A Radical Fix for General Motors

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Commit to a fleet average of 40 mpg by 2015 and 50 mpg by 2020, competitive with European standards, with a mix of hybrids, electric cars, lighter vehicles, and efficiency improvements.

7. Re-charter the dealer network for these three brands with fewer, healthier dealers.

8. Establish a viable capital structure enabling this company to operate with sound cash balances and a reasonable debt-to-equity structure.

Federal Auto Czar

The second company would retain the remaining brands, employee agreements, factories, and dealers. Management would proceed to liquidate the company, on terms that reasonably protect employee rights, dealer rights, and creditor rights, comparable to what a bankruptcy court might offer. When this process exceeds GM's residual balance sheet, the federal government would fund the balance on a one-time basis.

Who could pull off this radical plan? For starters, the President should appoint an "auto czar" operating under the President's Economic Recovery Advisory Board. My candidates are former Massachusetts Governor Mitt Romney and Louis Gerstner, who turned around IBM (IBM). For CEO of the first company, I would propose Carlos Ghosn, CEO of Renault (RENA.PA), one of the world's most successful automobile executives, with Wagoner and his team managing the second company.

Such radical surgery would be difficult and expensive in the short term, but it is the only way to make American automobiles competitive for the future. Creating a viable company is a far better solution than letting GM go bankrupt, or facing the slow death of going on "life support" from American taxpayers.

Business Exchange related topics:
General Motors
U.S. Automakers
U.S. Competitiveness
Bailout

Bill George, professor of management practice at Harvard Business School, is the author of two best-selling books, True North and Authentic Leadership. The former chairman and chief executive of Medtronic, he serves on the boards of ExxonMobil, Goldman Sachs, and Novartis.