Nationalizing Chrysler

Yes the time has come to talk of final things, and no I don't mean the end of the Mayan Calendar. I'm talking about Nationalizing Chrysler.

According to Nouriel Roubini's Global Economic Monitor, the Democratic Congressional plan to save the Big 3 would "Allow automakers to tap $25 billion under the $700 billion TARP program as a 7-10 year loan at 5-9% interest rate. Loans will be conditional upon placing restrictions on bonuses, executive-compensation, golden parachutes, improving fuel efficiency with rigorous independent oversight and changes in the management. Goverment would get stock warrants and no stock dividends would be paid during the loan period.

While one hopes the Democratic Congressional Auto rescue plan gets passed soon, the truth, as we all know, is that it will solve neither the obvious nor underlying economic problems of the auto industry. For that, we're going to need a more fundamental approach.

The Democratic Congressional proposal should be broadened to allow a government bailout of both GM and Ford that sees the US Treasury permanently assuming the health care and "Legacy" costs of the two companies. In exchange, we the people will receive a minority equity --and voting-- stake in the companies, as well as significant public and union representation on their Boards.

Chrysler meanwhile, would be bought from Cerberus Capital Management-- immediately. As it happens, Cerberus is, at this writing, desperately trying to unload Chrysler, which they bought for almost nothing from the German Auto Company, Daimler in the summer of 2007. For Daimler, the key part of that deal was getting someone to take on Chrysler's legacy costs. The US Treasury can now return the favor and save Chrysler from being completely run into the ground by Cerberus, which was woefully miscast as an auto holding company in the first place.

The new company could be renamed "US/Chrysler," and in the course of a year or two transformed into a dedicated green car company whose chief line would be a new, stripped down, low cost (ie., compact, GPS less, no Satellite radio) hybrid. The car would go for approximately seven to eight thousand dollars. Low cost auto loans to make the car affordable for every American family could be financed through a new US/Chrysler Bank.

The point of the car would be, first, to make cheap hybrids that got 100 miles to the gallon ubiquitous in America. Second, the existence of such a vehicle should scare GM and Ford into coming up with something that could compete. Third, the transformation of the US auto industry would either rout the Japanese, German and Korean Car companies or force them to come up with something even greener.

What we're talking about is no longer a race to the bottom, but a race to the top.
Of course that's not going to please everybody.

There has been a laissez-faire argument advanced on the Right over the past several weeks about the power of "creative destruction" in Capitalism. Through this prism, the free market is seen as an elemental force of nature that cannot, nor should not, be dammed up.

Briefly, this argument is a steaming pile of shit. Creative Destruction may work in the early phases of Capitalism, as part of the bloody business of primitive (Capital) accumulation, but in Late Capitalism, "creative destruction" is a euphemism for "race to the bottom."

What "creative destruction" really means for the neo-liberals and neo-cons who advance it, is that Detroit must be allowed to fail because it's no longer viable. But have no fear they tell us. Through bankruptcy, GM for one, can dump its outdated labor contracts; restructure its labor costs, close unprofitable plants, and drop their onerous pensions and health care plans.

These economies will then supposedly make post-bankruptcy Detroit competitive again in world markets against leaner, meaner Japanese, and Korean companies that don't have Detroit's legacy or union labor costs hanging like a millstone around their necks.

This argument of course conveniently forgets that it was not the "free market" that created what we call the American Way of life. What created the post War economic boom that characterized "the American Century" was an Industrial working class that was paid well enough, for the first time in history, to actually consume the products they were producing.

The creative destruction argument also conveniently skirts the ethical and moral issues raised by cutting people's pensions, retirement benefits and health care after they have spent their lives working, in good faith, to accrue them. If this is the kind of good faith that "free market capitalism" now represents, then nobody should get too upset if and when a dispossessed working class decides that maybe potential future capitalists should be thrown into the river at birth.

Finally, it was the abandonment of American manufacturing in the 70's that led directly to the rise of the Financial Service economy in the 80's. The finance economy of the last twenty-five years created enormous new pools of wealth for the US and the world, but was based on consumer and leveraged corporate debt rather than actually making things. Surprising nearly everyone, this enormous slagheap of debt-- rising up by the side of the glittering new pools of financial wealth-- turned out to be more than just an aesthetic problem. Now the man made mountain of toxic debt has collapsed and it's going take us a long time to dig out from under it.

However, as is often the case in life, the way of out of this crisis is precisely the same as the way in. It's time to put our collective national creativity to work, not by destroying the last vestige of our industrial base, but-- by all means necessary-- beginning to make American manufacturing viable again.

Read More:

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

Comments

[MajorKong]

"What created the post War economic boom that characterized 'the American Century' was an Industrial working class that was paid well enough, for the first time in history, to actually consume the products they were producing.­"

Henry Ford had this figured out 100 years ago. "If I pay a man enough to buy my car, he'll buy my car."

[dwatkins9]

Think about this. Ford pays double the prevailing wage in the hope that he will get some of it back when his workers buy cars? He is, in effect, buying the cars from himself - and at a premium, since there is no reason to think that he will recoup all of that extra pay in profits from the sale of cars to workers.

I think that Ford was committed to (among other things, like fascism and anti-Semitism) bringing unskilled workers into the middle class, for what that may be worth, but the above remark is either apocryphal or was tongue-in-cheek.

[MajorKong]

In reality he paid high wages so that he could retain his skilled workers. Good business sense.

[DuganS1]

The Henry Ford comment doesn't mean much or anything. First, the cost of cars had gone down progressively for many years making them affordable to more American's. Second, the idea that increases pay for his employees will result in higher car sales isn't great logic, as increased costs mean increased prices which mean cars become less affordable for everyone that doesn't work for Ford.

[MajorKong]

True on a micro level. On the macro level, a well paid work force = consumers.

People who don't make any money can't afford to buy your products.

[dctackett]

sounds good to me, an affordable car, what a concept... less $ on management salary and perks, less on advertising, less on pricey gadgets, more on innovation, more on great gas mileage...

start pumping out some stripped down affordable cars with the best of current technology, while heavily investing in R & D for the next gen cars...

it also sounds like you irritated the well off car lovers out there... "I wouldn't give up my convertible for that!"...

[dwatkins9]

"Well off?" Heh, I wish. I am an ordinary middle class worker. The point is, there are already what you call "affordable" cars out there - you can buy a brand new car for less than 10,000 dollars. Almost nobody buys them. I am not the only one who doesn't want to drive around in some miserable little stripper. If I only had 10K to spend on a car, I would much rather buy a five year old used car with adequate power and some of the bells and whistles than a brand new little one lunged tin can econobox. Forcing Chrysler, or any company, to produce cars that the public won't buy seems to me to be a recipe for disaster - unless the real agenda is to force us to buy them by eventually eliminating all the other choices. And it is precisely that that we car lovers suspect the Puritanical left of wanting to do.

Repeat after me: "Cars are not just transportation appliances­."

[RightWingMarine]

oh sure, let the cat out of the bag. Now we all have to fake being surprised when it happens.

[DuganS1]

What would be the point of the govt taking over Chrysler and virtually destroying the company's production capacity and eliminating their viability as a business just to build some hybrid car? Hybrid cars are already being manufactured. Why not forget all that hassle and just subsidize a few companies that already make hybrids, maybe with tax breaks, grants, low interest loans to expand capacity, or even additional incentives for consumers to buy them?

[PhxJustice]

Chrysler has some great models on the road that I wouldn't want to get rid of, just for the sake of "nationalizing" them: The Chrysler 300 (great highway mileage - I can drive from Phoenix to Palm Springs on less than one tank of gas), the Dodge Charger is just kick ass cool (many police departments have these now) and so is the Dodge Viper (though it needs some updating).

Let's also not forget the Chrysler brought us the revolutionary Dodge Caravan!

Now, if only we can get the right wing controlled (Dan Quayle is a board member) Cerebus out of the picture, things might actually improve at Chrysler.

[dwatkins9]

Not to mention the intensely cool Challenger, or the equally intensely cool and even semi-affordable Sebring hardtop convertible. Now, I might trade in my current soft-top Sebring convertible for the latter.

[KeepMeLearning]

I have a 300 Hemi and I LOVE it.

[JScott]

I've rented a 300 and even with the base 2.7 l engine it's still a pretty powerful and nice car.
And it's one of the few US cars with r&p steering, full disc brakes and all independent suspension.
It would be a crime not to use this platform for upcoming models-Cerebus don't skimp!

[texastrixie]

Instead of bailing out GM, why don't we buy the American rights to Hummer? I think its sales have fallen off a cliff, but we still need them - in the Army! Supposedly we have destroyed most of the Hummers being used in Iraq, and I think we have pretty much decimated the supply of these vehicles stationed locally in the states. Don't we need to rebuild thousands of these vehicles for use by our armed forces (and extra heavy duty versions here) plus some for the states to use in case of national disaster? Buy the company, refit empty factories in the midwest, and hire displaced autoworkers to make them. Make part of the compensation package for these workers as stock in the company.

GM gests cash to stay alive, and change to fewer, and greener cars. We get a chance to rebuild our military equipment at a discount, and out-of-work autoworkers get a job. I don't know if Hummer is a totally US-based company, but there would have to be a law that once we bought the American component, no Hummers could be imported into this country and sold. We really might make money on this deal.

[DuganS1]

A company named Oshkosh Truck rebuilds most those damaged vehicles. Also, the military has been looking to replace the Humvee with a more advanced vehicle for a few years now.

[disgustedcitizen]

Ah, I see where you're going. Turning Chrysler into the Volkswagen of the US. Not a bad idea. I like Chrysler, I have a 2005 Chrysler Crossfire which I love with all my heart. Of course, it is 90% Mercedes, but that is why I love it so.

[KillTheMessenger]

If you like Chrysler, you should go an buy one or two more NOW. Maybe if all the Chrysler lovers do that we don't need a bailout?

:-)

[dwatkins9]

A nine thousand dollar econobox with no radio or other gadgets. Oh, goody, where do I sign? I can't wait to trade my 200 bhp convertible in on that. Hope there's not a long waiting list.

Ever hear of the Trabant?

Geez....

[KillTheMessenger]

The Trabant was "wonderful" car.. especially the fifteen year waiting period during which you could imagine all you wanted that yours would be something else than a Duroplast (wool in resin) chassis with a two stroke engine.

[dwatkins9]

And you could always hope for a Yugo upgrade - that was only for the truly successful, though :-).