DETROIT -- As of this morning, it appears that the Bush administration and Republicans in Congress are perfectly prepared to let General Motors go into bankruptcy, and that President-elect Obama and the Democrats in Congress are trying to simultaneously reform and rescue GM. Since the auto industry has been, after Big Oil, the most faithful business handmaiden of the Republican Party, you might find this a mite peculiar. And since House Speaker Nancy Pelosi comes from the metropolitan area with probably the lowest percentage of Detroit-made vehicles of any in the country, it seems stranger still.
Let's be clear: The management of GM doesn't deserve to be bailed out, and it's not clear to me that a bailout would work -- certainly not as long as the company continues its "change as slowly as possible" pace. Tom Friedman
put it caustically last week when he mocked the idea that a corporation should require federal assistance to "innovate":
I could not help but shout back at the TV screen: "We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?" If we give you another $25 billion, will you also do accounting?
But let's be clear about something else: GM's stock value last week was down to $1.5 billion not because it doesn't have factories and business relationships worth vastly more than that on the open market. It's because it also carries very large pension and healthcare obligations that, should the company go bankrupt, would actually fall on the rest of us.
So the choice facing the federal government is not whether to spend billions on a bailout. It's whether to bail out the company now, in the hope of rescuing it, or to bail out the medical, pension, and unemployment costs of GM retirees, workers, and suppliers after a bankruptcy.
And the media are back to their old tricks. You could read dozens of mainstream media articles quoting Republican Senators such as Richard Shelby on
the evils of subsidizing GM without ever once being reminded that Shelby and many of the other Republicans ganging up against a bailout come from states that don't have GM, Ford, or Chrysler plants but do have German or Japanese transplants that would benefit greatly if GM went under.
A major goal of the Bush administration in pushing GM into bankruptcy is to get at the union contracts that provide middle-class wages in states like Michigan, Wisconsin, and Delaware. Breaking these contracts in a bankruptcy court, the Right reasons, would be another blow at the idea that workers ought to have living standards similar to those of managers -- what Barack Obama infamously called "spreading the wealth."
GOP blogs make it clear that this is all about the United Auto Workers -- and who cares what it does to our economy.
But you'd never know that from the media.
Read More:
Should the Government Bail Out the Big U.S. Three Automakers? HuffPost Bloggers Weigh In
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its a tough remedy but the Republicans let the workers down again.
If we can find $700 B for companies that push paper and $10 B/month for Iraq, we certainly can afford $25 Billion to help companies that build real products.
4.5 million Americans out of work if they go down. 4,500,000 X $60,000= $270,000,000,000 hit on the economy (thats 270 BILLION). Do we need to add in all of the restaurants, stores, malls, etc... for some of you to get the point? The $60,000 number is low, but the end number is still huge. Everything starts to fall after that...
Am I happy about any of this, heck no! But, I'll surely bail out 4.5 million American autoworkers before I pay for another Wall Streeters bonus or extravagant retreat.
The bailout of Detroit doesn't any fix the problem. It simply buys another 6 to 18 months, after which the money will be gone at we will be right back in the same situation. Either another bailout, followed by another and another and another in perputuity, or allow a bankruptcy. Let's get the pain out of the way now, instead of extending this problem to the future.
Yes to outsing bad exec's and greeeeeeeding union leaders. But not loan GM $$ to re-group, re-structure, and re-hire Americans! But to let GM or any of the big 3 go under and loss of milliions of jobs, billions of revenues that trickle down to the corner store-- ITS ALL LIKE THROWING THE BABY OUT WITH THE BATHWATER!!!!
God, all this reminds me of my sister-in-law-- just one bad decision after another!
What a just reward for the UAW who insisted on paying employees not to work.
The car builders are only as good as the technology, mgmt and materials will permit. Wages, health care and pensions represent about 8-10% of every vehicle, which is not unreasonable.
paying employees not to work is just a means to keep good workers alive until something more solid comes up (i.e. so they dont look elsewhere and you lose a good employee or dues paying member).
http://www.huffingtonpost.com/aemilia-scott/objects-in-mirror-seem-mo_b_143710.html
Hope the link works.
Aemilia
#1 - Have the feds buy a whole lot of cars, trucks, and buses. I mean, $25-$50B of them. Pay for the vehicles in advance with a big cash deposit. Make Detroit build vehicles the federal government can use, for uses like the armed forces transportation system, the postal service delivery system, helping the the 3 million-strong federal workforce (perhaps you can deduct something from their pay in they take a federal car for a few years). With this order, make Detroit deliver vehicles that are incredibly fuel efficient, or that run on natural gas, or hydrogen, or battery power, or something else that would jump start some critical new sectors of the automotive space. Put a board together to oversee the purchase, and have them take 1-5 years to get delivery of all that is needed -- change the order as circumstances change.
#2 - Let GM and friends go Chapter 11, but have the feds step-in prior to the filing with Congressionally-approved $25-$75B in DIP Financing. Debtor in Possession Financing (DIP) is a special investment made, post filing, that ensures the DIP Financing repaid before all others. Put a special board in charge of the DIP program that would oversee the management of the credit line.
Mr, I'd rather we all chipped in and bought a lot of cars?
The average hourly income for the Big 3...including benefits...is $72 an hour vs. $48 for Toyota & Honda @ US plants. Add in that the Big 3's market share has sunk from 70% to 47% over the last 20 years, and you see how this crisis came to be.
Any bailout without compromise by the unions will do NOTHING for the long-term stability of these companies. The only question is...do Democrats, who are now in a position where they need to suck up to the unions who helped them take over Washington, have the ballz to demand that union contracts be renegotiated.
Breaking the union contracts is imperative for the survival of the industry, not a sneaky GOP end run.
Are you so bugged by SUV's that you think these people deserve to lose their jobs in a bad economy where good jobs are hard to come by? Are you so happy with your Toyota you don't care what happens to a big part of American heritage?
If the greedy criminals on Wall Street get a bailout then so should Detroit because we are talking about thousands of workers and American icons. The bailout should come with conditions of course, but we shouldn't ignore the needs of the auto industry when we have an opportunity to rebuild it.
If your upset about the job situation you should have gone after the Bush administration sometime in the last 8 years to stop the exporting of millions of manufacturing jobs to 3rd world countries.
16 years ago presidential candidate Ross Perot told us about the incompetency of GM Management as they openly attacked labor to drive up their bottom line and fill their pockets, another precursor of today's economy. Over the last 5 years they have closed manufacturing facilities and shipped manufacturing equipment to it's new location in China and other foreign locations. The responsibility of managing and funding the retirement system has been handed to the unions who have relied on Wall Street to build and maintain wealth in these funds, good luck now !
35 years ago, during the so-called oil shortage, U.S. auto manufactures had the opportunity to convert to battery power using the newly developed Lithium Battery from NASA. Ford Motor actually started development on two models of electric cars, within 3 years the auto industry had dumped the electric car and were back poluting the environment. We can no longer continue to support an industry that has abandoned it's former inovation and creativity for the sole purpose of boosting the bottom line for it's stockholders !
The "greedy criminals on Wall Street" shouldn't of got a bailout either. Two wrongs don't make a right.
As for all the workers, I strongly suggest the workers apply for jobs at Toyota and Honda or other companies running successful auto plants. Alternatively, they can train for a new job outside the industry. It's an American tradtion to be flexible and adaptable.
Is $25 billion going to matter. Probably not. Americas' auto industry is so corrupted, so mismanaged, so behind the curve that they will never recover because they were too arrogant when they had the chance to retool. They sent jobs to Mexico rather than retool US plants. They are typical Corporate Americans——we're too big to fail. If you're too big to fail, then your company needs to be broken up. Period.
I say we use that money to fund small companies who are already doing what the Big Three should have been doing 30-40 years ago.
we now desperately need. The US auto industry, has undermined the best interests of the American people for the last 50 years, in the name of corporate profit. We now find ourselves drastically behind
European countries in terms of mass transit systems, although our transit budgets are enormous.
Detroit has lobbied for this illogical distribution of funds, to keep highways open for more and more or their own product, and railways rusting and refused. No bail-out of this sort of shortsightedness is
at all reasonable. I applaud those in Congress who finally see the writing on the wall. The focus should be on those thousands of employess and their families who will lose their job. Use that money to get these people building trolleys, trains and rail systems. How many times do we need to hear that we have polluted the entire planet before our politicians do something to get us caught up
to our friends in Europe who know when to take the train to work....( because THEY HAVE ONE ! )
Now that Nissan and Toyota are making full sized trucks the big 3 may not be missed.
I for one will morn the loss of the US auto industry for the Iconic cars they have made in the past but you can keep the current crop of cr@p they shove out the door. I worked in an auto plant and the mindset I saw was one of indifference. They were just cars and who cares if they are junk. People will continue to buy out of brand loyalty. Those days may be coming to an end, some people will buy Detroit to keep the money in the USofA but many will try to get real value for their hard earned money.
Perhaps as part of the Bailout, it should also be a Buyout and some of those mothballed plants should be loaned or leased to some of the Electric car companies that are in need of assembly line manufacturing. And some of the other could be retooled to produce solar panels, wind mills and the like? I for one would like to see a vehicle that gets 50+mpg or comparable, can carry 5 or 6 passengers, is crash worthy and costs under $10k. I also liked your idea to make trolleys and people movers at these factories.
I often travel 95 North from Boston to where my daughter goes to college. Rush hour there is ridiculous, with 20-mile-long traffic jams. Look around, and 90% of the vehicles have only one person in them. Yet there is a commuter rail with park and ride facilities the entire route.
If we had a high-speed rail system, my 2-hour drive would be reduced to 25 minutes, and my stress level to zero.