HERE'S WHAT WE DO WITH DETROIT ...

If we're going to bailout the Big Three automakers - and I think we should - here's what we should do.

1. Don't allow the EXECUTIVES currently in charge to draft a proposal on what they're going to do. They don't deserve a second chance to make a bigger mess of things.

2. Strip the OWNERS of their "investment." They either allowed this mess to occur, or bought into it along the way. Why reward their lack of foresight? And besides, put together the Big Three are only worth about $10 billion because of collapsed stock prices. If we're going to put in $25 billion into this industry, I say we own them.

3. Immediately invite a star like STEVE JOBS to take over the companies, and give him/them a sweetheart deal in 3-5 years if their making progress. Give these guys 3-5 years and something like a $50 billion line of credit/bridge loan to make things work. People like Jobs know how to run a business (Can you imagine the first "i Car" line?).

So, you're probably asking why do we bailout these companies? Well, we don't. What we're doing is what Mitt Romney suggested a few days ago: a managed bankruptcy.


This means forcing the current executives out, telling the shareholders and bondholders "you lost your investment" (so you get nothing for making a stupid investment), renegotiating union contracts (everyone gets a stinger in this one), and investing billions more in "Green Auto" technology. Oh, and the industry has to pay us back and keep a lid on executive salaries for the next 5-7 years.

Here's how we structure executive pay.

What we say is that no auto executive below the superstar(s) gets a salary that goes above Toyota's or Honda's average executive pay - until we start outselling them. Here's why ... Just last year top U.S. auto executives were paying themselves between $12-20 million each. In 2006 Toyota's top 37 executives earned $21.6 million, combined! Honda's top 21 executives earned a relatively paltry $11.1 million. I think you see part of the problem here. Oh, and did I mention that U.S. auto executives received their big payouts despite losses and layoffs?

As for the UAW and labor, they need to make concessions - and make some demands too. Unfortunately absenteeism in the auto industry has been running about 3 times higher as other industries. This has to change.

But this doesn't mean that the auto industry gets what it wants vis-a-vis labor simply by saying "Look at what the Asians pay their autoworkers ..." or "Look at what Japan's paying U.S. auto workers in this country ... it's about $10 dollars an hour less." The issues aren't that simple.

For example, Japanese firms operating in the U.S. pay regular bonuses (up to $8,000 per year) to their U.S. workforce. This helps keep employees happy, and unions at bay. They do this because they want to stay competitive with unions, not out of the goodness of their heart. This crisis can't be used as an excuse to bust up unions.

As well, by pointing us towards autoworker pay in Asia the U.S. auto industry is conveniently ignoring how Germany has been producing high quality cars at a profit while paying higher wages than the U.S. What separates the U.S. and German automakers? A long history of quality, image, and marketing (How does "style become substance"? Who signed off on that crappy ad campaign?).

There's more ... much more. But the point is, a managed bankruptcy that provides new leadership and money, while imposing costs on dumb investors, poor executive performance, and poorly incentivized labor contracts could go a long way in keeping millions of "down stream" workers employed, while staving off what could turn into a full blown depression in our current market environment.

- Mark