Articles and Blog Posts about Auto Industry Crisis/title> </head> <body> <h1> </h1> <h2>Memo to Congressional Oversight Panel, May 25, 2009</h2> <p> ---------- Forwarded message ----------<br /> From: <strong>Susan Helper</strong> <<a href="mailto:susan.helper@case.edu" target="_blank">susan.helper@case.edu</a>><br /> Date: Tue, May 26, 2009 at 1:42 AM <br /> Subject: Re: Request from the Congressional Oversight Panel <br /> To: "Rhinesmith, Alan (COP)" <<a href="mailto:Alan_Rhinesmith@cop.senate.gov" target="_blank">Alan_Rhinesmith@cop.senate.gov</a>><br /> Cc: "Syverud, Steven (COP)" <<a href="mailto:Steven_Syverud@cop.senate.gov" target="_blank">Steven_Syverud@cop.senate.gov</a>><br /> <br /> <br /> Mr. Rhinesmith and Mr. Syverud,<br /> <br /> Thanks for the opportunity to weigh in on this very important issue. <br /> <br /> Below are some brief recommendations, followed by some articles where I (and co-authors) elaborate more. I'm happy to talk more about this, or elaborate on this document. (I'll be travelling the rest of this week, so can be reached via email or cellphone (216 513 3518). I also provide some suggestions of others you might contact. (I've also attached the comments below as a Word document). <br /> <strong><u>Recommendations for future action regarding the auto industry</u></strong> <br /> <strong>Memo to Congressional Oversight Panel, May 25, 2009</strong> <br /> <strong>Susan Helper<a href="https://mail.google.com/a/case.edu/?ui=2&ik=175b752980&view=pt&search=inbox&th=1240cae12bc1661f#1240cae12bc1661f_1228f4767d14aa7d_12272a08959c9a6d_12261cf0a769f48e_1217b7165b5f7e04__ftn1" title="">[1]</a></strong><br /> <br /> I appreciate the hard work of the Auto Task Force. However, I feel that TARP money has been expended without a sufficiently broad analysis of the problems facing the industry. Below are some thoughts about what such analysis might show: <br /> 1. The key problem the industry faces is a price problem, not a cost problem. Understanding the reason why consumers are willing to pay $2000 more for comparably-equipped Japanese cars is the key to establishing a viable industry. <a href="http://www.brookings.edu/opinions/2009/0304_auto_industry_wial.aspx?rssid=wial" target="_blank">http://www.brookings.edu/opinions/2009/0304_auto_industry_wial.aspx?rssid=wial</a></p> <p>2. A good way to remedy this problem is by adopting the sort of tough-minded collaboration with suppliers and workers that Toyota and Honda have been practicing for years. (This point has been the subject of my academic research over 20 years; a representative source would be "Collaboration with and without trust", at <a href="http://wsomfaculty.cwru.edu/helper/publications.html" target="_blank">http://wsomfaculty.cwru.edu/helper/publications.html</a> ) </p> <p>3. The government has a greater incentive to create a viable industry that did the previous management because its horizons are longer and broader. That is, the government can and should act like a long-term investor, not a desperate bailer-outer. <a href="http://voices.washingtonpost.com/hearing/2009/05/now_an_owner_government_must_a.html" target="_blank">http://voices.washingtonpost.com/hearing/2009/05/now_an_owner_government_must_a.html</a></p> <p>4. The government can undertake this transformation of the industry without micromanaging it. Instead, it should set processes in motion that causes managers to generate their own action plans, for which they should be held accountable. For example, management should get together with suppliers and workers involved in the top 10 warranty problems, and generate action plans for how to fix them. <a href="http://www.tnr.com/politics/story.html?id=8c381173-66fe-4e60-9c44-6acee7350e1c" target="_blank">http://www.tnr.com/politics/story.html?id=8c381173-66fe-4e60-9c44-6acee7350e1c</a></p> <p>5. A goal of this transformation should be to keep a strong capability <br /> to design and build cars in the US. <a href="http://www.dissentmagazine.org/online.php?id=216" target="_blank">http://www.dissentmagazine.org/online.php?id=216</a><br /> <br /> 6. The above recommendations are built on years of combining field research in the industry with international comparisons and academic knowledge. My colleagues and I feel that the questions raised above (in particular, why is the price gap so large? and, what are the true costs and benefits of offshoring?) are eminently researchable. The answers to these questions aren't just nice to know--without these answers, government-appointed board members and TARP adminstrators can't act in the public's interest.</p> <p>We therefore feel that the Auto Task Force could very much benefit from drawing more on the community of scholars that studies the industry in this way. I'd particularly recommend in this regard my colleagues at the International Motor Vehicle Program ( <a href="http://www.imvpnet.org/" target="_blank">http://www.imvpnet.org/</a> ), John Paul MacDuffie (<a href="mailto:macduffie@wharton.upenn.edu" target="_blank">macduffie@wharton.upenn.edu</a>) and Glenn Mercer <<a href="mailto:mercer.glenn@gmail.com" target="_blank">mercer.glenn@gmail.com</a>>, and two other long-time colleagues, Dan Luria of the Michigan Manufacturing Technology Center (<a href="mailto:dluria@mmtc.org" target="_blank">dluria@mmtc.org</a>) and Kristin Dziczek of the Center for Automotive Research <<a href="mailto:kdziczek@cargroup.org" target="_blank">kdziczek@cargroup.org</a>>. We are developing a concrete proposal for research on these issues, which we'd be happy to discuss. </p> <p> <p><a name="1240cae12bc1661f_1228f4767d14aa7d_12272a" id="1240cae12bc1661f_1228f4767d14aa7d_12272a"></a><a href="https://mail.google.com/a/case.edu/?ui=2&ik=175b752980&view=pt&search=inbox&th=1240cae12bc1661f#1240cae12bc1661f_1228f4767d14aa7d_12272a08959c9a6d_12261cf0a769f48e_1217b7165b5f7e04__ftnref1" title="">[1] </a> Susan Helper is AT&T Professor of Economics, Weatherhead School of Management and Research Associate, National Bureau of Economic Research. Contact information: <a href="http://wsomfaculty.cwru.edu/helper/" target="_blank">http://wsomfaculty.cwru.edu/helper/</a> and <a href="mailto:susan.helper@case.edu" target="_blank">susan.helper@case.edu</a></p> <p>On Fri, May 22, 2009 at 3:45 PM, Rhinesmith, Alan (COP) <<a href="mailto:Alan_Rhinesmith@cop.senate.gov" target="_blank">Alan_Rhinesmith@cop.senate.gov</a>> wrote:</p> <p>Professor Helper, </p> <p>As you may know, the Congressional Oversight Panel is a special 5 member > panel created by Congress in the Emergency Economic Stabilization Act of 2008 to oversee the Troubled Assets Relief Program (TARP). It is chaired by Harvard Law Professor Elizabeth Warren. The panel has published 7 reports > and conducted several field hearings (see <a href="http://cop.senate.gov" target="_blank">cop.senate.gov</a>) but has not yet focused significant attention on the financial assistance being provided to the U.S. auto industry through the TARP.</p> <p>With Chrysler now in bankruptcy and a deadline looming for GM, we should be getting further clarity on the direction of Federal assistance soon. Over the next few months, the Panel may want to analyze the Treasury Department’s strategy to date for using TARP funds to assist this industry as well as what further financial commitments, if any, should be made to the U.S. auto industry going forward.</p> <p>We have read the recent policy paper that you and Howard Wial wrote for Brookings. We would be interested in your thoughts concerning the Federal Government’s strategy and the effectiveness of the use of TARP funds to date and prospectively in assisting the U.S. auto industry. If you could provide us with a short memo outlining your recommendations or send us additional published analyses you have previously written, that would be helpful. We would also ask you to recommend additional experts – particularly from the academic world – with whom we might consult on this topic.</p> <p>Thank you for your assistance.</p> <p>(I will be out next week but my colleague Steve Syverud is working with me on this issue and looks forward to your response as well.)</p> <p>Alan Rhinesmith<br /> Senior Policy Advisor<br /> Congressional Oversight Panel<br /> 732 North Capitol, Room C-617<br /> Washington, D.C. 20401<br /> 202-224-1650</p> <p> </p> </div> </body> </html>