Democrats' Soft Spot for Automakers Have Shielded Detroit from Its Own Bad Decisions

Not at current U.S. "rate of usage" at least.

It is high time to rethink "mass transit" in "interurban" and "national" terms.

Personal mobility is simply NOT what the dreams of '50s GM engineers thought it would be.

Not if we are looking toward sustainability.

Reinvestment in rail -both interuban and local- plus an acknowledgement of the automobile's proper role as almost entirely INTRA-urban transport are what we need now.

Any "bailout" for the automobile industry -at least as currently structured- is just more decoration on the tombstone of Unsustainable Industrial Economies.

november5.org

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

As if by ironic coincidence I have recently rediscovered a copy of Ralph Nader's classic critique of the US auto industry- "Unsafe At Any Speed". While rivals such as Honda, Kia, Hyundai have been developing hybrid alternatives, Detroit's "big Three" have been churning out gas guzzlers such as the Hummer and kindred monstrosities as well as publicly denying global warming(using many of the same dilatory "show me" tactics in Nader's book) so they should not be surprised if they get bitten in the ass!!!

Terry

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

I don't know if this is Alternet's headline or the author's, but it should be "Has Shielded", not "Have Shielded".
That one's not too tough, folks.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

...that the Big Three were selling the cars that Americans wanted. I'm no fan of big gas guzzlers but I do know that they were selling like there was no tomorrow and in fact Honda and Toyota were dragged all too willingly into the big pickup market. This is a business that cannot react to overnight spikes in fuel prices(caused by speculation more than anything) due to the sheer physics of retooling. The Big Three are guilty of lack of foresight and should have been building more fuel efficient vehicles but they were responding to public demand all along. My '96 Saturn still gets 40/30 mpg and even Hondas and Toyotas fuel economy ratings are lower than they were in years past. Anyway, 25 billion dollars is a better investment and will protect some 300 billion in total tax revenue(according to Carl Levin anyway) than the more than 700 billion going to a limited number of bankers that truely do not deserve to be in business.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

Nobel laureate and economics professor Gary Becker could not put it more right in his blog. I come from Sweden and am a former union leader and negotiator. I am so surprised when coming to the USA and seeing the total lack of social responsibility shown by the unions, the total lack of being able to negotiate for the future, to make companies sustainable.

In Sweden the unions and the corporations, in particular the unions, have had a policy that bad and mismanaged companies should be made redundant. The theory was that only economically sustainable companies could pay high wages. The unions forced bad businesses out, made them close down. GM, Ford and Chrysler would have been made to change as SAAB and Volvo did. Sharply reducing the workforce, cutting wages and focusing automation and helping the companies adapt for the future. If you only look to yourself, your own interest you get the situation you have in France and the US, stagnant companies and an superbly egotistical union that as soon as things go bad goes crying to the government to bail you out. As Becker shows you can produce good cars with adequate wages and benefits in the US.


Bail Out the Big Three Auto Producers? Not a Good Idea-Becker

If GM is not bailed out, the company claims it will be forced into bankruptcy within a few months, and Ford's situation is only slightly better. GM is blitzing Congress, President Bush, and President -elect Obama with pleas for a bailout, followed by a warning that bankruptcy will also hurt auto suppliers throughout the nation that depend on GM's business. GM is also claiming that bankruptcy will put major financial pressure on the Pension Benefit Guaranty Corp, the federal agency that insures benefits to retirees in the auto industry as well as to million of other workers.

Nevertheless, I believe bankruptcy is better than a bailout for American consumers and taxpayers. The main problem with American auto companies is that during the good times of the 1970s, 1980s and 1990s, they made overly generous settlements with the United Auto workers (UAW) on wages, pensions, and health benefits. Only a couple of years ago, GM was paying $5 billion per year in health benefits to retirees and current employees because their plans had wide health coverage with minimal co-payments and deductibility on health claims by present and retired employees. In those days, the UAW was one of the most powerful unions in the US, and it bargained aggressively with the auto manufacturers, carrying out strikes when its demands were not met. When the American auto industry began to face tough competition from Japanese and German carmakers, they were saddled with excessive pay to their workers, and vastly excessive pensions and health benefits to their current and retired workers.

It is not that cars cannot be produced profitably with American workers: the American plants of Toyota and other Japanese companies, and of German auto manufacturers, have been profitable for many years. The foreign companies have achieved this mainly by setting up their factories in Southern and border states where they could avoid the UAW, and thereby introduce efficient methods of production. Their workers have been paid well but not excessively, and these companies have kept their pension and health obligations under control while still maintaining good morale among their employees. In recent years GM and the other American manufacturers have chipped away at their generous fringe benefits, but their health and retirement benefits still considerably exceed those received by American auto workers employed by foreign companies. As a result of lower costs, better management, and less hindrance from work rules imposed by the UAW, about 1/3 of all cars produced in the US now come from foreign owned plants.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

Big Auto ! We wouldn't be so heavily dependent on foreign oil otherwise. I rest my case.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

I can't blame the American people for being disgusted at being expected to bail out first the airlines, then the investment capitalists, then the bankers, and, now, the automakers. But, in actuality, it is not the automakers who are to blame for their current situation.

If it had not been for massive capital investment by the Japanese government into their own auto manufacturers, combined with low American tariffs on their imports and lower health care expenses for their younger workers, American manufacturers could have invested more in the technology required to compete on quality. (Despite the unlevel playing field, American manufacturers have now caught up.)

If it had not been for the UAW and other unions, the American middle class would have been little more than a capitalist pipe dream.

If it had not been for consumer demand--you know, the thing that drives capitalism--there would not have been Hummers, SUVs, nor the Indy 500. Supply-side economics doesn't create the kind of wealth Americans have enjoyed over the past four decades (up until 2007).

Isn't it a little short-sighted to blame past generations for wanting to build a lifestyle for themselves and their progeny that was on a footing a little more secure than, as one poster here writes, "adequate"?

Those of you who feel that the Big Three should be allowed to go bankrupt as payback for their folly need to look yourselves in the eye and ask yourselves if you've ever bought a car with more horsepower than you needed, if you've bought a station wagon or an SUV, owned leather seats or a convertible. Is your house merely "adequate" to meet your family's needs? Have you ever paid to see a movie lacking in any redeeming social value merely for purposes of pure entertainment? Have you ever bought something you didn't need purely on impulse or thrown away clothes that were "out of style"?

It's time for liberals to stop whining and start pull together to bring America through what is probably the toughest economic times since the Great Depression. Let's not forget that is was the auto industry that retooled to help America win the Second World War. We owe them and the dedicated Americans who work there or who have retired after decades of working hard to achieve the American Dream. We can't just write them off now for the sake of clinging to some fantasy of being holier than thou.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

I thought we were only going to bail out the financial sector. Now the automobile manufacturers? What's next? The airline industries? The golf ball manufacturers and La-Z-Boy? What about ME, the citizen consumer!?

Simply put, if you're a multi-generational family company that cannot adapt to the demands of the 21st century, then you're going to go the way of the horse buggy manufacturing industry. We cannot afford to be Macroeconomic Romanticists, we must be Macroeconomic Darwinists and let the weak die out. However, in these troubled economic times, bailing out those who are in debt that was unavoidable (e.g., STUDENT LOANS, first tenuous mortgages, small business capital investments [like a new delivery van], etc.), would fundamentally fix our economy because it would allow people to spend again! Bailing out the financial giants was also a play to make sure that they kept servicing, and profiting from, our debts. Thanks, Washington.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

In the end, corporations can make poor decisions [sub-prime mortgages, etc.] and put their existence at risk. But if they're large enough to affect the economy by tanking, they turn to the public purse to bail them out.

To me, this sounds like extortion [more on that here]. But it's also the cost of doing business in a society that wants to play that whole neoliberal, deregulated capitalist game!

Politics, Re-Spun

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

Dr. Ravi Batra, an Economist at SMU has a brilliant idea.
Why not, instead of a bailout, buy 51% of the "Big Three's" stock, sell it back to the rank and file and let them decide how to build an auto that Americans want and need?
The current management tried to dupe americans into buying SUV's that were too expensive and wasteful for us and now they're paying the price for creating an artificial market.
At the risk of sounding "Socialist", the workers have the solutions to this problem

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

I'm worried that pumping money into a car giant like GM is protecsionism.After the wall st crash in 1929 protecsionism was seen as the main cause of the depresion.If the likes of BMW and Toyota were to take counter measures world tradeing could dwindle causeing unemployment to rocket causeing a second depresion far worse than the last.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

guys... you blew it... seriously... here are a few comments from me personally...

you knotheads KNEW back in the '80's that people wanted more efficient cars... remember the red and green flags at gas stations and even odd plate days for gas... you guys slept through it and brought out the biggest pile of junk imaginable... so... toyota, datsun and honda got a good grip on the american market...

the days of cheap gas were over BACK THEN, you guys knew it and continued on your merry way to oblivion...

suddenly a few of you woke up a little, retooled and in the mid 90's started to come out with lines of cars people might look at... again, the big asian three beat your pants off...

continuing onto today with those blinders on, you guys come out with bling and the hell with mpg or other considerations... the suv-pickup crowd was telling you that they wanted cars that were safe and still get decent mpg... we wanted vehicles that would last beyond the final payment on a 5-6 year loan without the engine or transmission needing to be replaced...

still, without listening, ford, you have produced the biggest pile of crap but sure is a little cheaper but too flimsy... gm... you guys are on another planet, and you need to take the damn thing to a shop just to figure out what that little light is telling the owner means with a big ticket computer reading module... chrysler, well what can i say, you guys can build a long life vehicle but you need fancy tools and the 'mopar prayer' needs to be said with the sledgehammer and monster screwdriver to do anything...

this past summer I drove a racecar that was lightyears beyond what you guys make, a toyota camry... rented a nissan maxima and almost cried when it had to be turned in... why do the three of you continue to ignore the consumer... we want a vehicle that is made here for this market at a reasonable price that pays your employees a livable wage...

chrysler, please explain to my why my '96 dodge ram pickup with 4wd and v10 engine gets better millage then your smaller. lighter new cars???

thank you, now you can burn and ignore this note and carry on until bankrupcy tosses your companies in the trash heap of failed business models... we told you, you guys ignored us and now expect the american taxpayer to pay for your bad decisions... I think NOT!!!

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

I want em to phase out the IC (internal combustion) engine on a fixed and rapid timetable.

The "Big three" have been operated as a "loss leader" (you sell milk - for example - for less than cost to attract customers to other products) by "big oil" which utterly controls (through a labyrinthine network of foundations, cross-owned businesses, and interlocking boards of directors [for example, at one time the treasurer of Exxon was on the board at GM])the American auto industry. This was laboriously detailed in a 1977 book "The Rockefellers" by Peter Collier.

It explains otherwise inexplicable decisions like confiscating and grinding up electric cars. When VWs started selling like hotcakes in the 60s, Detroit responded with muscle cars. Until we end the stranglehold big oil has on our auto manufacturers, they will continue to shrink into irrelevance and sooner or later, oblivion. They will not cooperate in efforts to promote alternatives to oil.

GM is now building a $40,000 electric car. Coincidentally, the car is so damned expensive that it makes economic sense to buy a much cheaper gas burning car - even if gas hits ten bucks a gallon!

Actually, it's no coincidence at all - and that's the kind of "environmentalism" we will continue to see from the oil-slaved American auto industry - unless we force em to change.

It no longer makes sense for automakers to be a marketing tool for big oil.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

First, kill the electric car. It's bad for business.

Also, privatize any public transit systems for sale and kill them.

Next, hire 1000 engineers to build more planned obsolescence into cars. FORD is an acronym for "Found On Road Dead". The public will just go buy more of our cars.

Next, pay Congress many millions of this money in campaign contributions for better freeways. The more the nation is committed to the expensive freeway model, the less chance anyone has of using transit.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

were is my bail out

-US Steel, LTV Steel, Republic Steel

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

It is so OBVIOUS who is responsible to bail out the Big Three Automakers.
The Oil Companies!!!
With their big record breaking profits.
Who is most responsible for never letting the automakers make anything else?
It is obviously BIG OIL's job to fend off their desire for us to still run on nothing but gas guzzlers, NOT OUR's. We don't HAVE to buy them.
When my new Hydrogen Powered Chrysler Eco Voyager comes out, and it is affordable with fuel stations available for it, I will buy one.
So will everyone else. There are prototypes in every make and model.
We want to see those on the lots.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

Bailing out a corporation is not capitalistic.
Letting companies rise and fall with supply and demand is Capitalism.
They got themselves into it, let them get themselves out.
We do not have to buy their products if we don't want to.
We certainly do not have to pay them to be able to keep making out of dated shoddy fuel inefficient products, that are no longer in demand.
We can go and buy new products, that are in demand, somewhere's else.
It's tough but this is the core idea of free market capitalism.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

There are several misconceptions in the media about the auto industry.

1) The big three aren't making cars people want. This is so false. The SUV started at Chrylser after the "Iaccoca bailout," became a sales phenom, Americans loved them.

2) It's labors fault. I find it so curious that a group of people called a union negotiate a contract under that time's business climate is somehow wrong, in comparison to upper management negotiating their contracts.

3) Legacy and health care costs. This may be indeed a problem, except when comparing to other auto nations such as Germany and Japan. Only in the US is there no national health care and several other social programs that a Toyota or Volkswagon don't have to worry about trying to compensate workers. Germans have even stronger unions than the US has, it doesn't hurt them. It's the social programs of the nations that American car companies are competing against. And a second point here, the upper management of course gets all sorts of social compensations not available to the other workers as well as luxurious retirement packages.

4) It's a bailout. No, it's a loan. The money is to be paid back, at least that's what I last heard and what it should be. The terms of the loan are certainly going to be more specified than we've seen for Wall Street "loans."

5) Failure of management. Most of top management in the big three is fairly new. As much as I'd like to blame management, they've been trying to make big changes in a short period of time under vastly altering business climate. Trying to retool cars is a long term process, about 5 years, nothing like making a new shape of gummy bears which is easy. There are many things that need to change within the auto industry, but allowing them to fail isn't going to help make those changes happen fast, just the opposite, slow the process down.

And I'll bring up another point. We need to see this as nationalism. These are our companies and our jobs. I'm bugged by the no-bailout crowd (free enterprise, anti-union specifically), that doesn't seem to care if the foreign car manufacturers come to dominate the car industry. The opposition would like nothing more than the destruction of unions in America, paradoxically caring little about foreign unions. They care only about the free enterprise ideology, trying to still somehow save the trickle down theory through practice.

To casually flip some "let them die" decision is not understanding the long term history of their economic impact or the future needs of our country. Sure, they need to make changes. Guess what, they've made changes before, why shouldn't they be allowed to make some more? They want to make those changes, but time is not on their side right now.

Bankruptcy would be highly disruptive. Sales would probably plummet even from today's numbers. Would you want to buy a car from a bankrupt company? Auto supplier companies would also be thrown into chaos as would dealerships (which need massive changes right now as well).

Do we really need this kind of economic disturbance in the current climate? Add in auto bankruptcies to the crap going on in banking and we might be saying that this era will be worse than the Great Depression. We already are sitting on the precipice of economic disaster, let's not hammer another nail into the coffin.

A small loan, $25 billion in comparison to the $700 billion TARP, isn't such a risk. There should be conditions. Increase on CAFE, upper management concessions, alternative fuel vehicles, and I would say even the union should give up the jobs bank.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

We've been through this already. We are picking up the retirement plans of the airline industry and steel industry. Why? Because those companies went BANKRUPT.

So you are wrong about the government picking up the tab. By doing a loan it's an effort to avoid bankruptcy and thus also to avoid picking up that tab.

The government fund is called the Pension Benefit Guaranty Corp. (PBGC). And when the steel and airlines companies (there are other as well) went bankrupt, the retirement plans transferred to the PBGC at pennies on the dollars. In other words, the employees got shafted.

It must be nice to not care about other peoples retirements or is it some type of jealousy of negotiated health care benefits that really we ALL should be getting if not for the fact that we are the only industrialized nation without a national health care plan.

And further, auto makers have not always paid what unions demanded. In fact the last negotiated contract produced vastly lower wages for newly hired plant workers and reduced health benefits for retirees. In fact, at one time back in 1937 Ford workers were gunned down for wanting higher wages (the Battle of the Overpass, look it up). Nearly every negotiation has been fought tooth and nail, no give in to the union. The fact is that unions have made concessions in the last several contracts. Do you know what concession means? I'll explain, it means that the auto companies DID NOT pay whatever the union demanded.

And what's the title "company welfare" suppose to mean? Are you against people making a wage? We are suppose to work for companies for free? By definition ANY compensation to a worker would be company welfare.

You obviously don't know the facts to make such statements that you made.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

look, the automakers are in bed with the oil & gas industry, who obviously have a ve$ted interest in the types of vehicles being produced, ie, the big automakers are 'incentivized' by the oil companies to keep producing more and more gas guzzling vehicles. the two industries are pathologically co-dependent on each other, to the detriment of us all and the planet.

furthermore, for years the big automakers willfully ignored changing market conditions and consumer demand/desire to drive cars that DON'T pollute, instead they chose to completely ignore the environmental consequences of producing an unyielding supply of the SAME vehicles, built around OLD technology (the internal combustion engine), despite the FACT that alternative technology has been around for decades, like the EV1, built by GM more than 10 years ago. (the EV1s were great cars, but it scared the hell out of the oil companies, and was quickly killed off, 'crushed to death' in a california desert scrap yard)

this madness has to STOP, and not at the discretion of the oil/auto industries either, it all must come to end NOW. and this so-called 'crisis' is the perfect opportunity to force the auto industry to restructure and change its ways.

do i feel bad for the automakers... not on your life. their short-sighted greed, wanton disregard for the environment and what motorists really need/want to drive is what got them into this mess... so, let them bail themselves out. if necessary, let the big ones fail, because better, more responsible and forward-thinking companies, like ZENN motors (a canadian company that builds electric vehicles) and others will gladly step in to take their place.

INSTEAD of handing over gobs of cash to a failing auto industry that has consistently refused to do right by the public and the environment... the government should INVEST OUR MONEY in public transit infrastructure (like the europeans have been doing) to massively improve it so that taking public transit becomes much MORE convenient than driving single-occupant vehicles.

people need to change their attitudes about how they get around, and get back to transportation basics by demanding that our government invest our tax dollars in the construction of EFFICIENT & convenient world-class public transit systems, all interconnecting and on a massive scale. that is the highway to a better/cleaner future. whereas, producing more cars and building more roads is definitely NOT the way to go. the sooner we all wake up to that reality, the better it will be for everyone.

as for the auto workers, for those who are willing to LEARN, they should be re-trained to build more eco-friendly vehicles or even for work in the emerging 'green' industries.

http://www.zenncars.com/
http://en.wikipedia.org/wiki/General_Motors_EV1
http://en.wikipedia.org/wiki/Who_Killed_the_Electric_Car%3F

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

One lame duck is about to leave the oval office, and is doing all he can to scorch and burn, including new rules or laws or some kind of paper to allow coal companies to blow off the tops of more mountains and dump them into streams. Some say he's planning a nice 9/11 style farewell blowout. He says we must hand out corporate welfare. The other duck is lame because he won't access the oval office until January 20, but he is saying "yes we can give billions to the big three auto makers", even while those guys are handing out piddly millions to each other, rewarding each other for their sheer failures in R&D, their lack of creativity and innovation, and their complete tunnel vision.

Well, you have to feel sorry for the auto makers, right? It isn't like they've ever dealt with a recession before, or a sudden spike in fuel prices. They've never had any bailouts before, so they probably won't ever want any again, right?

Wait, yes they have, yes they have, and yes they will.

How can you blame them for their ALLEGED financial plight when they only made the big, flabby, fuel guzzling vehicles because the market wanted them (although the market often got whatever else it wanted from Toyota, Honda, Hyundai, VW, etc.). Then there are those pesky unions that have brought down the big three (even though the auto workers have given nothing but concessions for the last decade, maybe two decades). And there's always the cry of the top heavy corporation: "who could have known???"

Indeed, who does get millions in compensation and bonuses to know, to do the hard work of developing and manufacturing winners instead of losers, to present the diverse product line that can weather the vagaries of the economy?

Well, I hope all the guys down at GM are ready for the onslought of jokes about the new Cadillac welfare queens.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

Those against the auto industry bailout argue that the Big Three are failing because of their own shortsighted decisions and therefore do not deserve taxpayer money.

Those for it argue that a bailout is necessary to preserve the millions of jobs tied to American auto manufacturing.

There is as solution, one that preserves the jobs without rewarding the idiots, and it is as revolutionary as it is logical and necessary:

MAKE THE AUTO INDUSTRY BAILOUT CONTINGENT ON CONVERTING THE BIG THREE TO WORKER-OWNED COMPANIES.

Worker ownership means that voting shares of stock are parcelled out equally among all employees of a company. It is a superior alternative to both capitalism and communism. Examples of worker-owned companies include the hugely successful Mondragón Corporation in the Basque Country, which started in manufacturing and has expanded into finance, retail and education, and the John Lewis Partnership, a major UK retail company.

This would not be the first time a failing company was rescued by turning it into a worker-owned cooperative; most of Argentina's 200 worker-owned companies got that way because the bankrupt companies were taken over by their workers during the country's economic crisis.

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]

All real innovation comes from Detroit. The rest of the world mimics their genius and repackages their concepts.

The market for SUVs, TRUCKs, and other LARGE VEHICLES has moved the Big-3 in the direction they have gone. You can’t have a politician direct business they have no experience and push for items that may not be functional for 30 years.

Like Obama say, “Keep you tires inflated and the fuel shortage problem will be solved.”

[« Reply to this comment] [Post a new comment »] [Rate this comment: 1 - 2 - 3 - 4 - 5]