GM's new restructuring plan seeks an additional $16.6 billion in government aid -- for now. Chrysler wants an additional $5 billion. The $30 billion thathas either received or requested since December doesn't count the $8 billion it wants to develop fuel-efficient cars, and another $6 billion it's soliciting from foreign governments.
For these taxpayer subsidies, the government could buy hundreds of thousands of GM cars a month and give them to deserving citizens. Make mine a Corvette, please.
Before deciding what to do with Detroit's demands, uh, requests, government officials first need to confront a fundamental question: How could so many smart people produce such a disastrous result?
Make no mistake, there have been many bright minds in the American auto industry over the years -- at the automakers, the United Auto Workers union and the components companies. Most of them saw today's troubles coming for years, even decades.
"I frankly don't see how we're going to meet the foreign competition," said Henry Ford II, then chairman and CEO of, on May 13, 1971, right after the annual shareholders' meeting. "We've only seen the beginning," he predicted. Regarding Americans' increasing preference for small cars, he declared: "Mini car, mini profits."
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That was a couple of years before Detroit agreed to let autoworkers retire with full pension and benefits after 30 years on the job, regardless of their age. In practice, that meant a worker could start at age 18, retire at 48, and spend more years collecting a pension and free health care than he or she actually spent working.
It wasn't long before even union officials realized they had created a monster. In 1977, UAW Vice President Irving Bluestone said he was "flabbergasted" that so many workers were retiring at age 55 or younger.
"We were aware that the trend to early retirement was escalating . . . but we were surprised at the escalation in 1976," Bluestone declared. "It is astounding."None of this is ancient history. The 30-and-out retirement program persists -- a sacred part of the inflated cost structure that makes it unprofitable for Detroit to make small cars in America.
Another example: Every Detroit factory still has dozens of union committeemen -- the bargaining committee, shop committee, health and safety committee, recreation committee, etc. -- who actually are paid by the car companies. This is a "legacy cost" that the nonunion Japanese, German and Korean car factories in America don't have to carry.
The union, though, shouldn't bear the entire blame for Detroit's disaster. It wasn't the UAW that pushed GM into the home-mortgage market, where it has incurred billions in losses over the last couple of years.
Nor can the UAW be blamed for Saturn and Saab, two brands that never made money, as GM executives have recently acknowledged. What they haven't explained is why their company would keep these money-losers around for nearly 20 years.
So why were these problems allowed to fester, when smart people recognized them all along?
The answer is that the solutions were painful, requiring not just brains but considerable amounts of courage.