Cafe de Mello

When I was an enlisted man in the Army, we used to joke that the difference between the Army and the Boy Scouts was that the Boy Scouts had adult leadership. It looks like the same joke could be applied to the US Government today.

Fortunately, we have finally elected some adult leadership. Unfortunately the US auto industry my go belly up before Obama is sworn into office.

Yesterday I wrote that before any bailout is legislated, someone needs to develop a plan that specifies how the bailout money will be used to make the automakers more solvent, other than allowing them to continue conducting business as usual until the bailout money runs out.

One feature of any bailout proposal should be the immediate removal (without golden parachutes) of at least GM's upper management. Rick Wagoner, GM's chief executive has argued that he doesn't think replacing GM's top management would "be a very smart move. I think our job is to make sure we have the best management team to run G.M."

When I read that GM's vice chairman Robert Lutz has poked fun at environmental concerns declared that only "a few nuts in California" were worried about the harm cars cause the environment and called the Toyota Prius a PR gimmick, I have my doubts that this is the best management team available. Looks to me like Wagoner and Lutz were content to ride a dinosaur company right up to the point of fossilization.

The fact that congress had already approved a $25 Billon plan to help the big three automakers retool their plants to make smaller, more fuel efficient cars, seems to acknowledge that upper management in these companies failed to recognize and plan for the changes needed to stay competitive. In order to receive any bailout funds, these companies should be turned over to more forward thinking management.

Management change, however, should be only part of the operational changes the companies specify before receiving any bailout funds. All the discussions of the need for the bailout mention that these companies are "are burning through money at an alarming and accelerating rate: about $18 billion in the last quarter alone." Obviously, any bailout must be conditioned on turning down the money furnace that is burning these funds.

Assuming the automakers can develop reasonable plans for using the bailout money to fund changed operations that will allow them to avoid bankruptcy, the bailout money must not come from the $25 billion authorized to help them retool their manufacturing plants. If they are to become more competitive, they need both the bailout and the retooling assistance.

The most ready source of bailout funds is the $700 billion already approved. Too bad our current president "has no appetite" for this solution. True to his less than adult nature, Bush is more intent on giving the democratic congress the finger one more time than in solving this crisis. As I have just discussed, his solution, using the retooling funds, makes no sense. It would make more sense to provide no assistance at all than to provide only the bailout or only the retooling assistance. That would be committing $25 billon to a certain failure.

Adult leadership in the congress would have both houses meeting right through Thanksgiving and Christmas if necessary to ensure that the automakers submitted effective plans and that a package containing both bailout and retooling money was available. If the democratic leadership threatened this, I suspect Bush would find an appetite for letting the bailout come from the $700 billion.