The 7 worst ways to rescue Detroit

3. Pre-empt the possibility of bankruptcy

One of the best incentives for an underperforming CEO is the threat that a bankruptcy judge and team of turnaround wizards will seize control of his company and give him the boot.

If the government indemnifies failing automakers against bankruptcy, it will rubber-stamp business as usual and let the automakers slow-roll their way into even deeper losses.

• Tell us: What if GM and Ford fail?

Better: Consider a plan to aid the automakers, but only as part of a bankruptcy filing.

4. Appoint a federal car czar

Pleeeeeaaaaase, Mr. Obama: Don't let the government get into the car business! The automakers already build lousy enough cars on their own.

Better: Acknowledge that there's vast overcapacity in the car industry and that the Detroit automakers are too big. Commit to helping solve that problem -- or letting it solve itself.

5. Place the whole restructuring burden on Detroit

The automakers have plenty of problems, but it's not their fault that state and local laws protect inefficient dealers and weaken the Big Three's ability to distribute their products as efficiently as possible.

A restructuring package that orders reforms by automakers but takes a pass on protectionist state franchise laws would be a half-measure.

Better: Find a way to release the automakers from dealer obligations that don't make business sense. This could make it easier to kill overlapping divisions like Mercury, Pontiac and Saturn, one thing many analysts feel is necessary for the Big Three to slim down.

6. Subsidize cars

There's some talk in Congress of offering new tax breaks for certain kinds of cars (in addition to existing tax incentives for hybrids) or even a temporary tax break for buying any car. The idea is that such incentives would boost sales at the domestics and help them climb out of their hole. But that wouldn't do anything to lower fixed costs that are too high or correct other inefficiencies that would still exist after the tax subsidies expired.

Better: Gradually raise the federal gasoline tax, as a way to encourage buyers to purchase the most efficient car that meets their needs (and help the government raise badly needed revenue).

7. Penalize their competitors

As the Detroit automakers have been complaining about everything that's wrong, a new Detroit has been taking root, mostly in an arc of the South that ranges from South Carolina to Texas. Virtually all of those plants belong to foreign automakers, including Toyota Motor (TM, news, msgs), BMW (BAMFX, news, msgs) and Nissan (NSANY, news, msgs), but they employ thousands of Americans as executives, managers and blue-collar workers.

They're also some of the most efficient auto factories in the nation, often able to switch from one model to another based on what products are most popular. And they buy lots of made-in-America parts.

Any incentives or other policies that stifle demand for cars from such "transplant" factories would undermine one of the healthiest parts of the U.S. manufacturing base.

Better: Consider more incentives to lure foreign automakers to the United States, and make the New Detroit even stronger. Sooner or later, it might be the only Detroit we have left.

This article was reported and written by Rick Newman for U.S. News & World Report.

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