Saving Detroit - from itself

CONGRESS IS poised to enact a massive taxpayer bailout of GM, Chrysler, and Ford. Congressman Barney Frank is charged with crafting the emergency legislation. Our leaders apparently believe they have only two bad choices: do nothing and let the domestic automobile industry die, or postpone the inevitable by throwing good money after bad.

There is a third option: a government takeover of these companies with a mandate to make the green cars of the future. Only the creation of a government corporation with the power to take these companies over, shake up their management, unshackle them from their pension and healthcare liabilities, renegotiate union contracts, and give them a clear mission to produce the ultra-efficient, green cars of the future will save the American automobile industry.

I have seen firsthand the "can't do" attitude of these companies' leaders in a series of lawsuits GM and Chrysler filed against state greenhouse gas laws. Last year, the first of these cases went to trial in Vermont. I and others on the legal defense team were stunned by the pessimism of Detroit's leading executives and engineers. Even as the evidence of numerous breakthrough automobile technologies piled up in the courtroom and the price of gasoline spiked outside it, GM and Chrysler's executives contended, with straight faces, that they would go out of business if they could no longer rely on gas guzzlers for their profits.

GM and Chrysler lost the Vermont trial. A federal judge in California also rejected a parallel lawsuit they filed there. Undaunted, GM and Chrysler have appealed and are pressing another case against Rhode Island's greenhouse gas law. These lawsuits demonstrate not only bad corporate citizenship but Detroit's utter and continuing blindness to the own companies' best interests.

Detroit is woefully behind the times. While the European Union will achieve fuel economy of 49 miles per gallon by 2012 and Japan 47 miles per gallon by 2015, GM, Chrysler, and Ford say they need $25 billion in loans in order to reach the modest goal of 35 miles per gallon by 2020 now required by US law. And they want another $25 billion or more just to stay in business.

The government should not provide taxpayer money to companies whose leaders remain hostile to the massive fuel economy improvements and greenhouse gas emissions reductions that are vital to our energy and environmental security. Detroit is going broke because of a consistent history of bad decisions, bad management, and bad attitude. The only way to change that culture is to fire the management.

Letting these companies die also should be off the table. They employ more than 200,000 people. These workers, their company towns, the dealerships nationwide, and millions of other workers reliant on the automobile industry would face economic catastrophe if the companies fail. Taxpayers would likely pick up the costs of pensions and other liabilities. The social costs would be enormous.

If taxpayers spend billions on a company like GM, which currently has a market value of $1.8 billion, we should have ownership. Congress should create a government corporation, charge it with buying a controlling stake in struggling, domestic automobile manufacturers, and give it a clear mission to shake up these companies and produce the clean, green cars of the future.

A government-run automobile company could draw on the best minds and innovations in the country. Small companies that already have developed breakthrough technologies but lack the money to mass produce their vehicles could be brought into the enterprise. Broad legal authority could be granted to renegotiate union contracts. America could get out of the back seat on fuel economy and take a leadership role in producing the green cars of the future. And eventually, the government could sell off its stake piece by piece.

There is precedent for successful government corporations. Volkswagen was wholly government-owned for over a decade and even now remains partially government-owned. For over 70 years the Tennessee Valley Authority has met President Franklin Roosevelt's call for "a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise."

The challenges America now faces are comparable to those we faced in the Great Depression. And they call for similarly far-reaching and visionary measures. The taxpayers should rescue the domestic automobile industry from itself.

Matthew F. Pawa, a lawyer in Newton, is an adjunct professor at Boston College Law School.