Transition Topic IV: Ought To Bail Out on Auto Bailout

A Detroit bailout now seems like a political inevitability. If true, we have planted one foot precariously on the slippery slope of government rescue for failing industries beyond the financial sector, with no end in sight. We continue to ride the free market up and socialize losses on the way down. Failure of major automobile companies would cause deep pain and the loss of perhaps millions of jobs. The impact would be devastating. But bailing out the auto industry is a truly bad idea. As a taxpayer, I resent paying for 20 years of short-sighted and poor business decisions made by incompetent executives at General Motors, Chrysler and Ford who have enriched themselves on the descent. Where do we stop? How many jobs need to be lost before the government steps in to guarantee solvency? What industries qualify? Who set the criteria and on what basis? We are spending a $1 trillion with no guiding policies and no overarching philosophy. We are sliding toward an ad-hoc command and control economy as the final legacy of the failed policies of George Bush. His metastasizing crises have forced government to react rather than lead.

During this perilous time of transition, Obama has a narrow window to do right. He properly has said that the United States has only one president. He is, quite appropriately, keeping a low profile until his inauguration. I imagine, and fervently hope, however, that he is working behind the scenes to minimize the damage of this bailout, to extract whatever good is possible and to establish rational criteria for future handouts. He must reign in a situation that Bush has allowed to careen wildly out of control.

The market has revealed the soft white underbelly of a bloated industry making inferior products relying on outdated technology, employing a workforce no longer competitive in a global economy and clinging to primitive environmental controls. We should not rescue companies that have so badly managed their markets for so long. In fact, no industry is less deserving of a government handout. Since the Clean Air Act was passed in 1970 in the face of fierce auto industry opposition, auto executives have stridently resisted all calls for modernizing the American fleet. Detroit rallied against every effort to institute reasonable Corporate Average Fuel Economy (CAFE) regulations, kicking and screaming every inch of the way. The United States consequently boasts the dubious distinction of having the lowest standards and highest greenhouse gas emissions from cars and trucks compared to Canada, Europe, Australia, Japan and China. That is true even after the 2007 energy bill boosted fuel-economy standards. Even the strictest regulations proposed by California, being fought vigorously today by the auto industry with help from the Bush Administration, would only meet China's current standards in 2016. This is the sad legacy of the industry we now want to bail out.

Foreign companies that embraced green technologies rather than fight them are now the global leaders. In stark contrast, Detroit's arrogant disdain for environmental concerns about fuel efficiency and pollution controls ultimately doomed the industry to second-class status, and now we all pay the price.

If the political winds are too strong to resist an ill advised bailout, Obama should use his enormous clout to extract maximum concessions from Detroit. Now is the time. Obama certainly has a good foundation on which to build. In a speech to automaker executives last year, Obama criticized the industry for doing almost nothing to lessen the country's dependence on foreign oil by improving fuel economy. His plan called for raising standards for both cars and trucks to 40 mpg by 2022, over current standards of 27.5 mp for cars and 24 mpg for light trucks.

That proposal, while tough and gutsy in an election year, particularly in light of the Democratic base, does not go far enough. The bailout is the opportunity to demand more as a quid pro quo for government assistance. The money must come with strings attached, so that funds are used to:

1) Meet world standards for fuel efficiency, with no reason to set a goal below Japan's current level of 45 mpg. Until alternative powerplants become commonplace, this must include efforts to improve the efficiency of internal combustion engines. Cylinder deactivation to match power to demand, flywheels and idle-off operations are some examples of methods for improving the old-style engines.

2) Lead the world in reducing greenhouse gas emissions from cars and trucks. Fuel efficiency is only one part of that equation. Automakers must further reduce emissions from internal combustion engines using advanced pollution control technologies.

3) Commit to the commercialization of advanced electric cars, gas-electric hybrids and fuel cell vehicles. The United States is woefully behind Japan. Toyota set the standard with the first kid on the block, the Prius. Detroit is so far behind the curve that Ford is using Toyota's hybrid technology rather than home-grown ingenuity. How embarrassing. Honda is already producing the FCX Clarity, a zero-emission hydrogen-powered fuel cell sedan. In 2009, Mitsubishi will begin selling the iMiev, with a top speed of 80 mph and a range of 100 miles. A full charge will take only seven hours. We are getting our behinds seriously kicked. Environmental transportation technologies are the forward wedge of the global green economy of the future, and we are being pushed aside as an economic lightweight because Detroit failed to see the green light.

Care will need to be taken to ensure we do not run afoul of unfair trade practice laws as bailout money is used to advance powerplant technology and retool new factories capable of producing the next generation of automobiles. That is a surmountable barrier.

Obama is not yet president, but now is the time to get brutally tough with an industry that has failed the American people. If they want our money, they will need to meet our demands.

Comments

[autobailout]

As a lifelong democrat, I am appalled by my elected reps trying to get these bailouts through. The banks didn't deserve it and the auto industry absolutely doesn't deserve it. Everyone is hurting. I am a small business owner on the UWS of Manhattan and I am eating egg salad from a plastic container every day. These auto workers make $56 an hour and their cost of living is low. It's like making $200 on one of the coasts. Our lawmakers need to start thinking of the people who elect them, not special interests.

Protest the bailout at http://www.autoindustrybailout.com/petition/

Enough with the handouts unless you're going to give them to everyone and not just select groups of people.

[WestCoastBuckeye]

Everything you say and document makes so much sense. But, just to nit-pick, I think you should reexamine the 'Detroit' word, when I think 'America' could have just as easily substituted.

E.g.: " ... And we are being pushed aside as an economic lightweight because Detroit (America) failed to see the green light."

Decades of international American politics (HUGELY amplified by the last eight years) has allowed this situation to get to where it is. Saying it's solely the industry's fault for failing "to see the green light" doesn't spread the blame around NEARLY as much as it should.

I admit, I'm nit-picking. Auto companies have shown almost zero interest in upgrading their products to reflect modern times or environmental concerns ... but largely because they've been given almost zero government incentive to do so.

I just hope your advice is truly considered: Obama has an opportune, might-not-come-again moment to garner true concessions out of the industry ... ones that should have been made more than a decade ago.

[Jeff Schweitzer - Huffpost Blogger]

You make an excellent point.

[txbluedot]

My favorite lines from this article:
"We continue to ride the free market up and socialize losses on the way down."
"...now is the time to get brutally tough with an industry that has failed the American people. If they want our money, they will need to meet our demands."

Excellent and well-said!!

[Jeff Schweitzer - Huffpost Blogger]

Thank you!

[Luigi53102]

Your points are well taken, but your argument would be significantly better if you started from facts rather than hyperbole.

"Toyota set the standard with the first kid on the block, the Prius." Actually, that would be Honda, with the Insight. Ask Amory Lovins if you don't believe me.

"Detroit is so far behind the curve that Ford is using Toyota's hybrid technology rather than home-grown ingenuity." The most advanced hybrid technology in the world has been developed by a consortium of GM, Chrysler and BMW, and that dual mode hybrid system is available in real GM vehicles. How embarrassing, indeed.

"Honda is already producing the FCX Clarity, a zero-emission hydrogen-powered fuel cell sedan." And GM is already producing the Saturn Equinox fuel cell vehicle, several hundred of which have been driving around New York, DC and LA since this spring. Neither the Clarity nor the Equinox drive anywhere else, as there are no hydrogen fuel stations anywhere else.

Just in case you suspect some bias here, I drive a Honda Civic hybrid (have owned hybrids since 2002) and don't work in the auto (or any related) industry.

[Jeff Schweitzer - Huffpost Blogger]

Those are reasonable points, but I don't agree with all. Yes, Honda was first with Insight, and I should have put that in as a caveat. But Prius was the first to be accepted as a mainstream vehicle; look at total sales.

I disagree that the consortium you mention has the most advanced hybrid technology. And note that it took a consortium rather than a single company. And note that one member of the consortium is foreign. How embarassing indeed.

The GM Equinox is not even close to an equivalent of the FCX Clarity; the former is essentially a concept car, the latter is production-ready.

I drive a Lexus hybrid.

[Oregon Ivy]

I bought one brand-new Chrysler, after years of puchasing foreign imports, trying to support the "buy American."

Unfortunately, it was an expensive piece of s.* %.t It started falling apart before the one-year warranty was up, and I had to have the engine replaced. Five years later, the ac was gone, as were the back window wipers, the door and window seals, the radio, and it leaks oil like a sieve. I've had 4 Toyotas that ran beautifully for over 20 years with no issues other than regular maintenance.

Until the American car-makers get their acts together with quality products at affordable prices, they will always be second-best and do. o m . ed to fail.

[jhNY]

Using threats or fear, or some combination, every industry with any political clout whatsoever will be running toward the Treasury with its hair on fire and its hand out. Make that both hands.