Looks like there will be no auto bail out with this Congress and this president. The NYT reports today:
The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition during a lame-duck session next week.
Nor does it appear that Bush supports any action. What does this mean? “Some industry experts fear that one of the Big Three automakers will collapse before then.” This is GOP tough love.
Again, I don’t know that anybody should shed too many tears for the Big Three/Medium Two, but I would at the very least accelerate the $25 billion retooling loan to them — only with major strings attached (see “Why bail out the car companies when they bailed out on us?“). It looks like Obama agrees, according to today’s Washington Post piece, “Obama Ties Automaker Rescue to Regulation“:
Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an auto czar who could ensure the money was being used wisely.
Aides said Obama is also open to an oversight board that would perform the same function as one individual. The proposals come as the estimates of the cost to fix Detroit’s three largest automakers continue to mount.
“Certainly he wouldn’t believe in it being a blank check,” said an Obama adviser, who spoke on condition of anonymity due to not being authorized to speak publicly on the topic. “He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns.”
But, again, none of this is going to happen until Obama is president:
“Right now, I don’t think there are the votes. I don’t know of a single Republican who’s willing to support” the auto bailout, Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said yesterday. While Dodd said he supports a bailout, he cautioned against “bringing up a proposition that might fail” and suggested that Congress wait until Obama takes office.
Not clear Detroit will survive that long, but as the NYT says, that’s no big deal to the GOP:
Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, said he would not support legislation to aid the auto companies and seemed prepared to let one or all of them collapse.
“The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force,” Mr. Shelby said in a statement. “The financial situation facing the Big Three is not a national problem but their problem.”
On Thursday, Representative John A. Boehner of Ohio, the Republican leader, also came out strongly against the idea.
“Spending billions of additional federal tax dollars with no promises to reform the root causes crippling automakers’ competitiveness around the world is neither fair to taxpayers nor sound fiscal policy,” Mr. Boehner said in a statement.
Representative Jeb Hensarling of Texas, chairman of the conservative Republican Study Committee, in an appearance on Fox News, said: “You wonder where bailout-mania will end.”
Mr. Hensarling said American automakers should bear responsibility for their failed operations. “They are producing high-cost products that consumers don’t want to buy. And so now we have Washington on the verge of giving them a bailout simply because we have all heard of them and they have high-priced lobbyists.”
Again, bankruptcy is probably a better near-term option than simply handing the car companies a blank check (see Pearlstein: “A Detroit Bankruptcy Beats a Bailout”). But helping Detroit make a rapid transition to high fuel efficiency cars and advanced hybrids would be the best option of all.
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What people are looking for is least pain and that can be done, mostly with bankruptcy, but if the government puts money into the industry they should also make some of the decisions.
Motor vehicle labor unions say they have already sacrificed, new hires make half of what those who were already hired are making. If it’s good enough for new hires, those who have been working at the higher pay rate should make 55 percent of what they are doing now. (it would probably make those who are now saying I told you so that if we made this compomize in the contract it would happen us; oh well) If it’s good enough for the new hires, it should be good enough those you have been working for years at the highest rates. White collar jobs take paycuts also.
Then as long as all 3 American headquartered companies are having trouble, if they do have to downsize, eliminate the weakest sector of the business for that company. Whichever one is weakest in large pickups drops that from their product line, whichever is the weakest in SUV’s does the same.
As long as there is opprotunity for change as there is now, change is certainly easier, but a real long term fight against greenhouse gas global warming is a long term fight. Right now we should concentrate on saving a motor vehicle industry so that in the future we can influence the motor vehicle industry.
Kiss yer pensions and health care coverage goodbye!!!
No loyalty to the American worker.
Word.
How To Save A Major Automobile Company
Neil Young
http://www.huffingtonpost.com/ neil-young/ how-to-save-a-major-autom_b_143749.html
Any idea what a bankruptcy would do to the Volt and the E-flex line?
Bankruptcy might be a good idea for one of them.
I sympathise with republicans who would rather use bankruptcy to deal with the financial problems of any of the big 3. It is why there are such laws. And they’ve worked in the past for large companies. But can the current state of the financial system and the north-central economy deal with one or more such huge bankruptcies?
I don’t think they can. That is just an unfortunate reality. 5 years ago, maybe. Today, no. So Congress needs to take a two pronged approach.
The first is the financial incentives for doing “right” things (like funds and guarantees for financing for retooling and research for more efficient vehicles and electrics and hybrids) . This should not be a hard sell for republicans.
The second, more difficult issue is that if bankruptcy is determined to be, at least in the near future, off the table, how to keep these companies (or the northeast economy) afloat, and in what form? I think republicans can be convinced of the argument that bankruptcy is momentarily unwise. But what to do next is a real tough question. Both democrats and republicans, along with the auto-building states, need to focus on this issue.
Obama should offer the republicans a stake in determining the outcome. I think they would willingly work very hard in ensuring that Detroit doesn’t become an second New Orleans. This is an unprecedented situation, and republicans shouldn’t have a difficult time abandoning the, so far fairly quiet laissez-faire voices, like Pawlenty’s, for the chance to help craft a real solution.
The problem is that if one of the major autos goes completely under the implications of that will echo up the supply chain to other companies and will probably result in the economy shedding about 5 million jobs.
In a free market sense, its possible that the USA simply doesn’t know how to competitively build cars anymore and that this “should” happen. However, even Adam Smith understood that the free market’s pruning of inefficiency was destructive and had huge human costs, and that those costs needed to be offset — but we’ve just come through about a 20 year republican experiment in disabling the social safety net.
So instead of having retraining and reeducation programs and programs to keep laid off workers in thier houses while they’re getting retrained we’re just going to destroy 5 million jobs and dump those people out on their asses. That means 5 million people who aren’t buying houses, cars and flat screen TVs, which ripples out through the rest of the economy to shed even more jobs (globally) in the companies that produce everything that those other 5 million people would have bought.
The free market is somewhat similar to the global climate in that it is composed of a large number of inter-related positive feedback loops. So left to itself it tends to operate either in bubble mode, or in deflation mode — it doesn’t produce a stable economic system. Left to itself the free market is perfectly happy producing >30% unemployment in this country — the free market doesn’t care about human suffering.
Really what needs to be done is to get rid of the overhanging problems with pension and health care costs. Universal health care would have probably saved the car manufacturers, but we decided we’d rather keep the republicans in power.
You people are fools if you aren’t on the phone calling all your GOP senate and congress reps to support some form of financial support for the auto industry and it would be good to understand why this is needed and why your mind is twisted.
1) The auto industry is not asking for Bailout in the sense of money for nothing. They are asking for bridge-loans to get them through this economic turmoil CAUSED by the financial elite and inept.
2) They can’t get loans from the regular markets because the credit market has essentially dried up. That $700B along with the more than $1T from the Fed to the favored financial companies has not gone into new credit for anyone…it has just fixed the balance sheets of companies like Goldman Sachs and JP Morgan or Morgan Stanely and they’ve given out over $20B in bonuses. So the money to the financial companies has been wasted multiple times.
3) The rise of the price of oil that also mortally wounded the auto industry was also caused by the government by lack of regulation in the commodity market and by the same financial groups as in 2) that caused the housing bubble and then used their derivative/hedge muscle to inflate the Oil bubble that had really started in 2002. See the June 2006 senate report concluding this or just read here: http://www.stopoilspeculationnow.com/site/page/the_problem
4) Do you ever wonder why the media and their economic “advisors” were all pro Financial bailout but are anti-auto industry bailout? The financial elite took over the GOP years ago and infiltrated every media outlet…most of which are owned by 5-companies. They don’t give a crap about you or the economy and know that ironically companies like Goldman and the like will be able to use their Tax backed dollars to buy the Auto companies for a song and control your lives even more. This media infiltration has helped turn you against all the domestic autos for over 8-years and you didn’t even realize it. Doesn’t hurt to have Chinese and Japanese money connected to those same groups and your debt…and then look at who benefits if you have no auto industry.
5) Ripple effect. By any such estimates and UNLIKE most of the banks, which could be wiped out and replaced pretty easily (really banking is not that complicated…only pyramid schemes are)….the domestic auto industry with their 1st, 2nd and 3rd tier suppliers are integrated and that’s not even including the economic benefits of their workers directly. A conservative estimate shows that if any one of them tumbles over…even under the “protection” of bankruptcy…that would cripple the entire supply chain that includes parts for Toyota, Honda too..and it would fall like dominos. Estimated impact of 5 to 9 million jobs lost (notice how the financial companies didn’t mention their job numbers much) plus $275B to $400B of lost personal income (incl. spending in the economy) with $100B to $160B loss in taxes after 3-years. Do the math people! The multiplier benefits or losses if it falls over of losing your domestic automotive industry is huge. It will cause a depression from the recession and all other crisis will be made much worse as the house foreclosure and credit card defaults will go through the roof.
Source: http://www.cargroup.org/ documents/ FINALDetroitThreeContractionImpact_3__001.pdf
6) Control of your domestic energy policy including fuel efficient vehicles. You know that Toyota only developed the Prius with huge subsidies from the Japanese gov’t right? That the Japanese autos have for years had an advantage of special help and protection from their governments…including a closed market…right? Unfair trade practices and currency manipulation with a lack of protection for any domestic industries is at least partly to blame.
7) Yes the Big 3 or Ford, GM and Chrysler made some major mistakes…mostly by letting and still letting bankers, marketing and MBAs run companies about products instead of engineers who know something. The Wall Street and financial elite infected every company in NA such that the only ones allowed to run the companies were the ones who knew how to suck up to Wall Street or they’d ruin you. Jac Nasser was among the worst. The solution to that is including strings in the money that limits executive compensation, perhaps creates a maximum ratio between the top and the bottom in the company, requirements for a better ratio of management to engineers. It’s funny that you hear about the rich executives mismanaging these companies, the lazy and overpaid UAW workers with absenteeism and Jobs Banks with outrageous buyouts…and you don’t hear about the diminishing engineers in the middle who actually have to help save the company from both sets of idiots and they keep cutting their numbers since they don’t have unions or are part of the protected fat cats class.
China is producing almost 50% engineers out of their schools while the US has less than 15%. That’s why China is getting ahead…they value and compensate people who actually design stuff and here the auto industry shows that you value either MBA idiots or overpaid UAW people far more than they are worth. Plus the Health Care costs that the Big 3 took on are killing them where in China, Japan, Korea…they all have national health care and thus have a competitive advantage.
So…if you want a future and some control over your energy and economy…you have to fight to save the auto industry even if you don’t want to. Any stipulations that force the Big 3 to invest in innovation directly…which means more engineers and hopefully less management and long-term less UAW inefficiencies and protecting of the worst workers…then America can forge their future…if you let them die…the ripple effect will cause the depression and you will have no control over your energy future and Humpty Dumpty will be impossible to put back together. Anyone who is telling you to let them fail…already has their money in the Japanese and Chinese markets or currencies and is literally betting on America failing as a way of making money.
Wake the F up people! How many times are you going to allow yourself to be played!