Crash Test
Dear Nancy Pelosi and Harry Reid,
You've been writing to me for months (years), now I'm writing to you....
Why are we bailing out the auto industry?
We have enough cars sitting in new car lots and used car lots across the country that nobody can buy. Why do we really need to waste all that steel, rubber, leather, emit greenhouse gases for a product nobody needs. What we need to do is figure out how to convert those cars to energy-efficient cars. We can change a heart, how come we don't know how to change an engine?
Yes, I know, that 600,000 jobs hang in the balance but wait, I have a solution. Why don't we convert all those plants to alternative energy sector plants, windmills, solar panels, solar batteries, bio-diesel, lithium batteries...put the UAW workers first in line for those jobs and turn that sector into a Union Shop. It's a win-win all around.
By the way, how come whenever there's a check, one of them gets the check. Remember John Snow, our Treasury Secretary, who engineered the Dubai Ports Deal on a no-bid basis to Dubai Ports, a company he owned a $25,000,000 stake in from his days as a private citizen? (No, that's not girl-economics, I didn't add a zero, by mistake). Well, John Snow's new company (now, that he's back in the private sector), Cerberus Capital Management bought an 80 % stake in Chrysler last year and purchased General Motors Financing Arm, GMAC - a concept I don't even understand except it's some version of "bundling" General Motors sub-prime debt which is part of what got us into all this trouble to begin with! And, now John Snow is trying to turn GMAC into a bank holding company so he can access Henry Paulson's bail-out funds. Well, I, for one, say "no". And, surprisingly, so do a lot of people in Michigan who think they need to come up with a real plan for a hybrid before they come to us with their hand out.
And, so does Ted Turner, quite slyly and eloquently on Lou Dobbs' show yesterday (after which he roundly scolded Dobbs for his immigration stance). General Motors is losing 1.35 billion dollars a month. They don't have a business plan that supports a bail-out. They don't even know how to make a hybrid. They have a hybrid but I think it's hand-made and whereas I'm all for being old-fashioned, this is ridiculous. You know how many were available in August? One.
We have an amazing opportunity here for a New Deal - so I'm humbly asking. Please, Nancy, Harry, and Barney (Frank), take a minute - deliberate, get some expert advice, don't just put your finger in the dyke, they'll only be back again next month, we have a chance here for real change and a way to take the country in a new forward thinking direction. Please stop talking about halting Golden Parachutes (when John Snow's standing under a windfall) and start talking about NEW jobs, CLEAN air, health benefits, fuel-efficient cars and houses, and while I'm at it, a reduction in the interest rate those people who bought the cars from GM are paying. Really, it's an opportunity for a win-win all around.
Sincerely,
Amy Ephron
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One of the major reasons the Big 3 are having $$ problems is the lack of a government health plan. Japan has such a plan, which means Japanese automakers are not saddled with that huge expense. The playing field is not level for the Big 3 against Japanese automakers.
As a Michigan native in the middle of UAW Land, I am delighted by Amy's idea. Great minds seem to think alike; I was equally pleased to read Thomas Friedman's thoughts along similar lines in Today's NY Times. (http://www.nytimes.com/2008/11/12/opinion/12friedman.html?_r=1&oref=slogin).
I am not connected in any way to the auto industry, but it I feel that it's necessary to stress how very important it is to the economic well-being of this already distressed state. Simply allowing the Big Three to crumble would be disastrous and have an impact on our economic infrastructure far beyond those directly effected. On the other hand, there is nothing to be gained by the rest of the country by bailing out the Big Three with no strings attached, and allowing them to continue their pattern of refusing to create greener machines while hiding behind lobbyists and Michigan's delegates to Washington.
The beauty of Amy's proposal is that it saves (and possibly creates) Michigan jobs, and forces the Big Three to retool and change direction as they should have long ago. It is somewhat heretical for me to espouse any position other than "bail out the Big Three," but America's taxpayers should not be asked to fix this colossal problem with no requirement for change and accountability from those who created and benefited from it for decades.
The Big Three don't refuse to make green cars, they will always make what the public wants and until very recently, they wanted big SUV's and gas guzzlers. Since oil prices were manipulated out of sight by the speculators, demand has dropped. Still, sales of even the economy cars that the Big Three do in fact produce are down due to the bad economy.
However, I'm not blindly in favor of a bailout without strings. As for the use of idled factories for the purpose of making green stuff, it's probably not realistic.
The big 3 concentrated on SUVs because they made a greater profit selling a $25,000 that cost $5000 to manufacture than they did selling a $10,000 economy car that cost $5,000 to manufacture.
Don't kid yourself that "what the public wants" has anything at all to do with what the Detroit auto manufacturers build.
On the plight of the auto industry, this is where UK manufacturers found themselves in the 1970s - with stockpiles of unsold cars. There are no such stockpiles now, because most of those companies have vanished. This is also where mass production can lead, particularly if everything is naively predicated on growth in a changing/diminishing market. It doesn't have to be like this - over in Germany, BMW make their cars to order. Having said that, even they are experiencing a slowdown, and trimming their operations back over the upcoming holiday season.
On alternative uses for the facilities and the workforce, yes - that's a very good idea. Add to the list vertical-axis wind turbines (VAWTs), which are more compact than horizontal units and don't need energy to keep them facing into the wind. They operate in all wind directions, and at low wind speeds.
One problem, of course, is that the small manufacturers of alternative energy machinery would want a decent stake in the business.
Another problem is that while some of us keep talking about alternative energy, there's the question of what you do with the energy once you've generated it. OK, homes could be kept powered-up, but green energy is only of value to industry if there's still some go-ahead industry to use it.
Because "we" don't have a clue how to run a business, that's why. "We" are unqualified to pick winners and losers in the market, and "we" don't have authority to use tax money to gamble on investments.
Democrats should lay down the following condition : that the manufacturers and business
roundtable back national universal healthcare for all American citizens. Then businesses can
compete. Its bad enough Detroit automakers fight higher cafe standards but now they want us
to bail them out. No. Either they back national healthcare or they go the way of the buggy whip.
Business and government should make no bargains with each other. That is not freedom, that is tyranny.
i as a taxpayer refuse to support an industry that pays 73$/hour average labor where as their competitors pay half that.
GM/F are walking dead. i refuse to bailout zombie entites.
Amen brother.
Agreed. Go into bankruptcy and renegotiate to current conditions. robots do all the work, everytime i see an auto plant on tv, all i see is someone guiding the arm. Thats a $10 an hour job. none of my money for these overpaid doofs.
Who pays for the transition? You can't "just retool" an assembly line to make it produce something else... that's a massive investment. The big three are working on hybrids, and alternative energy vehicles, but they'll never reach production if the companies run out of cash.
The problem is, those unsold cars are money-- they cost tens of thousands each to produce, and the auto companies can't get the money back until a dealer buys a car.
It's a cash flow problem, without much in the way of good solutions-- but a very bad solution would be to let them fold, as that's likely to create several million lost jobs (I think I heard 2.5 million people if GM collapses, and similarly large numbers for Ford and Chrysler).
Thats bunk. The jobs will move to Toyota or Honda or some other company. what will go away are way overpaid union employees that guide robot arms around. Do you realize that even if the auto company wanted to lay off people during a slow period, they still have to pay them? Thats why they keep making cars even when they dont need to. They need to go to a system where we order cars and they are made on an as ordered basis. Its called just in time delivery.
What about the guys making starters? Batteries? Switches? Windshields?
Roughly 10% of the nation's jobs are closely tied to the auto industry. You want to see unemployment go from 6.5% to over 15%? Seriously?
Last time I checked even Toyota and Honda sales were down. The problem isn't American auto manufacturers, it's piss poor economic policy of the Bush admin. It takes approximately 2+ years for auto companies to retool for a new product. But even if the hybrids were being built, sales would still be down due to the recession and money supply. And autoworkers are NOT overpaid but CEO's and upper management staff are. I worked in the industry for 34 years and dude, you don't have a clue.
I don't think your numbers are right. The numbers I hear (who knows if they are right) are about 2-2.5 million jobs.
It isn't just the line workers that would be out of work if one of them falls. It is the parts manufacturer, the salesperson at the dealership, even the mom and pop stores in the towns where the workers live (that often do not have other employers to absorb laid off workers). All of those would be out of luck with your proposal.
It would be great to see a huge infusion in alternative energy related manufacturing. But I don't think building a wind turbine requires the same number of job producing components that a car does. You are talking about thousands (maybe tens of thousands) of complex integrated parts in a vehicle- each one that has to be built by some line worker somewhere else. You'd have a tiny fraction of that with a solar cell.
This is not to say that I disagree with the idea of committing to a massive scale production of green manufacturing- but the idea of "swapping" one of the big three for that would probably still add about 1 million high paying manufacturing jobs to the unemployment line and cripple some of the hardest hit car making towns.
The 2.5 million job figure is a red herring. GM wouldn't go out of business, they would just declare bankruptcy and restructure (downsize big time). They would be smaller, but not out of business.
"They don't have a business plan that supports a bail-out."
The auto industry already got a $25 billion govt back loan bill some months ago.
They want more. Why not? It is in there fiduciary interest to see if they can get on the bailout gravy train, if they "need" it or not. Of course they "need" it. The executives would be fired if they didn't take a shot. Paulson clearly stated, previously, that all sorts of sectors might get a piece of the pie.
The "freeze" in credit and the uncertainties in the markets is much to do with the uncertainties expressed by Paulson, Bush and Congress. Business is waiting to make their business plans on the basis of whether they get bailout money or not, and what the toxic paper will be evaluated at in Paulson's auction process, since that will tell them the value of the paper they hold.
Business has to slow down and wait because it is executives' fiduciary duty to see how this ends up for them--and Bush and Paulson have done nothing firm. How about Paulson lending out the money no strings attached, then Bush impotently pounding "The banks must lend, NOW!" LOL.
My understanding is that they got a promise of $25 billion... but have yet to receive it.
Amy, I agree. I'd like to add the following. (I already sent my idea to Jim Jubak at MSN and Dylan Ratigan at Fast Money . . .In addition to your above proposals, consider this. Boeing has a long backlog of orders. The company has little competition in the way of France and China. Use the auto industry facilities and workers for Boeing. Use America's natural resources for production, ie steel, aluminum, natural gas, etc. Ford already has an inside guy (ex-Boeing exec). Supporting the airplane/defense industry in our country also supports smaller American companies like Precision Castparts and BE Aerospace--and many other companies down the foodchain. Produce more trucks and cars that run on LNG, an abundant resource. We are then supporting American workers, American companies, American defense. Thanks for your great article.
Great post. Could you run for Congress, please, Amy?
Exactly! The engineers, the skilled workers, the infrastructure are all in place. They need help bridging the gap. The government should provide funding through incentives, research grants, tax abatements, empowerment zones, and as many creative ways as possible to speed the transfer of the focus to alternative energy and mass transit. Subsidize development of the new technologies, and the jobs will follow.
Doesn't it make more sense to spend taxpayer dollars saving American jobs than it does bailing out high flying brokerage houses?
No. The financial system undergirds everything. Playing business-man is not something the government is qualified (or authorized by the constitution) to do.
Amy,
First thing first. Ford has several hybrid vehicles Escape, Focus to name a few. GM has Cadillac Escalade SUV, Saturn Aura Sedan, Chevy Malibu Sedan, Chevy Tahoe SUV etc.. Also, it's not just 600,000 jobs try 3 million plus. Plants almost in every state even California. This affects every supplier, local shops and ad agencies - madison avenue. Not to mention this affects the overseas plants, suppliers and agencies as well. So, while everyone including Tom Friedman (whom I generally agree with) makes it sound simple it's not. Money should not be given to them without huge government oversight and accountability. But we have to stop the bleeding now..
No we don't.
Thank you Finnegan. The correct number of job losses would be close to 3 million plus. It's not just GM that would fail. As a metro Detroit resident, I can tell you the nearly every job in the area is related to the auto industry. You do not have to be directly employed by the big three to be affected here. A failure of any of the "Big Three" would be catastrophic for millions of people in an already struggling area.
Amy, I agree with everything you say, but this makes too much sense, so I'm sure they won't pick up on it. They will just keep building all the gas-guzzlers they can push out on to the dealers. What they need to do is give some of the money to those industries that are already doing this kind of production. Make some of this money available to the working men and women to buy geo-thermal heat pumps for their homes and solar and wind products for their homes to cut down on energy consumption from the commercial sources. Thanks for such a good article.
Yes, We Did, O
Yea, I agree with you but unfortunately I see two small problems. How fast could this kind of plan be put in place?
And second it makes far too much sense so some big dogs will have to put the kibasch on it since they won’t get enough of a bonus.
If there was money in it, it would have already been done.
While I agree in part, I think the only way for there to be money in it is if the government gets involved with attractive tax incentives for both manufactures as well as consumers.
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