Detroit bailout editorial

Here’s the editorial I wrote for today’s paper about the Detroit bailout deal Congress and the White House have been working away on so busily this week:

The more we hear,
the worse Detroit
bailout sounds

CONGRESS IN RECENT days has made two things plain with regard to the Detroit Three automakers (still known as the “Big Three,” although they no longer dominate the marketplace):

• It is determined to do something, and to do it right away.
• It doesn’t really know what to do.

A couple of days ago, the plan seemed simple enough: Give automakers $15 billion or so — instead of the $34 billion they’d asked for — just to delay the inevitable until March. That approach was at least plainly and obviously unappealing. Essentially, we’d be throwing $15 billion into a hole, and accomplishing nothing other than kicking the can down the road.

In the last couple of days, as Democrats negotiate with the White House to try to shape a deal that enough Senate Republicans will vote for — realizing that some Republicans will never go for it — the “plan” has gotten more complicated. Note that we put “plan” in quotation marks, because this seems a dubious application of the word. “Plan” suggests coherence; it implies that we know where we are going. What was shaping up as this editorial was written seemed undeserving of the term.

Oh, but it would all be guided by a “car czar” to be named later — by George W. Bush, who will be out of office next month. House Speaker Nancy Pelosi has hinted that the czar would not need to be replaced once Barack Obama is president, thereby leading to speculation that the czar would be someone the president-elect had agreed to, we sorta kinda hope.

Presumably all this would be spelled out more specifically by the time Congress actually votes on it, possibly today (or possibly as hastily as last night; that was unclear as of this writing), but a sober period of reflection before the government takes a huge stake in a collapsing industry seemed not to be part of the “plan.”

Here’s an interesting sidenote: Even as the management at General Motors — management that we are assured by the board would not change, because the board doesn’t think it needs to change — eagerly awaited (temporary) salvation, Ford Motor Co. announced that it would not seek short-term federal aid, because it doesn’t face the same “near-term liquidity issue” as G.M. and Chrysler. That actually makes Ford sound like a better investment than any company that wants a bailout.

We understand that a collapse of the erstwhile Big Three would have a terrible effect on real people and real businesses throughout this country. But we also know — this has been more than amply demonstrated — that the Detroit automakers and the United Auto Workers have been locked in a mutual death embrace for some time, operating under contracts that make it impossible to thrive. Meanwhile, we’ve seen foreign carmakers operate here in South Carolina and elsewhere across the South, producing good jobs and weathering the current economic downturn better than the U.S.-based companies.

We wish we were confident that Washington had a coherent vision of how to turn the U.S. auto industry around, making it profitable and putting American automakers back out in the vanguard of innovation, making the cars that we will want (and the planet will need) tomorrow. That would be worth investing in.

But we view with suspicion any deal that spends our money to keep the U.S. auto industry going on its present course, especially when said deal is worked out in a rush between a lame-duck Congress and president.

6 thoughts on “Detroit bailout editorial

  1. Lee Muller

    American automobile manufacturing has to be saved, but the charade of a bailout is not going to save it.
    A lot of the unprofitability of Detroit is due to usesless, ideological regulations, taxes and union featherbedding imposed by federal and state governments. Governments need to make some drastic concessions.
    The Democrats are injecting poison pills into the bailout which guarantee its failure:
    1. Tighter, arbitrary mileage standards, instead of letting the engineers build vehicles which customers tell marketing that they want to buy, will just fill the lots with cars consumers don’t want. The socialist answer is to force them to buy them with high fuel taxes, or by simply outlawing the models the public wants.
    2. Defacto adoption of the ridiculous California CO2 standards, which will require a fleet average of 42 miles per gallon, a figure no vehicle manufacturer can meet. It will shut down Honda, Toyota, Kia, Hyundai, Subaru and all the imports. CO2 is not even proven to be any sort of environmental problem.
    3. Mandates to “retool” are a farce. A new model takes 5 years to bring to market. $15 Billion is 2 months of cash unless GM, Ford and Chrysler can cut costs drastically.
    4. There are no real concessions by unions, who have to take a pay cut equal Toyota and Honda plants on US soil, on a per-verhicle basis, which is no more than $43.00 per hour including all benefits. It will probably have to be lower than that, at least for a year.
    5. There must be concessions by retirees. They have to give up not only all cost-of-living increases, but take a lump sum cash settlement of the remaining pension funds so the automakers can walk away from that cash drain.



  3. Lee Muller

    If you live “up North” maybe you can find someone who works in automobile manufacturing to explain my points to you.

  4. slugger

    This bailout is like “ crawling along the edge of a straight razor and hoping to survive”. The clowns are going to give the circus away.

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