Retired used-car dealer Shamus Flatley of North Scarborough weighed in this week on the crisis facing the American automobile industry. He reminded his coffee ship associates that although executive jets and million dollar bonuses are an accepted form of thievery everywhere in American corporate life, in view of the widespread voter resentment toward Big Three high-livers, he believed that unless some major changes come about, a government bailout may not be politically possible.

He did call to mind a sort of silver lining in the automobile cloud – one element in Detroit’s march to disaster than was not of their own doing. The elephant in the tent, he contended, is a $2,000 competitive penalty each American car must pay, i.e., medical costs and employee retirement – both of which are government gifts to auto makers (and all citizens) in Europe and Japan. Put another way, a $2,000 supplement is bestowed on foreign cars by their own taxpayers. This 2 grand not only makes it hard for Detroit to compete at bottom dollar, but also permits lots of engineering bells and whistles to be loaded into a Honda Hardtop, a Kraut Caravan, or a Thai Tuk-Tuk for the same selling price.

Shamus offered two options as solutions: a significantly re-jiggered government loan, or bankruptcy.

A loan first. Before Congress should get in bed with Detroit, two things must be written into any agreement: 1. new stringency in the executive suites, and 2. protection of the tax dollar, including ownership/claim of some type. When Chrysler was thrown a lifeline some years ago, the taxpayer eventually got back his (or her) dollar with a penny or two profit. A similar guarantee should be specified.

Next: Fire the present CEOs – without parachutes. And new management must use Internet video conferences, eat in the cafeteria and fly coach. The government (anyone but George Bush) should appoint a hard-nosed commission – or czar – with oversight. How about Mitt Romney, a first-class brain, knows the car business, motivated by his own ego and ambition (so what’s wrong with that?). We also have a homeboy. George Mitchell has the moxie to supervise any such operation. And George would be willing t fly coach, if Obama would ask him.

Next come new labor agreements. Perhaps the wage structure of Honda in Huntsville or Toyota in Tennessee could be duplicated. It would be painful because Detroit bennies would be emasculated, but we might sweeten the deal with profit sharing or stock grants. Also, whether offered in return for the pain, or simply as good management sense, labor should be given profit sharing and voice in management.

It goes without saying that we should eliminate dividends to shareholders until any loan is repaid. The owners must share with the taxpayers. That shouldn’t be too difficult. Ford and GM shares are already down to a buck or two and, while Chrysler is privately owned, investors who hired Bob Nardelli as CEO after he scammed $200 million from Home Depot while being shown the door, deserve what they get.

Government should underwrite research. This would produce benefits well beyond automobiles – energy, construction, transportation, education, electronics, e.g., improved cameras for paparazzi to capture Lindsay Lohan without underwear.

Something that should be done immediately – like next week – is to provide loan guarantees for buyers. Few people are willing to gamble that Ford will still be around in two years to fix an ailing tranny on their new Focus.

Flatley then turned to the other choice, Chapter 11 bankruptcy, noting that it is both good and bad. It would wipe out shareholders, and most of them are not at fault. Call it the luck of the draw. It might also be painful on suppliers who are owed. Call it the luck of free enterprise. It would place into the hands of a judge the authority to approve whatever painful steps thought necessary, and some judges are wise, some are not. But bankruptcy can work – and has – for airlines as well as paper mills.

He reminded those listeners who were still awake that bankruptcy would not be cost-free to them. Liquidation would mean that many of the costs, such as relief and unemployment compensation, would be loaded onto the taxpayers (Treasury obligations for under-funded retirement are already estimated at $23 billion.) How about loss of taxes from the pay of 3 million workers, plus the beer and NASCAR races with which they find solace?

In one way or another, sooner or later, the taxpayers will be in the thick of it. They should don whatever protective clothing they can obtain.

Rodney Quinn, who lives in Gorham, is a former Maine secretary of state. He can be reached at [email protected]


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