The Auto Industry: Should We Be Left Holding the Bag?
First off, I don't think there is any way we can let the domestic automobile industry disappear. First steel. Then cars. At this rate, the entire country will be nothing but a rust belt and an entertainment industry. No more GM, but plenty of cool software for smart phones.
It can't happen.
And, forgive me, I cannot get worked up into a frenzy about the industry for ignoring economic and environmental trends and allowing foreigners to take over. I do not expect industry to act in the nation's interests. I expect capital to behave like capital, with minimal regard for their workers let alone the country at large.
And that is why we have government. It was government -- successive administrations and Congress -- that allowed the auto industry to self-destruct. It was Congress that created loopholes for Hummers, SUV's and the rest. It was Congress which refused to impose binding mandates for fuel efficiency beyond what the industry said it would accept.
It is Congress that allowed lobbyists to thwart any chance we might have had of establishing an industrial policy like every other major industrialized state.
Blame industry? For what? For acting like industry. That is what capitalists do and it is government's role to check its excesses. But not here. Not our politicians.
So what do we do now? We bail Detroit out. We elected the governments that permitted this disaster. It's our responsibility to make sure that American workers do not pay the price for the voters' stupidity and greed.
And then we establish an industrial policy that ensures that 19th century rapacious capitalism be buried in this country as it has been buried in social democratic Europe. Anyone who expects banks, auto manufacturers, or Wall Street to do the right thing out of some kind of patriotism is nuts. The new President and Congress have to work together to ensure that industry's latitude is limited by as many laws and regulations as is necessary to prevent more disasters like the ones we've experienced in 2008.
But first things first: save Detroit, save those jobs, and keep those workers and their families able to meet their mortgage payments, put food on the table and keep their kids' health insurance. To even contemplate a Christmas massacre of a few million jobs is criminal.
More correctly we lost ship building, first to Japan, then to Korea. Government then allowed foreign pricing to undercut and devastate our steel industry, then encouraged offshoring automobile electrics and electronics and sub-assemblies, then offshoring electronic manufacturing with Corporate tax breaks building offshore facilities.
I'm waiting for subsities from the Government to offshore its Citizens. Then I can afford to move Spain (Great cuisine). Maybe they can pay for my language lessons too?
December 9, 2008 1:15 PM | Reply | Permalink
The reigning government has not only neglected to check the excesses of the auto industry, it has aided, abetted and encouraged the excesses, a practice which can only be explained if the government is an extention of the corporation, ala the fascist state.
December 9, 2008 1:21 PM | Reply | Permalink
Steel and autos are soooo yesterday.
Still, the U.S. remains the third largest steel producer in the world.
December 9, 2008 1:22 PM | Reply | Permalink
"At this rate, the entire country will be nothing but a rust belt and an entertainment industry.... It can't happen."
It has already happened.
December 9, 2008 2:21 PM | Reply | Permalink
No worries, Tom Fridman has the answer: like Ghana, we can become the next hub for all things IT.
You see, if you read enough of Tom Friedman's books, you realize globalism is exchanging "dirty" industries, which employ thousands, for t-shirt shops and graphic design studios, which employ dozens.
Hot, Flat, Crowded....and Broke.
December 9, 2008 2:42 PM | Reply | Permalink
Some people have suggested Ralph Nader as an auto czar, and that would be good, but Ross Perot would be more entertaining. Some quotes from Perot, whose company EDS was once owned by GM:
# I had several memorable experiences with GM. One, it just drove me crazy that when a customer had a problem with a defective engine, we wanted to treat it as a class action suit rather than fix the engine.
# It takes five years to develop a new car in this country. Heck, we won World War II in four years.
# Revitalizing GM is like teaching an elephant to tap-dance. You find the sensitive spots and start poking.
# The first EDSer to see a snake kills it. At GM, the first thing you do is organize a committee on snakes. Then you bring in a consultant who knows a lot about snakes. Third thing you do is talk about it for a year.
December 9, 2008 2:56 PM | Reply | Permalink
This first bailout is universally acknowledged to be only the first. And why should we be funding several different models of both pickups and SUVs? Like how about, each of the big 3 gets to keep one full sized (non hybrid) SUV in production, and two or three pickup truck brands. Or how about we only fund hybrid SUVs and pickups?
To throw money at vehicle models that are never going to last is a waste. Perhaps we can save some of the jobs, and save money by not trying to save all of the jobs.
Imagine if all of the bailout money had been put into a public lending entity, so that people could actually borrow money to buy cars. We wouldn't be in this situation, although things are going exactly according to plan.
From today's Financial Times:
http://www.ft.com/cms/s/0/7a03e5b6-c541-11dd-b516-000077b07658.html
December 9, 2008 3:07 PM | Reply | Permalink
I do not expect industry to act in the nation's interests. I expect capital to behave like capital, with minimal regard for their workers let alone the country at large.
MJ, I don't think many people are blaming the auto industry for failing to act in the nation's interest. They are blaming the auto industry for failing to act intelligently in their own interest.
It's just not true that the auto industry has simply "acted like industry". I work for a large corporation myself, and my corporation is not on the verge of bankruptcy. It is succeeding. It is not somehow in the nature of industrial corporations to drive themselves into bankruptcy. If those corporations make smart decisions in the competitive environment within which they act, they succeed.
I support some form of bailout with government mandated and overseen re-structuring, for the sake of all of the working people whose lives and communities depend on the auto industry. But that doesn't mean I can't still blame the auto industry for screwing up.
December 9, 2008 3:41 PM | Reply | Permalink
There's also the possibility that Oil interests set up Swiss bank accounts with hundreds of billions of dollars, for doing things like killing electric cars and limiting 4 cylinder options in the American market. Accepting such payments while setting up their companies for bankruptcy would be in line with what M.J. was talking about.
December 9, 2008 3:58 PM | Reply | Permalink
Hundreds of millions, rather.
December 9, 2008 3:58 PM | Reply | Permalink
Hey, here's an idea!
AIG, the insurance giant received an $85 billion
bailout from the Feds.....suppose we get AIG to lend the money to the auto industry.
December 9, 2008 4:28 PM | Reply | Permalink
If there's no way to help the auto workers without also helping Nardelli, I'm not too interested. All of the execs at the Big Three have to be replaced before they get public money.
December 9, 2008 5:19 PM | Reply | Permalink
who cares about 19th century "rapacious" capitalism. we are living in the 21st century. Capitalism needs to exist together with regulation.
But MJ is light on specifics. We can't have Congress running the auto companies (they can't even run themselves).
I don't think we need to have GM, F and C all exist going forward. There's no reason why we can't lose one of them. Cerberus won't put any additional money into C because it's not a good investment. So why should the government give C more money?
An industrial policy should not translate into government funding losses for a company who's cost structure is broken
December 9, 2008 8:23 PM | Reply | Permalink
By all means let us save the jobs of the workers in Detroit. Now, what shall we have those workers do? It seems to me that the problem faced by the big 3 is that too few people want to buy what they are selling at the price they sell for. Giving those corporations money to "save" them, but not forcing a hard decision to be made about just what they can make and sell for a profit in the world as it exists, is just giving our borrowed money away for nothing.
Also, we are utter fools if we lose this opportunity to convert the big 3 into a little dozen, none of whom are "to big to allow to fail".
December 9, 2008 9:10 PM | Reply | Permalink
Congress shouldn't dictate what Detroit should be making. They don't know how to run a car company (or companies). Congress shouldn't be dictating their business plan. What makes you think Detroit can sell green cars at a profit any better than they can on their current product offering?
Business is simple - companies need to make things that consumers want or they won't survive. But Big 3 management hasn't been following this for a while. They need to better understand their customers. You think the government knows what people want? I don't. It sounds like you want the government to dictate what types of cars Americans are allowed to buy.
You can call it whatever you want, but there's no way to make the taxpayer loans senior to the existing secured debt without a bankruptcy process. And the restructuring needs to be driven by a bankruptcy judge who has business decisions as the priority, not political or environmental ones. To put an "auto czar" in charge will be a disaster
December 9, 2008 9:44 PM | Reply | Permalink
Bushie, we already did offshore our citizens. Without the expense of exporting them.
For years the majority of this country have only enjoyed an improving life style by being encouraged to spend money drawn from a false appreciation of their homes, converting transient capital appreciation to income. Simultaneously the US was a net dis-saver. Meanwhile, at the bottom end of incomes we have allowed huge numbers of illegal workers to keep the wheels spinning.
Of course, at the same time most corporations were encouraged not to hold cash, and the government has been spending money it doesn't have. And the balance of what we don't produce ourselves has been streaming out to the oil producers, China, India, and to Iraqis, Afghanis, Pakistanis, and who knows who else.
Our economy and, by extension, the world's just wasn't and isn't as big as we thought it was.
So it doesn't matter what Obama's cabinet attempts to achieve, this sag in the economy is going to be long and very painful for many of us. It's going to be a long slog out of this recession, and the repercussions will echo down the years.
December 9, 2008 11:45 PM | Reply | Permalink
I'm curious: Why is MJ talking about this topic? Does he have some particular background in this?
December 9, 2008 11:47 PM | Reply | Permalink
As I've said in here before, I think the entire American domestic auto industry is a genuine matter of national crisis, with only PARTS of the 'crisis' (actually, perhaps the lesser parts) being purely economic in their nature. The immediate psychological costs to America, and the potential ultimate national security costs, combine in my opinion to make the TOTAL loss of domestic auto manufacturing a non-starter: It simply cannot be allowed to happen, whatever theory must be either employed or debunked to prevent it.
I tend toward a free-trade, free-market view (I actually have a close working relationship with a 'transplant'), but there are practical LIMITS to all such ideological slants, and I've hit one here in my own mind.
I've also said in here that I don't claim to know the answer. I've seen many decent proposals in this thread alone, any one of which might provide the way forward. Of course, when JFK said we would go to the moon in the 1960's, I didn't know how we were going to do that, either. The point is to make a national pledge, and then do what it takes to get it done. That's the American way.
December 10, 2008 7:15 AM | Reply | Permalink
"Should We Be Left Holding the Bag?"
all depends on what's in it.....
December 10, 2008 9:48 AM | Reply | Permalink