The GOP Doomed Detroit. And We Wont Forget
I'm still shocked that the bill granting $15 Billion to bail out Detroit's Big Three did not pass. And I'm still worried that the failure to protect the jobs of hundreds of thousands of American is an incredible mistake that will make this economic downturn even worse. But I must admit that I understand the opposition's argument on this issue. Still, that doesn't mean they're right.
There is an important truth to the fact that bankruptcy could make the Big Three reevaluate their priorities and resurrect their position in the auto world and eventually re-hire hundreds of thousands of Americans. In the long term, bankruptcy could be just what the doctor ordered to improve the failing automobile industry and get our economy on track.
Also, Newsweek has a very interesting article about the foreign-owned automobile industry picking up steam in the South. These "little eight" companies employ many Southern workers with good wages and benefits. This is likely the reason that Southern Republican Senators voted against saving Detroit's automobile industry. In a capitalist society, competition is king, and we must let bad companies fail to secure the best product. This will ensure that the economy remains healthy in the long term.
But American families do not think long term. They think about the jobs just lost because the executives of these companies actually thought Americans would continue to buy gas guzzling American hybrids instead of gas-efficient, foreign-made hybrids. They think about how to get a new job in this economy, when most companies are laying people off in crisis and to avoid crisis.
So I've got to agree with Bob Shrum. Even if the Republicans had some legitimate reasons to oppose the bailout, those reasons will not be remembered. Instead, we will remember that 20 Senators agreed to give $700 Billion to Wall Street, but refused to give $15 Billion (2% of $700B) to support American workers. And the people laid off will remember that the Republicans are largely responsible.
It's been a bad year for the Republicans. But they could have moderately saved face by playing the politics to appear the savior of the automobile industry. Instead, they effectively fired the Midwest and will pay the price in 2010 and 2012 unless things start to turn around.
There is an important truth to the fact that bankruptcy could make the Big Three reevaluate their priorities and resurrect their position in the auto world and eventually re-hire hundreds of thousands of Americans. In the long term, bankruptcy could be just what the doctor ordered to improve the failing automobile industry and get our economy on track.
Also, Newsweek has a very interesting article about the foreign-owned automobile industry picking up steam in the South. These "little eight" companies employ many Southern workers with good wages and benefits. This is likely the reason that Southern Republican Senators voted against saving Detroit's automobile industry. In a capitalist society, competition is king, and we must let bad companies fail to secure the best product. This will ensure that the economy remains healthy in the long term.
But American families do not think long term. They think about the jobs just lost because the executives of these companies actually thought Americans would continue to buy gas guzzling American hybrids instead of gas-efficient, foreign-made hybrids. They think about how to get a new job in this economy, when most companies are laying people off in crisis and to avoid crisis.
So I've got to agree with Bob Shrum. Even if the Republicans had some legitimate reasons to oppose the bailout, those reasons will not be remembered. Instead, we will remember that 20 Senators agreed to give $700 Billion to Wall Street, but refused to give $15 Billion (2% of $700B) to support American workers. And the people laid off will remember that the Republicans are largely responsible.
It's been a bad year for the Republicans. But they could have moderately saved face by playing the politics to appear the savior of the automobile industry. Instead, they effectively fired the Midwest and will pay the price in 2010 and 2012 unless things start to turn around.
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after I wrote, I came across this Washington Independent Article about the incentives for foreign owned car companies if Detroit fails.
December 16, 2008 1:16 PM | Reply | Permalink
Not to defend the GOP in ANY way, but you have to admit that the carmakers in Detroit did a pretty good job of dooming themselves, too. People recognize that and the tax payers are reticent to give money to the same CEO's that will just need bailing out in another year.
But why-oh-why the country didn't react this way with the trillion dollar bail out of Wall Street is beyond me. Where was the outrage at hundreds of billions compared to the 30 billion here?
December 16, 2008 2:26 PM | Reply | Permalink
I that's was because the Bushies blackmailed us all on the Financial industry bailout. We were essentially told that we would lose our retirement savings if we didn't hand over our tax money.
The real mystery is why a Democratic Congress continues to believe anything coming out of the lying oily pit that is the mouth of G.W. Bush.
December 17, 2008 9:37 AM | Reply | Permalink
It is such a cliche' but we were able to stop making cars altogether and converted factories in order to make tanks and planes. Overnight.
We need to look at this like we are in the middle of World War III. Lets see if the New Administration is really serious about this.
The New White House is not going to let some bankruptcy judge figure this out.
December 16, 2008 2:56 PM | Reply | Permalink
They might not have a choice. If the R's in the Senate continue their war on the UAW, these companies will go belly up. They simply don't have the cash on hand to pay their bills.
It is unbelievable to me that Congress is willing to throw cash at Wall Street fat cats with no strings attached and then tie a rope around the necks of middle class blue collar Americans. It is shameful and you're absolutely right--we will not forget this.
BTW, Mitch Albom has a terrific article in the Detroit Free Press re: this issue. I'll try to find it again so I can post a link...
December 16, 2008 3:08 PM | Reply | Permalink
As promised:
http://www.freep.com/article/20081213/COL01/81213055/1082
I think he puts it pretty well.
December 16, 2008 3:10 PM | Reply | Permalink
Good stuff!!! "There ought to be a law." Look, lest than 20 days for the new Congress to act and less than 30 for the New Administration.
LET US PRAY.
December 16, 2008 4:11 PM | Reply | Permalink
people continue to "buy gas-guzzling American hybrids"?
December 16, 2008 4:32 PM | Reply | Permalink
Great! Shut down the assembly lines and turn out the lights in the last big factories.
We aren't even going to be able to build our own egg-beaters.
December 16, 2008 5:22 PM | Reply | Permalink
Come on, the big 3 doomed themselves. I'm all for extending the 15 billion, but give me a break. The Management and the Unions have beemn hamd in hand skipping down the road to oblivion for a long time.
Sure, the Republican opposition to this is cynical, designed to hurt the unions and advantage their own japanese factories down South, but be fair, these businesses have been in free fall for years, and those in charge, the UAW included, did little to stop it.
December 16, 2008 5:52 PM | Reply | Permalink
We can all debate the $700 billion TARP, but that should NOT be part of the analysis as to whether Detroit should get any money.
Just because we gave $ to the banks (whether it was the right idea or not) does not mean it's OK to give it to Detroit. If you use that logic than every industry should get a bailout
December 16, 2008 8:23 PM | Reply | Permalink
Why shouldn't it?
The theory behind TARP is that the expenditure of $700B in 2008 will prevent a credit shortage and loss of GDP several times that in the next four years.
Apply that to the auto industry. You give $15B now in interest-bearing loans, as opposed to grants, and you preserve not only the carmakers but their supply chains as well. How many multiples of $15B will GM and Chrysler add to the economy in the next four years? Is there any manufacturing sector in this country responsible for as many jobs or as much tax revenue as the carmakers?
December 17, 2008 10:32 AM | Reply | Permalink
What makes you so sure that GM and Ford will be able to repay these "loans"? I was laid off from a manufacturing company with a large industry that didn't get a bailout - why should the Big 3 get a bailout
How many multiples of $15bn will they add to the economy in the next four years? Under the current management and cost structure I would say it's a number between zero and zero.
We're not talking about bailing out the sector, just a few companies within the sector. If we don't bail them out, it's likely that the more profitable auto companies will pick up alot of the Big Three's employees, plants, etc. I'd rather have a couple really painful years then to let the Big 3 continue to survive in their current state
December 17, 2008 1:09 PM | Reply | Permalink
If no one buys American cars, which is the clear trend today, what we would be buying with our money is Soviet style "rust belt" factories, producing "goods" that nobody wants, and which are destroyed or piled up in scrapheaps. We will be subsidizing further pollution and waste, in a futile attempt to "prop up the economy".
We should use this money to re-tool at least some of these factories to build things we actually need and want - wind turbines come to mind. Unwanted SUVs vs. future energy infrastructure - I don't think it's a contest.
December 16, 2008 9:45 PM | Reply | Permalink
Rec'd. I would agree with just everyone who blamed anyone for this mess. Management, unions, Democrats like Dingell who overprotected Detroit, Republicans who blocked CAFE standards also, a mess this humungous is always a team effort. If the economy was at full employment or close to it, I would say no bailout, if the companies go bankrupt then people can still get jobs. But now, I think the risk is much too great that Big 3 bankruptcies will badly disrupt the entire economy. But you'r right, the Republicans have given up the midwest by doing this, at least that's a silver lining.
December 16, 2008 10:42 PM | Reply | Permalink
Pray tell just who do you suppose will remember?
Will it be those staunch Democrats in Kent, Oakland and Macomb counties?
What will you really remember? The Republicans' cynical effort to deflect blame onto the UAW? The staunch support of the Big Three management for all things Republican? The Big Three's culture of corporate arrogance?
As for me, I'll remember how the GM corporate culture devoured Saturn -- its last and best hope for innovation and survival.
The rest don't matter because it ain't personal -- it's just politics.
December 17, 2008 12:20 AM | Reply | Permalink
ALL POLITICS ARE PERSONAL! remember that
December 17, 2008 4:47 AM | Reply | Permalink
You have hit on the key problem that will likely doom GM, just as it did AT&T. Corporate culture is corporate destiny. The whole management team is raised in the culture. A manager does not rise to senior or executive level without being exceptionally grounded in the culture. Outsiders are either isolated or rejected outright, just as in any culture. This is why attempts to change things via an outside CEO usually fail. The entire executive team must be replaced bu outsiders.
This reveals why corporate mergers which may sound good on paper so often fail. Either the corporate cultures involved remain in conflict, or a consuming dysfunctional corporate culture forces itself on some consumed functional culture.
December 17, 2008 10:19 AM | Reply | Permalink
Good blog and insightful comments by all above.
I suspect Bush will use the TARP funds to ensure Detroit doesn't fail. This still leaves many organizational weaknesses in place for GM and Chrysler, leaving Obama holding the bag for cleaning up the long-term mess. The unions, too, may find themselves in a position requiring a shift in priorities, banning together to force change in Washington rather than at their individual industries.
Solving our systemic problems as a nation will enable all of their members to leave a better life. A life that has been next to impossible for decades.
December 17, 2008 7:36 AM | Reply | Permalink
It is worth pointing out, again, that the reason the Big Three need help right now is not because of a failed business model. It is because of a credit freeze.
December 17, 2008 9:04 AM | Reply | Permalink
Credit freeze or no, why would a bank extend credit to a company that can't make any money?
December 17, 2008 10:25 AM | Reply | Permalink
It's not just that banks won't extend credit to the companies -- though that is a problem. It's that consumers can't get auto loans, which is causing a dramatic drop in sales.
Look, we all know Detroit needs to change the way they do things. But putting them into bankruptcy is not going to help.
A 15 billion dollar loan to tide them over until they can work with the Obama administration to create a plan for sustainability is a small price to pay compared to seeing a million new unemployed workers.
December 17, 2008 11:31 AM | Reply | Permalink
I see the bailing out the Auto industry as a economic policy stake in the ground regarding the long erosion of American manufacturing. There are many Economists who believe that manufacturing is the only true creator of national wealth. They don't believe we can survive economically with a "service economy", and I tend to agree with that viewpoint. If manufacturing is the only real wealth creator, and the Auto industry is the backbone of American manufacturing, well, then you can see why all the concern.
However, my own experience as a mid-level manager in a telecommunication industry giant that no longer exists tells me that all the executives, not just the CEO, of the Auto companies MUST GO as part of any bailout. The Auto companies WILL continue to fail with the same executives at the helm - GARUANTEED! All internal business problems are, by my definition and experience, management problems. That includes employee/labor relations problems. Unions only came into existence because of abusive management practices.
December 17, 2008 10:04 AM | Reply | Permalink