Reality TV: Detroit Auto CEOs' Return To Washington This Week

Having been chastised by members of Congress, as I wrote in this post, for using private jets to travel to Washington for last month's hearing at which the CEOs of GM, Ford and Chrysler came begging for public assistance, it appears all have learned their lesson.


Comically so.

Reports have Alan Mulally tooling his way across the Eastern US in a Ford hybrid. Hapless GM CEO Rick Wagoner is doing something similar in one (or more) of his company's newer models.

Chrysler's Bob Nardelli had not, as of yesterday, disclosed his travel mode, other than to assure one and all that it certainly would not be a private jet.

The Detroit Three's second Congressional appearance has now taken on the character of a very bad reality television program.

Next, we'll hear that Mulally's car breaks down, or can't be recharged en route. So he misses the meeting because of frequent gas stops to fill the car's small tank.

Or that GM's Wagoner, inept as always, manages to lose his way and winds up in West Virginia, instead of Washington, D.C. Even his OnStar navigation system will fail him, to the embarrassment of all concerned.

Then Chrysler will reveal that Nardelli, not to be outdone, actually hitchhiked his way to the Congressional hearings. Unbeknownst to him, Mulally will have picked up Nardelli on I-70, south of the Breezewood exit, thinking him to be a drifter in an old, beat up suit, carrying a battered nylon courier bag.

Once before the Congressional panel, the three CEOs will be unexpectedly interrogated regarding their choice of lodging on the trip.

When it is revealed that Wagoner chose a Radisson, angry murmurs will sweep through the gathered lawmakers.

Mulally's selection of a Hampton Inn will be more favorably received, but only because the chain offers a plentiful, self-serve buffet breakfast.

But the assembled Members will rise to cheer and applaud when Nardelli reveals his audacious gamble in setting out for the Capitol on foot, staying overnight in a youth hostel in the Pittsburgh area.

Far from being insulted with the ex-Home Depot CEO's grimy, soiled and unshaven appearance, several Democrats will laud him as having finally gotten 'in touch' with the real spirit of 'hard working Americans' everywhere.

On a more serious note, though, I read yesterday's Wall Street Journal's Marketplace section's lead article, which depicted Alan Mulally's mug beneath the title, "Ford Will Speed Green-Car Launches."

What we are now seeing, sadly, is a group of struggling, near-dead companies offering to engage in whatever product and business strategies a group of equally-inept businessmen and women- Congress- demand of them, in hopes of securing some $30-40B of taxpayer-financed loans which are unlikely to ever be repaid.

Nothing good comes of a situation in which publicly-owned, private corporations set aside their own business plans and strategies, and, instead, simply agree to do public bidding, outside of, perhaps, wartime production agreements.

In this case, Ford and GM are touting what they believe Congress wants to see- a sudden rush to produce and market 'green' cars. No matter that the infrastructure for most of these is still non-existent. Or that they don't actually make economic sense for consumers to buy, if they are priced to make a profit.

By the way, look, next, for Congress to demand fairly rigid, low profit margins on 'green' cars, the better to speed their adoption.

Won't that result in the Detroit-based auto makers jumping from the frying pan of current, unprofitable vehicle manufacture, into the fire of newly-introduced, equally-unprofitable 'green' cars demanded by the Feds?

Probably so.

Simply put, why would anyone think that cars which the public doesn't seem to want in sufficient volume to make them profitable, will suddenly be popular just because a few Democratic members of Congress think, in their infinite wisdom as seasoned business experts, that our nation needs 'green' cars.

In my opinion, whatever happens next to Mulally's Ford, Wagoner's GM and Nardelli's Chrysler is appropriate justice which they will richly deserve. By turning over product planning to Congress, which last was seen architecting the spectacular collapse of Fannie Mae and Freddie Mac, as well as many commercial banks whose mortgage lending practices followed Congressional directives, these CEOs are abdicating what little chance of survival their firms have to a bunch of short-sighted politicians.

In short, Ford, GM and Chrysler are about to make a Faustian bargain with the devil, Congress. By suddenly pushing largely-unwanted, unproven 'green' cars, in exchange for tens of billions of dollars of loans, they will merely become more and more inextricably dependent upon the public trough.

It reminds me of the folly of Walter Wriston and David Rockefeller, then CEOs of Citibank and Chase Manhattan Bank, in the late 1970s. At that time, in the wake of the first oil price shock and Arab embargo, these two bankers were lauded by the Federal government for their vaunted 'recycling' of billions of 'petrodollars' from the Gulf to various third-world countries in need of loans.

The problem was that Walter and David forgot to mark up the interest rates on the resulting flood of 'sovereign loans' to unstable, poor (a/k/a "developing") countries around the globe, and, particularly, in South America.

Thus, only a decade later, in the late 1980s, many of these sovereign loans became non-performing, forcing the largest US money center banks to write off several billion dollars of these loans.

The thanks that Citibank and Chase Manhattan shareholders received for Wriston's and Rockefeller's bad loan and pricing decisions was a sudden loss of value in their investments in the two banks.

So much for private enterprise doing the bidding of government, instead of looking out for their shareholders' welfare and interests.

What happened to the US banks in the late 1980s is probably going to be repeated in Detroit in the next few years. Don't be surprised when the three American-based auto makers end up either as wards of Washington, merged at gunpoint, or on permanent Federal life-support.