Bail Out Detroit -- Right Now!
There are times when the lack of foresight in Washington is truly dismaying -- and the government's talent for squandering our shared Green future is shocking. This is such a time. All three U.S. domestic automakers are going down the tubes at once. But their plight has been completely overwhelmed by the nearly incomprehensible but urgent process of salvaging the financial industry. The news cycle has moved past the Wall Street meltdown and is now at least considering the woes of Motown, but a familiar pattern of public and political opinion has kicked in.
Detroit probably never imagined that the country hates it quite this much. But based on attitudes afoot in the land, no one thinks General Motors, Ford, or Chrysler has done an even remotely competent job managing the stewardship of their Very Important Business (millions of workers would join the unemployment rolls if the domestics fail). Opinions have ranged from "Let 'em die" to "Let 'em go bankrupt--and then die" to "Grrr... all right, let's [teeth gritted] bail these doofuses out."
Now, it's beginning to look as if a deadlocked lame duck Congress and White House have kicked the bailout decision into 2009. This is astonishing. Because if -- and this is a big if -- we can get Detroit back on its feet, with much needed concessions to raise its sustainability game, then we will have established a vanguard for a Green New Deal. There's a very real, once-in-a-century opportunity to utterly transform a major American manufacturing enterprise. It will cost anywhere from $25 billion to $50 billion, depending on how the deal is structured. That's a bargain.
Contrast this with the financial bailout, a $700 billion sockaroonie that it now seems will lead to partial and (perhaps) temporary nationalization of the banking system. The banking system was plunged into this crisis because it lost its ability to create a good product -- meaningful, stable investments -- and instead had to engage in an elaborate form of financial chicken with a tsunami of risk. Critics say Detroit has been building junk, but if you bought, say, a Corvette last year, you still have something that contains residual value. You will have lost money, but you won't have lost everything.You can't say the same for a vast and sloshing ocean of mortgage-backed securities peddled by the our formerly august houses of moolah.
It's important to remember what the fallout from all this will be. No one will ever take a mortgage-related investment seriously again, unless it can be thoroughly vetted. Investment banking, once considered a fine profession for a smart young person to enter, has been transformed into a Ponzi racket overnight, practiced by seedy men in soiled overcoats, scheming in darkness. Meanwhile, Americans still need cars. Lots and lots of cars. It's a depreciating asset. And a terrible investment. No one makes money by purchasing an automobile. They buy one because they need to drive their kids to school and themselves to work.
This is why Washington must, must, must fund a Detroit bailout. It would constitute, of course, a soft nationalization of the auto industry, and it would put a smackdown on several southern states' attempt to become de-unionized hubs of carbuilding for the Japanese and the Germans (the UAW, for the record, is extremely pro-bailout because its knows that bankruptcy is game over for its ranks of pensioned, insured legacy members).
Still, it's virtually unprecedented that the American people have a chance to dictate future terms to an enormous component of the industrial economy. There's now broad agreement that, over the course of the next decade, we need to retool the economy to be an engine of environmental innovation. This will have to be a multistage process where the automotive sector is concerned. As I've argued, once Detroit is rescued, given the falling price of gas, it needs to be able to sell its most profitable vehicles, trucks and SUVs, to revive its cash position. But after that, we need to see some genuine, measurable process on fuel economy and emissions, followed by aggressive R&D in the areas of advanced and sustainable mobility. We could let Detroit fail and throw the money at the many future-car startups that are currently out there, but that won't provide enough product to market, in a speedy manner, to deliver the improvements we require.
We'll never have another opportunity to take millions of U.S. workers and transform them, practically overnight, into Green warriors. And we need to do it before Christmas. The North American International Auto Show, which will be staged in Detroit in early 2009, can't be a funeral. It has to be a rebirth.
Read More:
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In
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EXCUSE ME! REALLY?
these CEO's make half a million dollars a week, and fly in private jets to BEG for my money!
NO WAY!
and the UAW leader comes out and says they're not giving any concessions.....
LET THEM ALL DIE!
"Detroit probably never imagined that the country hates it quite this much."
I don't know about the rest of you, but for me it's not exactly that I hate them, it's just, when I needed $25,000,000,000 to pay my routine expenses while simultaneously implementing overdue modernization, where were GM, Ford and Chrysler for me then?
But like you said, after I thought about it a couple days, I noticed that I actually owe it to myself to make the smallest possible sacrifice for the general good of the country by making the necessary sacrifice sooner than later. The failure to do that was the basis of my righteous feeling that they deserve to go into liquidation. And their CEOs do, but the cost of that to me would be that my country is suddenly full of a lot more unemployed people, general economic demand for essentials and minor luxuries wanes, and Poof! everybody's standard of living suffers.
Pat Buchanan, have mercy on my soul, made the case very well on Chris Matthews' Hardball tonight.
I think there is one bail out we and all agree on...bail us out of our dependence on foreign oil! We need to get on about the business of becoming energy independent and using alternative sources of fuel. The high cost of gas this past year seriously damaged our economy and society. While we are doing the happy dance around the lower prices at the pumps OPEC is planning further production cuts to drive prices back up. We have the knowledge, we have the technology, what America lacks is a plan. Jeff Wilson has a new book out that is beyond awesome. The Manhattan Project of 2009 Energy Independence NOW. He walks you through every aspect of oil, what it is used for besides gas, our depletion of it. The worlds increased need ie 3rd world countries becoming more modernized and consuming more. He explains EVERY alternative energy source and what role they can play to replace oil. His research is backed up with hard data and even includes a time frame and proposed legislative agendas to wean America off oil.
My answer to anyone who is actually fool enough to want to help the overpaid
idiots at GM, Ford, or Chrysler survive is: "Not on on my dime, you don't! Go buy
one of their cars with your own money. Hell, buy three." Unfortunately, this
imbecilic DC drama is not about whether to shovel my tax dollars to these clowns,
but how each politician can cover his pathetic ass so that he isn't held accountable
for it.
"Government requires coercion. Coercion is evil. It is exactly that simple."
-Alex Goristal
(con't)
And what are the Senators
and Congressmen of those 12 states (AL, CA, IL, IN, KY, MI, MS, OH, SC,
TN, TX, VA) thinking? US auto sales are essentially a zero sum game. In a
prospective bailout, every vehicle that GM, or Ford, or Chrysler sells
domestically that they would not have sold without the award of stolen tax
dollars, is a vehicle that one of those other 8 makers will fail to sell. Every
job "saved" at a GM, Ford, or Chrysler US location will (all else equal)
ultimately reflect in one of those other 49,000+ US jobs lost.
In addition, Ford, at least, seems to be speaking out of both sides of its
corporate mouth. They have clearly indicated that they think they can survive
until 2010 (their apparent estimate of the duration of the current economic
crisis). I suspect that Mullaly is only joining the other beggars in self defense,
out of fear that otherwise GM and Chrysler will be awarded stolen tax
dollars that Ford will be denied, which might indeed be a mortal blow.
GM, Ford, and Chrysler are not "domestic auto companies", and have not
been for over a generation. That concept is nothing but a myth perpetrated by
those companies, their unions, and the political class. What the are is
multinational corporations that source a significant portion of their vehicles
and parts destined for the US market from foreign locations. Ford has major
manufacturing operations in Canada, Mexico, the United Kingdom, Germany,
Turkey, Brazil, Argentina, Australia, the People's Republic of China, and
South Africa. GM currently manufactures cars and trucks in 34 foreign
countries, and engine blocks have been made in Mexico for many years.
Chrysler, even after the recent divestiture by Daimler-Benz, is still building
vehicles in Argentina.
The so-called "import manufacturers" are every bit as domestic to the US as
are the "big 3", perhaps more so. Those 8 foreign auto manufacturers have
operations at 25 locations in 12 US states, and employ >49,000 US workers.
BMW, Honda, Hyundai, Mercedes, Mitsubishi, Nissan, Subaru, and Toyota
build virtually every car and truck that they sell in the US, in the US. Last I
heard, the officers of those manufacturers were not queued up in DC, hat in
hand, begging for handouts like incompetent fools. (con't)
I disagree. The big three put themselves in this position by wanting profits as quickly as possible and refusing to put money into research and development. They need to get themselves out of it. Let them go into bankruptcy protection. They will have to restructure management and the UAW will be forced to renegotiate. It’s worked for several airlines.
How hypocritical was it for the Big 3 CEO’s to take private jets to DC to ask for their handouts? Charged to the company, I’m sure and not to the multimillion dollar salaries that Ford and GM CEO’s are unwilling to reduce.
They deserve everything they get and I am strongly against a bailout.
A New York Times article says that GM chief Richard Wagoner was paid $24 million in 2006 and 2007, in salary, stock options and other perks. And his 2008 salary base is $2.2 million.
Michale.....
I'm disgusted by the comments I'm seeing made by so-called "progressives", they nothing more than left-leaning opportunists looking to capitalize on union labours misfortune.
There are only two very vocal groups sticking up for the millions of automotive workers - the automotive workers themselves and as unbelievable as it may seem -many Wall Street analysts, hedge fund managers etc. who look at it this way- we can not afford to lose over a million jobs, so while we might not like the unions, but if we can blow 350 billion on opaque bank deals we can afford a 100 Million dollars to save millions of jobs.
You are spot on about southern states looking to become the non-union, cheap labour, tax-incentived alternative to the domestic auto industry. Oh yeah that's brilliant, let's make those red state Republicans wealthier so they can donate even more to their churches and the NRA. Barbara Boxer tipped her hand yesterday as well "Our guys in California developing electric vehicles should get the money". The vultures are out in force.
Finally you are correct, if the big 3 fail, the federal government picks up their pension obligations ...all 600,000 or so of them, so have effectively socialized the losses and have given away our national "upside" to green opportunists/entrepenurers. .
Bailing out these auto companies keeps productive assets in pursuit of unproductive endeavors. Namely, making expensive cars that Americans don't want.
Americans don't want to pay a premium for American autos - not when the premium goes to a forklift operator's $120,000 salary (instead of putting that money towards attractive features). A Toyota with better features or a nice warranty is much more attractive to consumers. Those inexplicibly high union wages are crippling the auto industry's ability to be competitive with the more efficient producers.
Hmmm.... so the forklift operator should be less well off so that he/she can make a less meaningful contribution to the tax rolls and be a less active member of the U.S. upper middle class? High-wage manufacturing jobs are essential to the health of the economy. Now, can those high wages be sustained through an aggressively retooled auto industry--one that gives the taxpayer real Green progress in return for the tax payers' generosity? I think so.
I agree, this could be a huge opportunity IF handled correctly. They say UAW wages add $2,000 to the sticker price of an American car. If true, I'd say that would be $2,000 I DIDN'T mind paying out of the $25,000 they're charging for a semi-decent car! 2008 Nobel-winning economist Paul Krugman agrees that the auto industry must be saved. (And he's not one of those trickle-down idiots; he's a real economist.) There are WAY too many jobs at stake; not just Big 3 jobs or Detroit jobs. I think he said it could amount to 5 million jobs factoring in all the companies that supply and service the Big 3, right down to local sandwich counters. Ad Age points out they are among the biggest advertisers, so there go a whole bunch of advertising jobs. It's a massive ripple effect. I hate GM as much as anyone else possibly could, having been a victim of their undersized-transmission racket the last year before the Lemon Law was enacted. But putting 5 million people out of work isn't going to make me feel any better, and it won't improve the economy either. This bailout has to be done, so let's take the opportunity to do it right and get some permanent long-range improvements in the U.S. auto industry. And let's start by kicking out those 3 idiot CEOs who didn't even (in the words of one UAW worker's sign) "jetpool" to D.C.!
What on earth makes the author imagine for a second that the bailout will be an opportunity to transform Detroit? There has been nothing even suggested that the the big three have a plan to do that and that the bailout money would fund that plan. The bailout money will go into the coffers, SUVs and truck sales will pick up due to cheap gas for the moment and nothing will be changed.
How is this for a plan (starting point):
1) Put them into bankruptcy to wipe out the equity
2) Rewrite the UAW contracts so they are on par with the "transplants" of foreign car companies in the US
3) Rewrite the dealership agreements closing excess dealers and unprofitable brands
4) Give the US taxpayers (or the gov't) warrants on the new companies if they should go public and be successful.
5) Give the pensioners some money and warrants on the new companies.
If the taxpayers have to suffer pain, then the pain is going to have to be equally carried by the stockholders who elected those morons and paid them dividends instead of investing, the workers and pensioners who squeezed the big three into catastrophic contracts and the dealers who lobbied to get state laws passed that make it nearly impossible for the manufacturers to trim their lines.
SUV and trucks sales picking up would be a wonderful thing, in this plunging price-of-gas environment. But I've already argued that Detroit needs to be able to sell as much as it can of its most profitable products, and that the feds should help whatever consumer wants to buy a new truck or SUV to do so. But the feds need to insist that Detroit undertake serious change in return for these efforts. Essentially, the USA needs to briefly nationalize the car industry.
Now, as to yr points:
1-GM was above $44 a share about a year ago. It's pretty far below that now. I'd say the equity has been mostly wiped out already. This really isn't about shareholder value. It's about preserving the manufacturing base and saving jobs.
2-This would be profoundly unfair to the UAW's membership, which has been a partner in Detroit's restructuring for years now.
3-So we want to put the people who sell the cars in bankruptcy, as well?
4-The taxpayer would be better served by environmental concessions that an $$$ position
5-I may be wrong about this, but bankruptcy would put the pensions in the hands of the feds, which would add even more drain.
You're proposing a nuclear solution here, forgetting that the fallout and radiation persist long after the city has been destroyed.
There is simply NO guarantee that giving the Auto industry their bailout will force them to change their ways..
There are only so many band-aides you can apply, only so many symptoms you can treat before you have to acknowledge the reality and come to grips with the fact that the patient cannot be saved..
The choice that has a MUCH BETTER chance of success is to let the patient die and then, from the ashes, create an entirely new business from the ground up.
One that is better and more in tune with today's realities.
To quote Captain James T. Kirk, "Let them die."
It's the only logical course of action.
Michale.....
I agree. Let them go bankrupt; then someone who's actually willing to build greener vehicles can buy them cheap and move the auto industry where it needs to go.
What would they buy, exactly? And who would buy them? Private equity's experiment with Chrysler has not gone well. It's also worth noting that as much as we need more Green vehicles, and fast, we also need companies that can build trucks. Look at Ford, which is assuming that GM and Dodge won't be able to meet demand for half-ton trucks in the future, and is ramping up production on its industry leading F-150. It's also not clear that in the face of fluctuating consumer demand--want a Pruis today, want a 350 horsepower sedan tomorrow--that ANYONE can be trusted to take the US car biz where it needs to go. Hence my suggestion that the taxpayer take a stake.
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