November 17, 2008

Institutionalizing errors

The American experience is replete with examples of mistakes that have taken root to become part of the institutions of every day. There are of course governmental examples that politically we tend to focus on. There are also many private sector examples. The conundrum currently facing the automobile industry in America is a prime example.

The auto sector did not suddenly drop anchor and punch a hole in the side of their own ship. The roots of this crisis date back decades. Ultimately what drives consumers, pardon the pun, is quality and price. Foreign automakers continue to find a better footing in delivering these key factors to market, simplifying the purchase decision in a way not suitable to the likes of GM, Ford and Chrysler.

Price: In the case of GM, both legacy costs and production costs mean that cars cannot be produced on a level playing field with Toyota or Honda. Challenges from Dealers and the UAW make proper restructuring more of a fable than a possibility.

Quality: Toyota has a better business model. The result - quicker to market, and better quality product.

The auto industry is indicative of the problems in government. When bad decisions become the operational procedures of an organization, bad things follow. The difference between the auto industry and government is the possible range of outcomes.

For GM et al., bailout may solve the problem. More likely it will only forestall the inevitable - a collapse gets punted down the road for a few years. Sounds like the case for Social Security, a little, no? The other alternative is to not bail out the industry. Allow it, or force it, to accept Chapter 11 restructuring and do so aggressively. Make things run leaner, give the company wiggle room to capitalize on it's new found desire to lead and thrive once again. Tough medicine, but medicine the patient (GM) doesn't seem willing to or able to take itself.

For the government's institutionalized blunders the cure may be more difficult. But there is an opportunity here to avoid consuming more of the same poison that has created the problems in the first place. Starting with the auto industry bailout. There is a right side and a wrong side to this. There's an opportunity for Republicans to get on the right side of this and make great strides in their image of being part of the problem.

The tricky part is that Obama can straddle the issue. Change can mean fixing things to back to the way they worked in the 1950's (re: GM, Ford, Chrysler). So he can cleverly argue, "yes let's bail them out but to be safe, let's add lots of regulation because clearly management at these companies screwed up." Implicit is the argument that Obama knows better. Of course he does, he's The One. He can fix what others could not. A Democratic government will ride to the rescue of the industry. GM will be able to struggle along for a few more years, out of the spotlight of course. And the media will launch into applause mode - Obama made the realization of the Volt possible. Look what he's done for GM, for humanity, for Mother Earth...the sugar levels will be unpalatable for those of us on the right. But GM, will only have forestalled it's problems. Certainly enough to get past 2010, and hopefully for Obama, enough to get past 2012. Until GM falters again in Obama's second term and the cycle will repeat itself. But Obama reaffirms that union vote for as long as he needs it.

Then there's the right course of action. Opposing the bailout. It's a super-risky strategy, one very likely to backfire at the ballot box. But it's the right thing to do for America, something conservatives typically can get behind. And something Democrats typically pull out their 10' pole to avoid touching. What's at stake is America's future. GM is still an important part of America. As GM goes, so goes the nation. GM's preeminence has been cut in half over the last 5 decades. Is America next? The battle is not for the next election (as Democrats tend to view it), but for the 21st century and America's part in it.

The right course of action is to use tough love. And then, the tricky part is to convince America, convince GM, convince the United Auto Workers, that this really is the best course of action and that everyone has to work together for the future of their jobs, their industry and their country. That's a tough, tough sell. But it's a sale worth making; for the Republican party, and more importantly for the country.

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