Normally I enjoy reading Seth Godin's blog but not "What to do about Detroit" - Part 1

In case you aren't familiar with Seth Godin (bio, blog, books), here's a quick intro: Seth is a writer, marketer and entrepreneur. You might have heard of Squidoo - that's him.

Right before Thanksgiving, Seth wrote a blog entry titled, What to do about Detroit in which he makes an interesting proposition and,if acted upon, theorizes about some pretty fantastic results:

"Not only should Congress encourage/facilitate the organized bankruptcy of the Big Three, but it should also make it easy for them to be replaced by 500 new car companies.

Or perhaps a thousand."

Very creative - I love creative people who think differently. He later talks about the costs of doing such a thing:

"I'd spend a billion dollars to make the creation of a car company turnkey. Make it easy to get all the safety and regulatory approvals... as easy to start a car company as it is to start a web company. Use the bankruptcy to wipe out the hated, legacy marketing portion of the industry: the dealers.

There'd be an orgy of innovation, and from that, a whole new energy and approach would evolve."

So the suggestion is to have lots of smaller companies making cars that are turnkey - LOVE IT! And logically, if there are more companies, there would be this immense flood of innovation - LOVE IT! I think it's brilliant. 

But I don't think it's plausible.

What Would It Cost to Build a Car Company?

Seth wants to make it, "as easy to start a car company as it is to start a web company." Yesterday, Paul Graham posted an article titled Could VC Be a Casualty of the Recession? Pretty fantastic title but the "meat" of the essay is that, "The reason startups no longer depend so much on VCs is one that everyone in the startup business knows by now: it has gotten much cheaper to start a startup." Paul is primarily talking about web startups just as Seth is. Paul talks about how a measly $15,000 is all it takes for some to start a startup that is earning $3000/month in just a few months. So what would it take for a car company?

Look no further than Tesla Motors. Tesla Motors, in case you don't know, is the maker of sexy electric cars. How sexy? Here, here, and here. To date, Tesla has raised $186 million from investors. They aren't profitable and the recession has hurt them as well (laid off 18% of its 384 employees in October). Beautiful cars, right? Just one problem: They've only been able to produce 60 of them so far. Oh sure, they've pre-sold more than 1200 but there is a teensy-weensy problem with production: it's hard to build cars and it takes a lot of time.

Fisker Automotive is another example of an American automotive startup. Fisker makes arguably an even sexier car, the Karma (here, here, and here). I'm not sure how much they raised but their latest round - their Series C round - was for $65 million. They've probably raised more than $85 million, I guess. And here's the kicker: their cars won't be in the marketplace until December, 2009.

In Part 2, I'll explain why I also disagree that having more car companies may not lead to all of this glorious innovation Seth hopes it will...