10/1/2008 | 4 MINUTE READ

Competitive Challenges: The Federal Government's Role in Today's Auto Crisis

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Recently, there has been a great deal of discussion about U.S. government support to the ailing auto industry.


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Recently, there has been a great deal of discussion about U.S. government support to the ailing auto industry. But the open question is: What type of financial support? Does the government need to step in and play a big role including "bailing out" the domestic-run automotive companies? Or does stepping in mean something different this time? Yes, the U.S. government needs to "step up" and get more involved in the auto industry and the role it plays in the economy and global market. However, that doesn't necessarily mean throwing a bunch of cash at the domestic three with the hope that it will be used wisely to turn the companies around.

There is precedence here. Jim Harbour testified in the Chrysler government bailout hearings in the late 1970's while employed at the company. He was an important part of Chrysler winning this bailout based on the plan his team outlined to get Chrysler back and to win against the global pressures facing North America. At the time, he was head of Advanced Manufacturing Engineering, and on a previous assignment had the privilege of visiting several of the Japanese operations in Japan. During those visits in the 70's, he saw how the Japanese were operating their factories and related facilities and knew eventually they would have an impact on the global economy and the automotive industry in Detroit.

In the bailout plan the team prepared, the team indicated how the Chrysler organization would incorporate many of the great things seen in Japan such as lean manufacturing, common engineering, efficient, reward-based purchasing, etc. This plan and testimony helped Chrysler win the guarantees it needed from the U.S. government and establish the financial turnaround needed to keep Chrysler alive. Just days after the success of this plan, Jim Harbour was called into Mr. Lee Iacocca's office. He recalls that the words "Thank you for your support on the bailout team" were indeed uttered, and just when he thought a big promotion was coming, Mr. Iacocca requested he take early retirement because the things outlined in the plan were Japanese techniques that would never be deployed in his company. Without my making a snide remark about that irony, fast forward to the industry and economy of today.

Does the government need to step in and provide bail-out money for the domestic OEMs? This is likely not the answer. Frankly, it's a bit like buying your child the new Sony Playstation or Wii. They get the new toy or tool, use it for a while and either misuse it, break it or grow out of it. Then they need something else. Harbour-Felax Group is very passionate about this industry that we love and want to see survive and thrive. Unfortunately, we are afraid the culture the companies operate with today will not allow them to be successful even with a boat load of money to bail them out. Bottom line: The companies have to figure this out financially and make the right decisions for their companies long term that will bring them through the storm with a new, rebuilt culture that is dramatically different than the entitlement culture of old.

So does government have a role? Absolutely. One of the biggest criticisms of the U.S. government is its lack of concern and action for the auto industry. Some government officials tell us that the auto industry is not a "critical" part of the U.S. economy, that domestic automakers need to just work harder at pleasing their customers, and that U.S. cars do not have the same fit, features or quality as foreign competitors. These are the uneducated government officials of our time. Senator McCain, who spends a lot of time in Michigan trying to win the vote, recently did an interview with a Detroit reporter. He indicated he bought his daughter a Prius, but when asked why he didn't buy her one of the many U.S.-built hybrids offered by the domestic three, he had no response. Was he not aware of the other great hybrid models made in this country?

The government in Japan walks in lock-step with Honda, Toyota and Nissan, and others. They do this because the auto industry is critical to them. This collaboration has allowed for a great deal more R&D, supplier growth, and global resolution of issues. The U.S. government has typically taken a back seat role in the auto industry, with little concern for its long-term survival until recently when fuel prices began to effect the pocket books of voters.

So what does government need to do? Put a team together to study the industry and work in collaboration with the automakers, suppliers, industry analysts, energy companies, global governments, and others to solve problems and get government support for issues in the automotive industry. Back when the government bailed out Chrysler in the late 1970's, there was such a group within the government. They cared about the industry and spent time after that bailout to learn more. But just at the most crucial time of foreign growth in this country that group was disabled-financial cuts. I wonder if the industry would be different if they had stayed in business?.