Use bailout money for new ventures, not old ones
Now is not the time for U.S. automakers to seek a bailout. Now is the time to show the world that they can compete and fight through innovation, much as Boeing has done in commercial aviation.
Special to The Times
FAILING companies are evidence of failed leadership. The solution lies not in investing more in old, failed ventures, but in using our American system of entrepreneurs, venture capitalists and angel investors to create new companies, and for old companies to show some resilience and pursue new things.
The proposed bailout of the Big Three auto companies is designed to save jobs in failing companies. We believe American workers, who have long been the most productive in the world, don't want to be wasted in nonproductive, unchallenging work. We believe they will flock to new ventures in green technologies such as solar, biofuels and wind; projects to rebuild our crumbling roads, bridges and airports; and investments in technologies that can help us reinvent the automobile.
We propose the taxpayers' bailout money be directed instead at venture-capital funds or angel-investor networks to provide startup capital to "intrapreneurs" inside existing companies and promising entrepreneurs outside of them. A disciplined process can monitor such investments. Our venture industry has a proven record of discovering, screening and investing in promising entrepreneurs, and following up with advisers, directors and management teams to create organizations that generate economic value.
Many of our companies are not failing. America has world-leading companies that include IBM, AT&T, Microsoft, Cisco, General Electric, Pratt &Whitney, Nabisco, McDonald's, Disney, Apple and Boeing. These companies each have a culture on how to do things, as well as intellectual property, brands and loyal customers. Such assets are not easily replaced — neither with time, nor organizational learning and experience.
Many of these companies have weathered near-misses in their history and provide learning for others about resiliency. A recent example is Boeing. In 2003, Boeing lost its 37-year run of industry leadership to Airbus. Boeing leadership responded with a game-changing, all-composite, fuel-efficient, long-range commercial airplane, the 787. Using innovative manufacturing techniques and new composites, Boeing is now fundamentally transforming the aerospace industry — as we like to say, they don't rivet planes together anymore, now they "bake" them. Robots and highly qualified workers in white coats use carbon fibers and epoxy resins to make the fuselage, which then is cured or baked in high temperature autoclaves or ovens.
Boeing has once again reinvented the architecture of the airplane, and in the process, reclaimed its industry leadership. Here Boeing is providing the example of what a 21st-century competitor ought to be: a solid global player that leverages an IT-enabled network of strategic partners, and a company inculcated with a risk-taking culture capable of sustained innovation.
Alan Mulally played a leading role in Boeing's initiative to reinvent the commercial airliner. Now he is CEO of Ford. Instead of asking taxpayers for a bailout, he should be pitching a plan for reinventing the propulsion architecture of the automobile.
Dividing up some grand sum of taxpayer money among the Big Three auto companies makes little sense. Each needs to rethink the fundamental architecture of the automobile and in the process provide a breakthrough product that challenges our very notions of what an automobile is, or should be.
Congress cannot do this; only transformative leaders who know the industry and their markets can. Now more than ever, we need to reaffirm our fundamental belief in the foundations of our economic system: a system based on a solid legal framework for an effective market-based economy; a system that is build on synergistic relations among government, private business and universities; a system that is envied around the world for its ability to allocate capital and foster entrepreneurship; and a system that is respected for its transparency underpinned by generally accepted accounting principles.
The Big Three still maintain a 40 percent U.S. market share. Now is not the time to seek a bailout. Now is the time to show the world that they can compete and fight through innovation using the economic advantages that have served this country so well.
We are looking to Alan Mulally to show that the Big Three can do what Boeing has done.
Richard Nolan and Suresh Kotha are professors in the University of Washington's Foster School of Business.
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