Friday, November 21, 2008

Bailout or Bankruptcy?

Over the past few weeks we have heard about the cons, (and a few pros), of bailing out our auto industry. You've probably talked about it with someone.

Yet most of us don't really know what would happen if they were allowed to go under. (First of all, they don't just go under, they reorganize.) Congress told them to come up with a plan and do it fast, like 10 days.

Ain't gonna happen. Not a real plan that will be implemented. An outline perhaps.

I subscribe to Seth Godin's blog updates and use them on occasion on my Collective Wisdom website. However this piece I'm presenting here for you to read and mull over:

What to do about Detroit

I was in Detroit last week... I have family there. I also drive a car. And I would rather that the world doesn't melt and the economy thrive. So I'm uniquely qualified to weigh in on the automobile industry.

Not only should Congress encourage/facilitate the organized bankruptcy of the Big Three, but it should also make it easy for them to be replaced by 500 new car companies.

Or perhaps a thousand.

That's how many car companies there were 90 years ago.

That's right, when all the innovation hit the car industry, there were thousands of car companies, with hundreds running at any one time. From Wikipedia:

Throughout this era, development of automotive technology was rapid, due in part to a huge number (hundreds) of small manufacturers all competing to gain the world's attention. Key developments included electric ignition (by Robert Bosch, 1903), independent suspension, and four-wheel brakes (by the Arrol-Johnston Company of Scotland in 1909).[16] Leaf springs were widely used for suspension, though many other systems were still in use, with angle steel taking over from armored wood as the frame material of choice. Transmissions and throttle controls were widely adopted, allowing a variety of cruising speeds, though vehicles generally still had discrete speed settings rather than the infinitely variable system familiar in cars of later eras.

Between 1907 and 1912, the high-wheel motor buggy (resembling the horse buggy of before 1900) was in its heyday, with over seventy-five makers including Holsman (Chicago), IHC (Chicago), and Sears (which sold via catalog); the high-wheeler would be killed by the Model T.

Back in its heyday, Ford Motor made every single part of its cars, including raising the sheep that grew the wool that made the fabric that upholstered the seats. That's not true any more. Now, suppliers make just about every part. We need those suppliers, and we need them to stay healthy.

What we don't need are giant companies with limited choice, confused priorities, private jets and a bully's attitude.

I'd spend a billion dollars to make the creation of a car company turnkey. Make it easy to get all the safety and regulatory approvals... as easy to start a car company as it is to start a web company. Use the bankruptcy to wipe out the hated, legacy marketing portion of the industry: the dealers.

We'd end up with a rational number of "car stores" in every city that sold lots of brands. We'd have super cheap cars and super efficient cars and super weird cars. There'd be an orgy of innovation, and from that, a whole new energy and approach would evolve. Betcha.

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