Blame and the Big 3It's easy to vilify Motor City, but maybe the problem isn't just about Detroit. Perhaps the entire system needsthe makeover.USA TODAY - McLean, Va.Author: Webber, Alan MDate: Dec 3, 2008Start Page: A.11Section: NEWSText Word Count: 904

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It started with Ralph Nader and Unsafe At Any Speed. Michael Moore made it funny with Roger & Me. Then recently,Thomas Friedman made it official with a devastating column in The New York Times: Detroit's automakers areincompetent fools, begging for a federal bailout, which should be conditioned on their all being fired and replaced bySteve Jobs.

The consensus, more than 40 years in the making, is that America's automakers are the industry we love to hate. Theypay themselves too much, make cars nobody wants and deserve Chapter 11. They made their own mess, and now it'sup to them to fix it. Right?

Well, maybe not. There's no doubt that each of the Big Three has been guilty of arrogance. But consigning them all tothe trash heap as if they were solely responsible for their demise requires a gross misreading of U.S. business history.

Some early lessons

My lessons in the real workings of the auto industry go back more than 30 years. In the early '80s, as part of a HarvardBusiness School research team, I co-authored a study on the U.S. carmakers in global competition. We looked at thecompetitive structure of the Big Three, compared with the national models in Japan, Germany and the United Kingdom.Our key finding: The automakers weren't colliding in head-to-head competition. Instead, each company was part of anational setup -- call it an enterprise system. The system was a triangle of relationships among government,management and labor that had grown over decades. Shaped by national interests, history and social and economicchoices, each enterprise system delivered what its country wanted most.

In the case of the U.S., the deals that cemented our enterprise system with the automakers came about after years ofhostility involving government oversight, labor strife and corporate resistance to outside control. Over time, explicit andimplicit deals were made that shaped America's system.

Government committed to an energy policy that virtually guaranteed cheap and abundant gasoline. In exchange, itdemanded the automakers agree to improved safety standards and a gradual increase in fuel economy.

Labor committed to a cooperative relationship with the automakers, agreeing to worker retraining when layoffs werenecessary and maintaining stability in the factories. In exchange, the automakers agreed to generous pensions andbenefits, including health care.

And so peace was made that delivered the results that everyone in the system wanted. Don't forget that in the fourthquarter of 2007, General Motors was able to report a $46 million profit -- and a 2004 profit of $2.7 billion.

A turn for the worse

Obviously, every auto executive has since swallowed massive quantities of stupid pills. Or else America's enterprisesystem unexpectedly came apart at the seams. Suddenly, gas prices spiked, and Americans no longer wanted carspredicated on cheap and ample gas. Not that it mattered. The collapse of the financial system meant they couldn'tqualify for a loan to buy a car if they wanted one. Meanwhile, with health care costs spiraling out of control, GMdiscovered that almost $1,000 in the cost of every car went to cover retired workers' medical costs.

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Maybe the financial crisis facing the Big Three isn't all their making. Maybe the U.S. enterprise system is fundamentallybroken and needs to be rebuilt. Letting the Big Three fail won't address the underlying problem, but neither will simplyadvancing them more money. Even the best plan offered by each carmaker won't be enough to do the job. We need athree-way deal.

As President-elect Barack Obama insists, we need to look at how the pieces should fit together and reconfigure thesystem. Detroit, and America, desperately needs a new energy policy. For the automakers, that means a bailout shouldinclude a government commitment to a floor on the price of gas at the pump -- say $4 per gallon -- with the promise ofan automatic tax increase of 10 cents per year for five years. If the automakers and consumers knew that five yearsfrom now gasoline would be no lower than $4.50 per gallon, that alone would drive auto design, manufacturing andpurchase in a smarter direction. Some of that increase would need to be rebated to low-income Americans who needtheir cars for work -- another reason it's a three-way deal.

The second piece of a Detroit bailout is health care reform. For U.S. automakers to be competitive, America needs anew model for how we pay for health care coverage. The United Auto Workers needs to lobby hard for a fundamentallynew approach to paying for its members' medical care -- and to make coverage a universal right of every American.

The sad irony of the debate over the Big Three today is that it not only misdiagnoses the source of the competitiveproblem, it also fails to credit U.S. companies for the progress they've made. Not only are the cars they make in theU.S. achieving world-class quality standards, but the cars they make in other parts of the world are enormously popular.

But here in the USA, we've already decided: The Big Three are corrupt, or funny, or not Steve Jobs. Sadly, the one thingthis write-off of the automakers will lose is jobs.

Alan M. Webber, founding editor of the business magazine Fast Company, is a member of USA TODAY's board ofcontributors.

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Abstract (Document Summary)

In exchange, it demanded the automakers agree to improved safety standards and a gradual increase in fuel economy.For the automakers, that means a bailout should include a government commitment to a floor on the price of gas at thepump -- say $4 per gallon -- with the promise of an automatic tax increase of 10 cents per year for five years.

Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.

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