Speaking on CBS's 60 minutes president-elect Barack Obama gave a clear indication of the scale of the problem he faces in trying to save the US auto industry and his dilemma must be awfully familiar to anyone in the UK who experienced the evaporation of the British-owned volume car business in the 1970s and 80s. All the three major US carmakers, General Motors (the biggest), Ford and Chrysler are effectively bust for two reasons: they're making the wrong kind of cars (gas guzzlers) and at the moment nobody is buying cars of any description. Some would say there's a third reason, the generous pensions and healthcare benefits they provide in a country that usually does nothing of the sort. So what does Obama think? The industry, he thinks, needs "a bridge loan to somewhere as opposed to a bridge loan to nowhere" and he wonders aloud "what a sustainable US auto industry would look like." The answer, of course, is a hell of a lot smaller, certainly in terms of the number of workers employed. So it doesn't look like Obama is going to write the sort of blank cheque the industry and the United Auto Workers Union wants. This is precisely what the Labour government tried to do in the UK in the 70s, leading to the formation and subsequent collapse of British Leyland. The bit that survived, Rover, also went to its doom under Tony Blair's administration when the Government foolishly underwrote a bid by a group of Midlands businessmen who succeeded only in enriching themselves. Of course the outgoing Republican administration may make life easier for Obama by agreeing some kind of deal before he takes office (GM says it might run out of money by the end of the year). It's already discussing a $25bn loan. Vauxhall (owned by GM) is a big employer in the UK with about 5,000 jobs and Ford is bigger, with 13,000. So Obama's musings are of some interest here too. But the US badly needs to shape an auto industry which is small enough to have the chance to get bigger rather than follow the British model and fashion one that suffers a death by a thousand cuts. It's Obama's first and biggest domestic challenge.