Michael Porter (Harvard Business School) is famous for his work on strategies designed to improve business competitiveness. His recent article in Business Week provides a tremendous overview of the issues that need to be addressed if our nation is to achieve the level of competitiveness that was true in our past and has been declining in recent years without any evidence that the current trend will cease.
Since he is focusing on strategies, he is advocating less for a specific set of responses as much as a serious, public dialogue about the issues in order for us to prepare for long-term goals. While concurring with the need to address our current crisis, he emphasizes that nothing done to address the crisis will prepare us for the long-term.
Rather than rehashing his arguments, I share my enthusiasm for promoting such a conversation.
I have been intrigued with the plight of the automobile industry. While it is clear that the leaders in Detroit have lacked foresight by developing products useless for today's needs, I am not sure that benefit would be gained by the current discussion of infusing more federal monies into the industry. I (with others) cannot see how more money will help the industry. I cannot think of how the current set of parameters in the industry, e.g., unions, benefits, retirement obligations, and questionable expertise, will allow the US car manufacturers to make products that will be profitable. In short, I think that we have to let the entire industry fall in order to allow others to take over, even if it means that (1) US will have to pay for the obligations incurred by the industry, e.g., retirement pensions, and (2) the manufacturing plants are taken over by "foreign" manufacturers who know how to produce products that will be profitable and energy efficient.
The implication in my conclusion is that I have established in my head a series of strategies that need to be employed, e.g., we need some sort of universal health insurance so that our products will not include such costs, private pension plans have to avoided while requiring employees to invest in 401 Ks, high fuel mileage will be rewarded by some sort of tax credit system to offset costs of new technology.
His article is breathtaking in its implications.
P.S. Tom Friedman wrote a scathing column on GM today that came to a similar conclusion, albeit in a different form. He is recommending that any bailout comes with the stipulations that the board of directors be replaced a receiver capable of addressing the requirements of innovation, tear up all existing contracts (including those with the union), and declare all existing shares worthless.
P.S. David Brooks today (14 Nov) addressed quite well the plight of the auto industry and focused appropriately on the need to let the American auto industry, as we have known it, die. Be assured that autos will be built by someone who is capable to making a profit with cars wanted by the public.
P.S. Here I am on 22 November writing that the strong opinion stated above is being roundly refuted by so many as irresponsible, given the general economic picture. Maybe if the auto makers in Detroit were in the same situation in a generally strong economy, letting the corporations go bankrupt would make sense. But, in such a dire situation as we face, it was would be disastrous.
I can understand why it is necessary to secure the industry, but I hope that they come up with a plan that makes some sense. Everyone agrees that the projections are that the $25 billion will be gone in the spring. What next?
P.S. Now on 23 November, there is a great article advocating bankruptcy as the best option of the car industry. Bailouts for the steel industry did not work. Only when they went under did they really restructure and become profitable.
This is truly complicated!
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