle.”

But for every 1964 Mustang, 1967 Cougar, 1968 Continental Mark III, minivan and Viper in Iacocca’s product portfolio, there are legions of horrific aesthetic and engineering abortions, such as the Grenada, the Mustang II, 1975 Cougar, the LTD II, the 1980 Fox-platform Thunderbird, the Chrysler Fifth Avenue/FWD New Yorker, Chrysler Laser/FWD Dodge Daytona, the Maserati TC, Dodge Dynasty, and the FWD Imperial.

But his most horrible, tragic, and catastrophic decisions of all culminated in the Pinto.

“DEATH MARCH” OR “PLANE CRASH” IN D.C. FOR THE DETROIT 3

[Get the latest “Truth With Speedzzter” here]

The Big Bankrupt Three Detroit automakers crashed and burned in front of Congress.

The poverty pilgrimage of Ford Motor Company’s Alan Mulally, General Motors’ Rick Wagoner, Chrysler’s Bob Nardelli and the United Auto Workers’ Ron Gettelfinger was an Edsel-sized disaster. A fiasco. A flop.

In a breathtaking show of tone-deafness, the hat-in-hand witnesses reportedly breezed into town on a fleet of “luxury private jets.”

A skeptical media – the same one that couldn’t be bothered with doing real stories about President-Elect Obama before the election – noticed the irony . . or the hypocrisy.

One would have thought that somebody in the huge public relations operations would have dreamed up something better. Something more symbolic.

A bus ride.

A convoy with thousands of employees who would get fired and lose their homes when the Detroit automakers are parted-out and stripped like a stolen Corvette in bankruptcy.

On the other hand, the dwindling cadre of logical engineers as well as the myopic bean-counters who plague Detroit would recognize that flying by private jet to Washington D.C. undoubtedly saved 3-5 hours of travel time (not insignificant when your time is worth $1,000/hour or more to your employer). It allowed Mulally, Wagoner and Nardelli the option to surround themselves with advisers and staff. It permitted them to conduct rehearsals and other work in flight (not possible on a commercial flight). It was also more secure than commercial air travel.

$20,000 in travel costs is chump change when you need $25-100 Billion! When Senators junket to exotic locales on “fact-finding” forays, they often take even more expensive military aircraft. And these same Senators vote to spend billions earmarks for “landscaping,” “nature walks,” “bicycle trails”, “beautification” and a museums for arcana such as the Woodstock Music Festival.

Nonetheless, all of that logic will be lost in the battle for public perceptions. It was as tone-deaf as driving a 1960 Corvair to a Ralph Nader birthday bash. . . .

Maybe they could have call the jets “air ambulances . . . .”

As for the main event -- the scene exuded all of the foregone “drama” of a Figure-Eight Jalopy race.

As Autoextremist Peter M. DeLorenzo put it:

"The din out there in the media right now is so anti-Detroit, anti-'bailout' that I welcome the opportunity to present the other side of the debate, even if it appears with each passing day that Detroit is running out of time and unable to break through the negative media clutter that envelopes the industry at every turn. And after that death march of a hearing before the Senate Banking Committee yesterday, I’m even more pessimistic.

When Alan Mulally, Rick Wagoner, Bob Nardelli and Ron Gettelfinger sat down in front of the microphones, I knew it wasn’t going to be good . . . ."

In fact, it was a total set-up from the get-go.

Later, even the hapless Mitt Romney weighted in, reminding everybody that his Daddy was among the old-line of Detroit managers who barely kept now-defunct American Motors afloat back in the halcyon days of the 1960s with frugality.

Mitt even claimed that helping the Detroit 3 avoid certain liquidation in bankruptcy would virtually guarantee the “demise” of the Ford, GM and Chrysler! (Don’t worry, Flipper Mitty will probably flip-flop to supporting aid . . . after it is too late.)

The journalists also dredged up the example of nationalized U.K. automaker British Leyland as an example of why “bailouts” won’t work.

Of course, the bulk of British Leyland did survive into the 21st century – which it likely would not have if the ratchets of over-regulation, hyperinflation, and government coddling of labor unions had not been leavened by bridge loan funding.

The vandals and visigoths seeking to burn down what’s left of Detroit conveniently ignore any success stories. They just don't fit the narrative.

Chrysler’s resurrection in the early ‘80s is wholly discounted as “prolonging the inevitable” even though every taxpayer dollar invested was fully repaid ahead of time and with interest.

“[T]he case of Renault, which combined fresh money and new management in the 1980s, showed that government bailouts can be beneficial.”

“The French government help for Renault also came amid increasing losses for the company. . . . [U]nlike British Leyland, Renault was able to use the financing to create new car models that were ultimately successful. That, along with tough cost-cutting by a newly installed chairman, cleared the road to profitability by the time the government began privatizing Renault in the 1990s.”

Renault even picked up the dregs of the weakened American company that Mitt Romney’s frugal Mormon pappy ran!

None of this matters to the Toyota-driving, Consumer Reports-worshiping, know-it-all Mob who want Detroit to “pay” for not eradicating the UAW forty years ago and who erroneously believe Vegas and Pintos accurately represent the quality of Detroit’s current products.

None of this matters to a hoard of finger-in-the-wind politicians who would spend billions more on pork and special interests, and anticipate heaping on billions more in unfunded mandates, but who will not lift a money-grubbing finger to save one of our most basic industries.

Romney, of course, is right when he says that the wages and benefits for UAW-represented workers must track with those of their “scab” counterparts in the right-to-work Southern and Midwestern assembly plants of the Japanese invaders. Yet, nobody in Washington D.C. has the bravado to suggest that the political branches of government have the power to make this happen. After all, it was FDR's "New Deal" that saddled the Detroit 3 with decades of labor trouble. Washington broke it and now they should fix it.

Instead, the Democrats and the GOP continue to squabble over the meaningless minutae of whether the already-appropriated $25 Billion for fuel efficient cars can or cannot be diverted to the more pressing need of avoiding a total shut-down of the industry. Stupid. Selfish. Tragic. Politics as usual.

Detroit is burning to the ground. Meanwhile all of those with fire extinguishers are acting as if they think fire is good.

IS IT CONSERVATIVE TO HELP THE DETROIT 3?

[Get the latest “Truth With Speedzzter” here]

It is not just the half of American consumers who buy imported vehicles who hate the Detroit 3.

Nope. It seems that a fair number of Republican pundits and politicians are anticipating the end of General Motors, Chrysler and maybe even Ford Motor Company.

The echo chamber of last Sunday’s news television was a hostile environment for any talk of helping the Detroit 3 deal with “double whammy” of economic downturn and $100 Billion Dollars in new fuel economy/greenhouse gas regulations.

“Let’em die” was almost the universal sentiment among those who claim to be “conservative.”

Adam Smith be praised and millions of auto-related jobs be damned.

For example, “Senator Richard Shelby (R-Ala.), a member of the Senate Banking, Housing, & Urban Affairs Committee, said: ‘The financial straits that the Big Three find themselves is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force. . . . I do not support the use of U.S. taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes.’"

Of course Alabama’s Shelby (not to be confused with Carroll Shelby) is merely doing the bidding of a host of import invaders.

“In Alabama, Asian and European auto companies have set up manufacturing in recent years. Once decimated by the loss of textile jobs, Alabama has attracted assembly plants from Mercedes-Benz (DAI), Hyundai, and Honda, as well as a roster of supplier companies feeding those plants. Foreign auto companies are attracted to the Southeast, where the United Auto Workers have no presence, rather than acquiring empty plants in the North that were organized by the union.”

Senator Shelby is reflecting the quasi-laissez faire “consensus” among elite conservatives (most of which have never deigned to even change a spark plug, much less understand the complexities of automaking) and a universal hatred for unionization in conservative circles.

To be sure, the United Auto Workers Union is a central player in the demise of the Detroit 3.

FDR-era union organizing laws forced unions on the Detroit 3 in the 1930s. By the 1980s, when the Japanese invader assembly plants started locating in “right to work” states, such as Senator Shelby’s “Sweet Home Alabama,” federal labor policy created a stalemate.

In other words, GM, Ford, Chrysler, American Motors and their various “rust-belt” suppliers were virtually powerless to shed themselves of unions, while their foreign invader competitors received a panoply of tools to avoid unionization. This resulted in a huge cost imbalance that only the gamble of bankruptcy or drastic federal intervention could possibly remedy.

The UAW’s abject failure to unionize the “invader plants” is one of the factors which know-nothings like Senator Shelby attribute to the fault of the Detroit 3.

FDR and an earlier generations of liberals saddled GM, Ford and Chrysler with expensive unions and then empowered them to hold the Detroit 3 hostage with “pattern bargaining” that was wholly divorced from the international auto labor market. This labor structure absolutely prevented and still prevents the Detroit 3 from being able to assemble small cars cheaply enough to compete with lower-wage foreign and non-unionized parts making and assembly operation.

Potential profit margins in small cars are, of course, small. Spotting the products of a Japanese invader auto plant a $1,500-$2,000 cost advantage up front is fatal.

Only a few strategies were available to the Detroit 3 that were short of destroying their businesses in bankruptcy in order to reject the UAW contracts and start from “ground zero” with new, non-union “scab” workers (which as we know didn’t work out for Firestone and directly lead to the horrible Firestone/Ford Explorer mess).

Senator Shelby, here's the options that the Detroit 3 realistically had:

First, the Detroit 3 could drastically cut costs.

They tried this and we received a generation of uncompetitive “cheap” small cars, such as the Chevrolet Vega, Ford Pinto, and AMC Gremlin. The quality of these UAW-built cars and their tepid successors (Chrysler K-Car, GM’s FWD X-Car and Ford’s Tempo/Topaz) virtually killed the Detroit 3's ability to successfully market to at least two generations of young consumers.

Second, they could move production off-shore to non-union locales.

However, the threat of strikes and “pattern bargaining” severely limited this option. Moreover, off-shoring hurts what should be one of the Detroit 3's unique marketing advantages – that their products help the American economy far more than an imported vehicle or one that’s designed and engineered overseas and merely assembled in the non-union parts of America out of mostly imported parts.

Third, they could shed themselves of parts operations and off-shore more of the subassemblies.

They did this, but the UAW’s strike threats forced them to continue to eat billions in costs from the “spin-off” parts operations.

Fourth, they could cut costs by extending design cycles and amortizing the millions in tooling costs on small cars.

They did this and got eaten alive by the Japanese four-year design cycle.

Fifth, they could comply with federal government-imposed Corporate Average Fuel Economy standards by building just enough money-losing small cars to offset more profitable larger vehicles, and dramatically raise the prices of the larger vehicles to reflect the inherent supply limitations that such an “offset” scheme would produce.

This was the Detroit 3 business model for most of the 1980s and 1990s. CAFE produces a massive distortion in the free market for vehicles. The types of automobiles at which the Detroit 3 led the world in the 1960s were virtually outlawed. As a direct result, Ford was forced to lose money on two or three Escorts or Tempos for every fuel economy-compromised, downsized V8 car it built. But in a true free market, Ford would have been free to pump up the volume on the types of profitable cars it was best at building. CAFE prevented this.

What is worse about CAFE is that it forced the Detroit 3 to market trucks, vans and SUVs to survive. For twenty years, an overwhelming plurality of Americans rejected the sorts of small FWD cars that the federal government sought to force Detroit to build. Literally to stay in business in the sorts of volumes necessary for any chance of profitability and to meet the UAW health care, job bank, and pension obligations, the Detroit 3 had no choice but to build the large vehicles that the market was demanding. They simply could not be automobiles because of CAFE standards.

Sixth, the Detroit 3 could dump the unwanted, government-mandated FWD cars into fleets.

They did this for years at great harm. Cars in daily rental and fleet service are typically abused mercilessly. Then they are dumped onto the “program car” market at below-market rates. This hurts the reliability scores and resale values. The Japanese invaders typically avoided the crucible of daily rental fleet operations (in the 1990s, the Detroit 3 held captive major rental companies like Avis and Hertz to insure enough sales to keep their assembly plants operating at minimum levels of profitability). Thus, the market wasn’t flooded every year with thousands of beat-to-death fleet cars trading at half-price.

Senator Shelby and the other “let’em die” defenders of ersatz laissez faire capitalism would have been hard-pressed to do any better, given the landscape created by federal regulations and federal policies.

BUT IS “CONSERVING” WHAT’S LEFT OF THE DETROIT 3 REALLY CONSERVATIVE?

The arrogant conservative pundits suggest that “we wouldn’t bail out small businesses.” This, of course, wholly ignores all sorts of federal subsidies for small businesses, such as SBA loans, research and development spending, agriculture subsidies, government contracting assistance, and favorable tax treatments.

The paleocons and economic purists complain that Detroit got themselves into this mess and the taxpayers shouldn’t foot the bill for getting Detroit out of it. But these same paleocons and purists conveniently ignore that the liberals saddled the Detroit 3 with unions and stood by while Detroit was held hostage to them. They ignore the horrendously expensive environmental and safety regulations that consumed billions over the past forty years in unfunded compliance costs. They gloss over Japan’s decades of protectionism that stopped Detroit from adequately investing in Japan and allowed the invaders companies shelter to develop their businesses free from active competition with Detroit. They can’t see that we’re competing with foreign governments who directly and indirectly subsidize the “invasion.”

They lament that once we stray from regulating the Detroit 3 into oblivion and actually provide some financial assistance to pay for these non-market-based regulations and mandates, then where would we stop. They claim that the airlines would be next. This argument presumes that complex industrial businesses are the same as service businesses.

But putting together a service business such as an airline (especially in the age of deregulation) is comparative child's play to starting a new U.S. automaker. It has been done repeatedly since the 1970s. Buy some aircraft and ground equipment; obtain some gate rights at airports; rent a reservation system and buy some ads. Although it takes a large investment, it is nothing like starting a automaker from scratch.

The Detroit 3 are unique, core industrial entities that cannot be readily duplcated in the U.S.A.

No one has successfully started an automaker in the Western world since the hyper-regulated automobile became the norm. No one. Raising the capital and putting together the complex design, supplier, manufacturing, marketing, and national distribution systems from scratch is a daunting task. It takes years and billions of dollars to bring a new product to market. Federal and state certification costs run into the millions for even modest changes.

Therefore, once one or all of the Detroit 3 are dead, it would take a miracle of biblical proportions for anyone to ever successfully start a domestic auto company again in the U.S.A. in the current overly-regulated environment. No new generation of Henry Fords need even try for they will surely fail. An automaker cannot be successfully grown in the U.S. like Sam Walton’s Wal-Mart or other low-tech service business.

If the Detroit 3 are slaughtered by Washington hubris, we may still have some non-union “invader” assembly plants banging out foreign designs constructed out of imported parts. But we will have lost the heart and soul of America’s industrial base forever.

CONGRESS SHOULD APPLY THE POTTERY BARN RULE FOR THE DETROIT 3

General Powell posited the “Pottery Barn” rule for Iraq: “you break it, you bought it.”

In fairness, a similar rule ought to apply to the Detroit 3.

Washington D.C.’s "auto experts" broke Detroit (with the willing assistance of the greed-soaked unions, non-laissez faire governments in Asia and Europe, and millions of myopic American consumers who couldn’t see past their own selfish interests to what was good for America as a whole). Now it is up to Washington D.C.'s "auto experts" to fix it. They “broke it,” so they should be obligated to “buy it” long enough to correct the market disruptions of the past and put the Detroit 3 on an internationally-level playing field.

At the heart of conservatism is the principle of responsibility.

Certainly, if the Detroit 3 had ruined their businesses without decades of meddling by federal and state governments, the ersatz laissez faire arguments would have some validity.

But we as a country killed the free market for Detroit 3 labor in the 1930s and destroyed the free market for their vehicles in the 1960s and 1970s.


We cannot get back to a level playing field and a free market without severe and decisive federal intervention. Those who cannot see this are either shilling for a special interest (i.e. Senator Shelby) or are so blinded by an ideology that they cannot appreciate or comprehend the current reality.

Regardless of the causes, to fail to act now out of some imaginary fealty to selectively-held "free market principles" would be the height of irresponsibility.

Conserve the Detroit 3!