Another FAILout on the Way?

Yesterday, Mitt Romney suggested letting the auto companies die. He’s partly right: shoveling money at the automakers is not going to fix their problems. Unfortunately, doing nothing has its own set of large and highly negative consequences. While Romney (along with the rest of the right wing) seems to think that busting the unions has to be part of any solution, Mittens at least recognizes that management will also have to make sacrifices, both real and symbolic. But even that won’t be enough, especially since the managers will start the money and perq grabs again as soon as nobody’s looking. A more radical approach may not solve the problems in Detroit, but nothing else will.

There are 100 million households in the US, give or take, and around 600 million shares of GM. Pull a round figure out of my, er, back pocket, and say there’s 100,000 people working for GM. GM wants the taxpayers (i.e., you and me, if you live in the US) to bail them out… or at least their upper management flew their private jets to DC to deliver that message (OOPS!).

Maybe instead of bailing them out, we should just own them.

Run the auto companies through the bankruptcy courts, dissolve the standing corporations, then create new ones (this sidesteps the current stockholders, who would be just as screwed without a bailout). Issue 200 shares of stock to each autoworker, and 40 shares to each American household. Remove the upper and middle management structures entirely, and let the autoworkers run their companies. The people on the floor know how things work, and their neighbors are the people buying cars — they’ll have a direct line to what Americans want. If they have to lay people off or cut their salaries, then they do it knowing some fat cat on the 16^th floor isn’t pocketing a bigger bonus at their expense. Meanwhile, their neighbors are also shareholders — not only in GM, but Ford and Chrysler as well. They will be more inclined to buy a car from one of their own companies, especially if the autoworkers have been listening and deliver the cars they want.

So if we’re going to have another FAILout, we should do it right. Many people will eventually sell their stock, some dork will amass enough to force itself into the picture, and the road to FAIL will start all over again. But it could be a long time. And who knows? Maybe we’ll get it right before then.