How the Car Czar Could Save the Auto Industry

As word emerged from Washington Wednesday of a deal to save Detroit, Lisa Mora-Jackson was relieved. But after being laid off from General Motors for more than a year, Mora-Jackson wonders who is going to bail her out. She's behind on her mortgage and her car payment. Business is dead at her husband's car detailing business, where she's been working since losing her job at a GM factory in Saginaw, Mich., last year. Worst of all, her unemployment benefits run out next month and her union safety net is unraveling. Mora-Jackson expected to land in the United Auto Workers' controversial "jobs bank," where workers receive nearly full pay while awaiting a new job. But UAW President Ron Gettelfinger pledged to kill the jobs bank if Washington would give GM and Chrysler life-saving loans. "It's getting scary now because I'm relying on GM to pay the bills," says Mora-Jackson, 41. "I'm in touch with some of my old co-workers and we're all asking each other the same thing: 'What are we going to do?'"
That question could be answered by the car czar, a new government position created to oversee the $14 billion in taxpayer money being injected into Detroit. That is if Congress approves the deal, which some Senate Republicans are vowing to block. If it goes through, the czar will have sweeping powers, the most awesome of which will be determining Detroit's fate.

If GM and Chrysler don't hold up their end of the bargain to craft a sustainable future, the czar can force them into bankruptcy. Ford, Motown's healthiest carmaker, will not fall under the czar's domain because it is not taking a taxpayer loan—for now. The czar will be appointed by President Bush in consultation with President-elect Obama, and they are said to be considering Paul Volcker, 81, who was Fed chairman during the 1979 Chrysler bailout. The czar would be a blend of super-CEO and bankruptcy judge. He doles out the loans to the automakers, sets the terms for their restructuring and can even compel "interested parties," like unions, car dealers and lenders, to make concessions. "The car czar is pivotal," says Harley Shaiken, a veteran auto-industry analyst and professor at the University of California at Berkeley.

With all that horsepower, it made me wonder, as an old Motown hand, what I would do as car czar. Not that I'm putting my name up for nomination, or think I'd be a credible candidate. When it comes to this whole idea of a great and powerful Oz overseeing Detroit, I'm with Mora-Jackson. "I don't know why they even need a car czar," she says. "Did they have a bank czar?" That's an excellent question when you consider that the financial industry received a $700 bailout—50 times what Detroit is supposed to get—and didn't have a single CEO hauled to Capitol Hill to explain themselves or their mode of transportation.

Still, when taxpayer money is involved, it's reasonable to have someone monitor it. And given Detroit's amazing ability to destroy capital—they've lost a combined $30 billion so far this year—it's understandable that America is lukewarm, at best, about financing this repair job. So here's how I would husband our precious dollars and keep Detroit in line:

First, fix the product line by focusing on fuel-efficient models of all shapes and sizes. Detroit should not just produce tiny, economy cars and kill off everything with a backseat. Not everyone fits into a Smart Car; believe me, I've tried with my family of five. It doesn't work. Detroit also doesn't need to hybridize the entire model line-up, as some have suggested. Hybrids like the Toyota Prius can be great on gas, but their advanced gasoline-and-electric propulsions systems are god-awful expensive. That's why even Toyota lost money selling the Prius when they first launched it a decade ago. If we want Detroit's automakers to be viable and self-sustaining, we can't force them to sell cars that lose money.

Create a federal advanced-vehicle lab where American automakers could work cooperatively with government researchers to create hybrid-and electric-vehicle technology. We all know Detroit is miles behind Toyota and Honda in the hybrid race. The most efficient and economical way to catch up is to join forces in a quasi-independent corporation to research, develop and produce hybrid drive systems and powerful new batteries to propel the American auto industry back into the green car race.

Overhaul America's auto factories so that they can produce multiple models down the same assembly line. The Japanese can produce as many as seven different models in one factory, whereas Detroit still operates on the model perfected by Henry Ford—stamping out zillions of the same model from a single plant. When car buyers switched from SUVs to small cars, this is a key reason why Detroit was caught flat-footed. Honda simply dialed up production of its Civic small car, while throttling back minivans and SUVs. Detroit is starting to emulate that approach, but they need to step on the gas.

Redefine the labor-management compact. Instead of fighting over table scraps at the Last Supper, how about if bosses and working stiffs figure out a way to get along? This means ceding power on both sides: Management needs to seek and accept input from the factory floor on how to better build cars. The union needs to loosen up the restrictive rules that prevent workers from being jack-of-all trades in the factory. You need a flexible workforce in those flexible factories to respond to the ever-changing whims of the marketplace. This, by the way, is part of the secret of the success of foreign automakers' American factories.

Haircuts all around. Yes, workers need to give up some of their wages and benefits. (By the way, GM assembly plant workers make about $28 an hour, not $73. That bigger number includes benefits and the huge cost of paying for retirees' pensions and health care. Foreign auto factories in the U.S. have virtually no retirees.) Management also needs to give back more than just their private jets and big bonuses. Whatever wage cut a factory worker takes, white-collar staff should sacrifice an equal percentage of their salary. The bond holders need to accept about 30 cents on the dollar, which would actually represent a nice premium to the 18 cents on the dollar GM's long-term bonds are trading at these days. Stockholders should kiss dividends goodbye for a long time.

As many as two-thirds of dealers need to be shown the door. Strong state franchise laws have prevented Detroit from culling its dealer herd for years. The all-powerful federal car czar should be able to trump those state laws and whittle the not-so-Big Three's retail network down to a size that reflects Detroit's diminished reality, not yesterday's automotive oligopoly.

Finally, listen, learn and get out of the way. Detroit is a big, complicated industry, with billion-dollar bets on each model and more moving parts than an Apollo rocket. A czar who gets lost in the weeds of micromanaging is doomed to failure. He or she needs to create a framework for success and accountability and then let the car creators do their work.

So where does this road map lead for Lisa Mora-Jackson? If GM succeeds, she could find work there eventually, though at reduced pay and increased responsibility. But like GM, time is rapidly running out for her. She pulled $14,000 out her 401k to pay bills, but that's dwindling. "I'm worried," she says. "All I can do is cut back, save money and look for extra work."

Shaiken fears workers like Mora-Jackson could become the early victims of a diminished Detroit. "She didn't decide not to produce small cars," he says, "but now the burden of failure falls on her." How the car czar steers Motown into the future, ultimately could determine the fate of thousands of workers like her.