Too Big to Fail

It's the byword for bail-out economics.

It's the tag that separates the truly indispensable cornerstones of the American money-making machine from those mere bricks (Circuit City, for example) for which bankruptcy or outright closure is acceptable collateral damage.

It's the magic incantation Washington pols and other Wall Street watchers intone when describing a company that, while it might not deserve a rescue from its current financial woes, is nonetheless sure to get bail-out cash because of its sheer size and the potential havoc its demise could wreck on the larger financial system.

If the pols are right, and these companies — automakers and banks, so far (inexplicably, pleas from within the pornography industry have gone unheeded) — cannot be sacrificed, no matter how ineptly they've been managed or how unlikely is there eventual recovery, then a solution is needed that goes far beyond the mere infusion of billions.

Clearly, these companies need to be smaller. They need to be broken up, like the government did with Standard Oil back in the trust-busting days and with Ma Bell in the 1980s. (This actually would be relatively easy for GM, which is simply a collection of previously separate car companies. Chevrolet, Oldmobile, Buick all were once independent and, at least theoretically, could be again.) And if troubled banks and car companies earned their bail-out funds not only by refusing big bonuses to inept execs but also by breaking up into leaner, meaner organizations, what might happen?

First off, of course, they'd once again be small enough to prevent their holding the world hostage. But they also would be small enough to change course, innovate and to hire entrepreneurs instead of executives. You know, those folks who are less interested in corporate jets than they are in the process of creating something new, better and of greater value. Those who do not work for the bonus and carefully calculated sale of corporate stock but instead live to delight customers with a better-than-expected product.

I believe this would work because it almost did, back in the early 1990s. GM, desperate even then to compete with the Japanese in the subcompact car category, authorized what was for them a radical experiment: They plunked down $5 billion (a drop in the bucket compared to the sums we're talking about today for rescues) and created a completely new division, hiring forward-thinking managers, designers, engineers and marketeers, sending them far away from Detroit to Tennessee, and giving them the go ahead to take a "clean sheet" approach to small car design. There, Saturn was born. And the cars it created were, for their time, both revolutionary and revelatory: gas-thrifty overhead cam engines (31 mpg on the highway, then among the best), sleek styling, great handling, mid-size interiors on subcompact frames, and high-tech engineered plastic fenders and door panels that would not dent.

I know because I bought one. I still drive it. My 1992 Saturn SL has 262,000 miles on it. Last time it was in for engine service, the mechanics told me I still had 30,000-40,000 miles of life in the powerplant. I have no dings in my doors. The seats are still in one piece. The paint is still good and still shines even though I've never waxed it — not even once. And I see dozens of SLs, SL1s and SL2s still on the road, still looking good and still running well, while many models from other makers are few and far between, dented on both sides, paint flaking off and faded, blowing smoke and collecting pollution tickets for their hapless owners.

Sadly, Saturn today is, just 17 years after it built my car, a ghost of its former self. GM never permitted Saturn to continuously improve the design. Last time I was in a Saturn showroom, in 2008, a tinier, less roomy hatchback stood in the SL's old spot on the showroom floor. I tapped on the car's door panel. Not that reassuring thunk of an undingable engineered plastic but the thin tink of metal. What? I said. The hovering salesman's face went red. Saturn had, he admitted, quietly abandoned its plastic side panels for thin, easily dented aluminum panels on a body made not in Tennessee but outsourced from an outfit in Europe.

One thing went wrong with Saturn: It remained part of GM. It was there for GM to cannibalize, it's coffers were still available for GM corporate execs to raid when they needed to quote better quarterly figures to greedy stockholders who cared not one fig whether GM made cars or canned canapes and couldn't care less about the people who paid the light bill, Saturn's customers.

Had Saturn been able to step out of GM's shadow, operate independently and continue to innovate and experiment, what might have happened? We'll never know. And it's not likely I'll ever want to buy another Saturn.

That's OK. GM, Ford and Chrysler can have their bail outs. I've got my eyes on a Toyota Prius unless Toyota comes out with something better. And it no doubt will. Toyota invented continuous improvement. Like GM, Chrysler and Ford, they got big, but they didn't forget, in the process, how to think like a small company.

Too Big to Fail? That phrase needs to go out the window with another favorite of mine, Buy American.

I'll buy a car from and deposit my money with any outfit I please, thank you very much. And in either case, it won't be a company that can't think beyond it's next quarterly report.