What About The Government "Bailout" Of Foreign Automakers?

Last night I was on Fox Business News with Neil Cavuto, talking about -- among other things -- the domestic auto industry bridge loan.  He asked if liberals were in favor of the "bailout" in support of the unions.  I said I personally supported it as part of a level playing field, considering the government subsidies that foreign auto makers have enjoyed on these shores of late.

In his November 20 press conference (PDF), the UAW's Ron Gettelfinger spoke about the "incentives" foreign auto makers have received from red, right-to-work states where unionizing is legally restricted and unions practically nonexistent:

Since 1992, states where we have transplants have located have put in over $3 billion dollars in incentives and I would point out that is the money that the state settled for and I want to go specifically to Alabama if I could for a minute. We have Hyundai Motor Company that got $252 million in incentives. Toyota there got $29 million in incentives. Honda, $158 million and Mercedes $253 million in incentives. It just seems odd to us that we can help the financial institutions in this country and that we can offer incentives to our competitors to come here and compete against us but at the same time, we are willing to walk away from an industry that is the backbone of our economy.

And while I read these figures to you, which are the actual figures that we have been able to dig up. I want to go to one particular story and that is the plant in Mercedes, the Mercedes plant in Alabama.

As it turned out, as I said Alabama offered $253 million but the state offered to train the workers, clear and improve the sites, upgrade the utilities, buy 2,500 vehicles and it is estimated that that incentive package totaled somewhere around $175,000/per employee to create those jobs there. And on top of this, that state gave this automaker a large parcel of land-around $250-$300 million dollars. That was the same price or cost to them of building a facility.

So we can support our competition but we can't support an industry that is in need? And this need was not brought about because of what the industry has done. 

In his remarkable book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense [and Stick You with the Bill], David Cay Johnston of the New York Times writes about the fiction that local small business are at a competitive disadvantage to Wal-Mart because of a big box store's ability to buy in bulk.  In fact, WalMart regularly goes into communities and demands subsidies to build in the area such that they keep the sales tax they collect and don't pay property tax.  Local businesses, with no such tax advantages, must charge higher prices to make a profit and quickly start going out of business.

The domestic automakers are struggling under the same burden against their foreign competitors with the subsidies they receive.  I asked Johnston about the situation, and he responded:

The current Detroit bailout debate has the Washington source-dependent press corps reporting that the Michiganders are seeking favors, but not the Alabama/South Carolina/Tennessee/etc. crowd, ignoring the huge state subsidies to foreign-owned auto plants, the implicit subsidy in federal law that makes union organizing almost impossible and the advantage that new plants have over older ones. I get sooooo frustrated at the awfulness of so much DC coverage.....which could be cured by actually reading the voluminous public record, resulting in less reliance on access to sources.

The journalistic coverage of this story has been truly awful, largely framed by anti-union zealots like Alabama's own Richard Shelby, who decries Detroit's "model of failure" but has vigorously fought every attempt to raise CAFE standards that could have made the industry more resilient against fluctuating gas prices.

Anyway, I had fun on Cavuto.  He asked good questions, listened to my answers and I got to make the case about subsidies to foreign automakers on TV, which I never thought I'd be able to do -- and certainly not on Fox Business News.

Watch the Fox Business News segment below:

Read More:

Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In

Jane Hamsher blogs at firedoglake.com

Follow Jane Hamsher on Twitter: www.twitter.com/janehamsher

Comments

[snowi]

Who is going to buy a VW or a Toyota when they don't have a job?

How's those Asian markets doing today?

[mattfiller]

If anyone thinks there is an equivalence between the US auto industry and the Southern assembly plants, or that the only difference is the unions, remember that the engines, transmissions, and most of the other parts for the cars assembled in the Southern U.S. and Mexico all or mostly come on ships from Asia and Europe. Ford doesn't need the bailout money now (that is why the $9 billion on their list is above and beyond the $25 billion originally on the table. But if GM or Chrysler go into bankruptcy and stop paying suppliers, many of Ford's suppliers, already hard-hit by the slowdown, will fail as well, leaving Ford with huge problems, and possibly unable to keep building its cars. One missing part out of the thousands needed is all it takes to keep a car from being shipped to dealers, or being assembled at all.

[mattfiller]

The foreign auto transplants are not at the witness table in Washington, but they are there - in the person and positions of the Minority Leader and other southerners. They sit with thousands of vehicles piling up on the docks in Los Angeles and Long Beach, but that only made the local news. Having worked in Torrance, CA for Nissan (before they moved their USA HQ to Nashville), I know exactly why those vehicles are there - Japan expects the US to find a way to sell the cars and save their plants, no matter how many dealer turndowns and dealer failures and bankruptcies there are.
So what is the plan for selling all those vehicles on the dock? Shut down GM and Chrysler, and sell these cars to their former customers. This should be obvious, but no one is saying it.
That is Senator Shelby's agenda - he is there to represent Japanese, Korean, and European interests, since they fund his campaigns contributors.

[TellitLikeItIs]

Excellent work, Jane!!! Thank you for exposing the hypocricy!

[rays15]

Thank you, Jane. It is so rare to find a thoughtful, independent journalist who doesn't just go for the cheap shot or follow the herd.

[SShaw490]

All excellent points. It's also worth noting that auto workers in Europe and Japan get free health care under socialized medicine, plus the EU is putting together a 56 billion dollar bailout of their auto manufacturers - while our auto manufacturers are buried under health care costs and Americans by the millions are hoping they go out of business. We are truly living in a society that is in full scale disintegration. When your own countrymen are hoping that millions of Americans lose their jobs, an event that will absolutely, positively plunge the country into a depression - well, there's no fix for that.

[killpack]

Americans by the millions are HOPING they go out of business? Are you kidding me? Nobody wants GM to go out of business! It's just that NOBODY wants to give their HARD earned money to the piece of crap company that it is. If they find a way to survive on their own, GREAT! However, I will NEVER endorse TAXPAYER money going to them. Times are tough right now. I would rather my share of tax dollars that would go to GM (that I paid) be given back to me so I can buy groceries!

[johncando]

it sounds like Taxes are new to you because my bet you have never been interested where you through them before.

[TommyMcCarthy]

With every post I read.....I'm becoming more of a fan of Jane Hamsher's........

The last few years...we've all had to "tune up" and "upgrade" our Hypocrisy detectors, and install aftermarket, finer-mesh, bulls**t filters just to survive these years of Republican hegemony alive and within striking distance of sane!!

In this area Ms. Hamsher needs no such gadgetry....she's a natural.....a thoroughbred, really.
For me, her work on Politics and the economy always strikes a nice balance of good humor and real passion for the issues joined ...and always armed with plenty of inconvenient FACTS.

I too had to laugh these last weeks as Sen. Richard Shelby.....("R" Honda/Toyota) Hauled his very best "noble but grave" face around the media circuit.....trying to drive the final nail in the coffin of the domestic auto industry as a matter of fiscal principle and the "National Interest". (Har-de-har-har)
Jane's posts and her work at firedoglake is at it's best exposing the REAL motives of phonies like Shelby.

Keep up the good work, Jane
tm

[ATruthBeKnown]

Road Trip .... CNN. MSNBC, MTP etc. Make the tour !!!!!

[jerrypl]

Jane brought up good points in the video, yet we have seen thousands of companies get tax abatements, and subsidies from states and local communities for decades to entice them to come into those areas. They end up getting upper handed handouts that give them more of an advantage than many smaller businesses in those same local communities pushing them into unstable financial disadvantages. This is wrong.

Government PORK projects that give advantages to foreign car companies in the form of uneven handouts has shown to be strictly for political reasons. Of course, new jobs are good, but such giveaways have ended up hurting America in the long run. These automakers have been wanting to manufacture outdated products that don't work for us anymore. Where has the long term vision gone with those shortsighted handouts?

http://eye-on-washington.blogspot.com

[TXfemmom]

If the U. S. manufacturers receive assistance, they must bring in new management, curtail costs for administrative workers as well as union workers, and THEY MUST BE REQUIRED TO RETURN 95% OF ALL MANUFACTURING AND ASSEMBLY OF THEIR VEHICLES TO THE UNITED States.

We should not subsidize them when they are moving so much of this to Mexico and Canada, and parts to China. THERE SHOULD BE NO EXCEPTIONS.

[JacqueItch]

The US auto manufacturers have for years done everything they could to block public transit, CAFE standards, alternative power systems, lighter more efficient vehicles while hyping and foisting onto the buyers the megalithic gas guzzling SUVs .
Face it ------ the oil companies and the auto companies have basically dictated America's taste to Americans for years. It is the same way the US beer manufacturers continued to push diluted half-flavored imitation brews and advertise them as the "best"; say something long enough and loud enough and eventually it will be believed as gospel.

No, the US auto makers don't deserve to be rescued.
But their workers do. With robotics, the US worker is in grave danger of disappearing at some time in the future. . . .but not all at once, and not because of corrupt corporate leadership.
If the auto makers are to be rescued, it is only to preserve the jobs of the people who depend for their livelihoods:
Which is not why Congress will bail them out----Congress recognises US manufacturers need to stay strong to compete in world markets..

[therealredstateblues]

Toyota has fought CAFE stds just as hard as Detroit, at the same time recieving subsidies from the japanese govt for R&D

Toyotas product mix relies heavily on trucks, SUVs and larger cars

Chevrolet has more vehicles that get over 30 mpg than Toyota or Honda

[TerrapinCB]

saw this link. Seems a few people are checking the veracity of this (and your "therealre­dstateblue­s"'s) comment

http://www.thetruthaboutcars.com/ask-the-best-and-brightest-does-chevy-have-more-30mpg-models-than-honda-or-toyota/

[JacqueItch]

It is disingenuous to proclaim that the Japanese fought CAFE standards in America the same way US manufacturers have.
Back in 77? President Jimmy Carter introduced and had legislation passed forcing auto manufacturers to raise fuel efficiencies of all vehicles they sold. Every year they would have to become more fuel efficient. By now, 40+ mpg would be common.
As soon as pro-Big Oil Reagan entered office, he listened to the Oil/Auto lobby and had CAFE standards rescinded. He also ripped off the solar panels for hot water heating installed on the WH roof.

But the fight to NOT create fuel efficient vehicles goes back much farther than that.

Face it----the collaborative partnership that exists between Oil and Auto manufacturers is one of symbiosis. Hurting one hurts the other.

Instead of seeing oil as a resource necessary to the industrial revolution, and being careful about its allocation, Oil/Auto have seen it purely from the mindset of profit.

This is at the heart of our current problems.
I have an '86 VW Jetta that gets 34 mpg and 40+ highway at 50 mph. Runs great!
I have junked quite a few American and Japanese cars along the way. . . .

[Lust4Lost]

the auto companies need to be de-coupled from their manufacturing base

we should 'bailout' the factories and allow the brands to go bankrupt

we should provide seed money to new brands with the caveat that for the first 10 yrs of their existence they utilize the existing factory base

there is a good reason why other consumer goods brands do NOT manufacture their own products, you simply cannot be good at both at the same time

[GKHaley]

When you say "both" what are you referring to? Are you saying that companies cannot manufacture and market their own products?

[johncando]

No he is saying you can't build in America and make money you can however buy from China and sell to America and make money

[johncando]

GM uncoupled in 1990s to end up with this, thank you for not knowing that GM wanted in the 90s to be assembly plants only and the Wcar was born GM Manufactoring was Fisher Guide ,ACDelco Fisher Body ,went Perigrin and split into many other plants AG Simpson and all have had contracts with GM and Peragrin brought GM Quality to its knees but one salery reliability in each plant is and was not good for checking recieved parts. GM should have kept everything in house and manufactured its own parts but the American thing is everything off shore or out of house like you suggest and see what you get . Nothing but Debt and crap.

[OneTop]

The Big 3 and a lot of their major suppliers have had the same lucrative Tax Holidays and subsidies as the transplants.
Just take the time to ask the good taxpaying folks of Ohio, Michigan, Ontario etc.
Those taxpayers have had a Big 3 corporate "g u n" to their heads for decades.

The issue is not cost structure, it's product!

The Big 3 continue to invest in, assemble and market products that are inferior to their competition. Combine that management philosophy with their atrocious customer treatment and it's no mystery as to why they are failing.

[kgb999]

The issue is credit availability.

[za2008]

The Big 3 certainly receive tax subsidies for building plants in the Midwest--I recall reading about subsidies for a new Chrysler engine plant (now being sold to Germans, apparently), the Chrysler Jefferson Avenue Plant (about 15 years ago--where the Jeep Grand Cherokee rolled off), and other examples of tax subsidies to build, upgrade, and expand plants in Michigan.

[Lark817]

According to my father, who would be so pleased if he could purchase a car from one of the big three that is comparable to any of the last 4 Toyotas he has owned, the issue is service. He currently owns 2 Toyotas; the new one gets more than 40 mph, and the older little pickup has more than 300,000 miles on it. He will tell you, over and over, the service from Toyota is amazing from coast to coast, and border to border.

[johncando]

No if you watch and read American build is inferior , not GM is inferior just cars in the USA are inferior, when given the task of build with a net hole American GM plants want a big tolerance on the net hole. Then if you understand this you will find American plants in GM are in thousandths and the prints for build are Metric. and if you understand this then you are getting smarter than those given the job of building and doing the conversion from metric to and back it looses something in translation but ends up crap. now to get your government to educate bubba and get him to understand his boss has given him the wrong information with his conversion and have them try to explain this to bubba . That is if the member of Government knows the conversion,you see this is now the problem and you think a Car Zar could be educated in time to know what to do in todays build. Here we go now Buba is from the Government working for GM and he knows as much as Bubba.

[SCG]

Thank you Jane. You are speaking up for so many that can't.

It's ironic that the same Mitt Romney promised the workers in Michigan to "bring the jobs back" not so long ago, is now counseling bankruptcy. He's as slick as his hair.

I'm beyond tired of Republican flag waving patriotism during election cycles, then they tell the domestic auto industry to in essence "go to h.ell" No public humiliation of the management of AIG (so far $152 bil in fed aid) or Citigroup? No tough questioning and certainly no recognition that it was the financial industry which created this current crisis and market collapse.

Where was our dear Republicans? as oil spectaculars (many tied to the very financial names now getting bailout funds) drove oil past $145 per barrel? Or the scam of the derivative markets and mortgages which were designed to fail, that is bring the world economy to it's knees?

No these actors remain untouched and unanswerable to the public. We're told it's the greed of the unions.

[Cobia]

But, but, but...
Phil Gramm (former Senator/slimeball, R-TX, oh, wait--- he' still is a slimeball) says it's all great, peachy keen as a matter of fact, and y'all are just "whiners".

[Lagniappe]

Not only did Gramm author the 1999 legislation that repealed Glass-Steagall, the New Deal law restricting the speculative activities of banks, but after Gramm left the Senate, he lobbied Congress on behalf of the Swiss bank UBS when it wanted Congress to overturn state laws restricting predatory lending and the issuance of mortgages to prospective home owners who could not afford them.” http://www.washingtonpost.com/wp-dyn/conte... McCain, like Gramm, has been a supporter of the “Enron Loophole” allowing Amaranth Advisors hedge fund, a commodities futures trading company, to attempt in 2006 to corner the natural gas market, a criminal violation for which the fund was recently handed a $300 million fine. http://www.consortiumnews.com/2008/051908a...

McCain also has a direct connection with Enron, having received money in campaign contributions from Ken Lay’s Death Star. "We're all tainted by the millions and millions of dollars that were contributed by Enron executives," John McCain told CBS' "Face the Nation" Sunday. McCain then acknowledged receiving $9,500 from Enron in two campaigns. http://www.time.com/time/business/article/... Gramm’s wife, Wendy, was on the Enron Board of Directors, and Gramm was the architect of much of the “reform” while he chaired the Senate Banking Committee, including a move to exempt electronic trading of electricity from regulatory oversight. According to Time Magazine, Gramm and his wife were at the forefront of many of the illicit practices that led to the firm’s massive ripoffs and ultimate collapse:~­~~~~~~~~~~­~~~~~~~~~~­~Democrati­c Underground

[katie98]

Thank you for setting the record straight. People's opinions
are only as good as the information they have.
Assigning blame for the wrong reasons
will not lead to a remedy.