Bankruptcy Could Help Fix Automakers' Problems President-elect Barack Obama wants to give U.S. automakers federal funds. Critics say funding without conditions would be like pouring gas into a broken-down clunker. Paul Ingrassia, a former Detroit bureau chief for The Wall Street Journal, says bankrupty might be a better option.
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Bankruptcy Could Help Fix Automakers' Problems

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Bankruptcy Could Help Fix Automakers' Problems

Bankruptcy Could Help Fix Automakers' Problems

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The drumbeat for more government aid to U.S. automakers is growing louder. This week, House Speaker Nancy Pelosi said aid is urgently needed. President-elect Obama also wants to give Detroit some money. Critics, however, say funding without conditions is like pouring gas into a broken-down clunker. Paul Ingrassia is the former Detroit bureau chief for The Wall Street Journal. Welcome.

Mr. PAUL INGRASSIA (Adjunct Faculty Member, The Journalism School, Columbia University; Former Detroit Bureau Chief, The Wall Street Journal): Good morning, Ari. How are you?

SHAPIRO: Good, thanks. Now, you wrote an opinion piece this week in The Wall Street Journal. You suggest kicking out the board and the management of all the car companies, appointing a government executive to run the companies. What's the justification for that?

Mr. INGRASSIA: Well, as far as the - all the car companies, I mean, I would give an overseer the chance to decide. If it was me, the one I would keep, frankly, would be Alan Mulally of Ford because I think he's actually doing the right things. But if you look at the management of General Motors, the management of General Motors has been in place since 1995. During that time the company's lost about a third of its market share in North America.

Bob Nardelli at Chrysler, I have no idea what his skills are as an executive, but I think he is uniquely unfit to lead a Big Three car company right now. And that's because Nardelli, a couple of years ago, got a $210 million severance package when he left Home Depot. Just the fact that he got that package makes him uniquely unqualified to call on others to sacrifice.

(Soundbite of laughter)

SHAPIRO: If Washington is going to throw out the top managers of these car companies, who do you think ought to replace them?

Mr. INGRASSIA: Well, I mean Larry Kellner at Continental Airlines has done a great job managing that airline. Now you might say, well, gee, he's not part of the car business. That's true. But sometimes when people are prisoners of their own experience, it really closes their mind to new and radical solutions which are clearly needed right now.

SHAPIRO: Something else you suggest in your op-ed is tearing up the existing contracts with the unions. Is that feasible, given that Democrats control Congress and the White House, and there are historically very strong ties between the unions and the Democrats?

Mr. INGRASSIA: Have you ever seen a copy of the UAW's national agreement with the car companies?

SHAPIRO: I have not.

Mr. INGRASSIA: It's more than an inch thick. You don't even have to read it to know that's just too many rules, regulations, stipulations etcetera. Proof of the pudding, by the way, is that there is a part of the U.S. auto industry that is thriving, and that is the factories opened in this country by overseas producers: Honda, Toyota, Mercedes, BMW etcetera.

SHAPIRO: How did the United Auto Worker union's contracts in Detroit compare to those, say, at Japanese plants in the South? Because my understanding is the salaries are comparable, no?

Mr. INGRASSIA: Well, the salaries are comparable. It's the work rules we're talking about. First of all, there's no contract because there's not a union. There's corporate governance involved, and all that. But the real difference is the work rules and a more flexible operating agreement in the factories that makes every major decision on the factory floor all the way up through management a negotiation.

SHAPIRO: Health care and pensions are good too?

Mr. INGRASSIA: Well, yeah, they are. They don't usually have plans that require no deductible and no co-pays. But the truth is, almost all Americans have deductibles and co-pays in their health care plans. You know, for the UAW to be defending that is a little out of date, frankly, especially when their companies are in this kind of situation.

SHAPIRO: New York Times columnist Tom Friedman endorsed your suggestions and added a couple of his own, and I wonder what you think of his suggestions. For example, any car company that gets taxpayer money, he says, should show that it will transform every vehicle in its fleet to a hybrid. What do you think?

Mr. INGRASSIA: Well, I think the problem with that is I think Congress will attach, quote, "strings," unquote, that are really sort of fig leaf strings. By that I mean limits on executive pay. Those are going to have to happen anyway. And the truth is hybrid and fuel-efficient cars are going to have to be built with or without regulations. I think the marketplace was forcing the companies to do that. So to require them to do that as part of a federal workout is where I would, you know, disagree with Mr. Friedman a little bit because that's something that's already going to have to happen anyway.

SHAPIRO: Paul Ingrassia won a Pulitzer Prize for his coverage of Detroit at The Wall Street Journal. Thank you very much.

Mr. INGRASSIA: You're welcome, Ari.

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