Roger Rabbit Does Detroit?

LOTS of news today about Detroit, where the Big Three are sinking fast. So President-Elect Obama (my hero) and the Congressional Democrats are considering bailing them out. There are several problems with this.

1. The leaders of the Big Three have acted incompetently for years — do we really want to trust them with our money now?
2. We're not going to buy our way out of this crisis by coming up with exciting new cars, but that seems to be what the Democrats are talking about.
3. What we really need is an alternative to what Detroit has been selling us — but maybe they can be a part of that. Big idea below.

A graph in today's Wall Street Journal shows how poorly American automakers have performed against their competition since 1995. Only high-margin, gas guzzling SUVs and pickups have kept them in the game.

Tom Friedman seems to concur in his column in the New York Times today. He has a dumb quote about the Prius from General Motors' Vice Chairman, who, speaking of dumb, also said that global warming "is a total crock of sh*t." The days when what's good for GM is good for America are clearly over.

Friedman has a new book out that advocates government policies to help make America the center of green innovation and technology. He says government intervention is necessary because the oil and highway lobbies are so strong that they successfully stifle green energy innovation, preventing a Silicon Valley type of bottom-up revolution. He may be right in general, but I think he's wrong about Detroit.

Friedman thinks that if we first fire all the Big Three executives, innovation and gizmos can solve the industry's economic crisis, but there are problems with that theory for this specific industry. First, we have almost one car per person in the US, and in the current economic crisis we're not going to go trading all those in on new models that lose 20% of their value as soon as you drive them home. Especially when they're like the Chevrolet Volt, which even with a big US subsidy will cost over $40,000 for a car that's not very good. Someone like me, who parks in a garage two blocks away can't even use one, because I'd have no way to charge it.

More effective than a putting all our Detroit eggs in a plan to exchange our polluting automobiles with clean green cars might be a plan to reduce our dependence on cars. The good news is that Obama and Congress have plans for that, and so does the American electorate. On Election Day, we passed 23 ballot initiatives that collectively authorized $75 billion in local expenditures on mass transit, like California's Proposition 1A. California's trains will be wind and solar powered and they are designed to drastically reduce both air and auto travel.

The bad news is that the trains will be bought from Japan or Europe. What if the Big Three go into the train and streetcar business instead?

In the early 20th century, America had thousands of profit-making streetcar systems. A GM-led coalition bought many of them and replaced them with bus systems (see Who Framed Roger Rabbit?). Now places like Portland and New Jersey are putting back thousands of miles of streetcar tracks, and it seems that many more miles are coming. Could Detroit once again lead the way, positively this time?

Executives like GM's Vice Chairman might be too big a problem to overcome. but we shouldn't bail them out if they're going to make money losers like the $40,000 Volt.

Transforming Detroit from a car, truck bus industry to a clean car, truck, bus, train and streetcar industry is the big idea. Some of the funding could come from the $100 billion already being talked about for new infrastructure and mass transit. And there's more money in places like the ISTEA bill (see T4America). Isn't it better to leverage other funds and include Detroit in the plans to reduce auto dependency than to simply bail them out?

"Freeway? What the hell's a freeway?"