(Cross-posted at
Annals of the Hive)
Imagine a President that came out and noted:
"Our auto industry suffers not so much from poor performance as a set of tough conditions. Unlike the banking industry, it's not virtual - it has to deal with real tangible products, real factories, real assembly line workers, and real maintenance and support. If Detroit had the market prediction, quality and customer care levels of the finance industry, our highways would look like the napalm scenes from Apocalypse Now or the wreckage from Speed."
"Some of Detroit's problems are perception - you can give the same car an American brand and a Japanese brand and the Japanese brand sells better. We talk up the Japanese worker, we talk down the American worker. And while Detroit is carrying the costs for successes in the 1950's and 1960's, the pension and health care benefits come due, costs that Japan has yet to face, though Japanese national health care means Japanese companies won't have to face the music like Detroit has."
"Japanese products are so attractive states like Alabama and Tennessee offer them wonderful tax breaks to come stay there, just so they can offer low wages and benefits. It's kind of an up-yours to the North, a bit of blow back from the Civil War, and it works. Next to an unneeded football stadium or Bridge to Nowhere, a large tax-subsidized auto plant is the best way of telling your district you love them, and by the time the results come out showing the plant produced not that many jobs and negative income for the district, the politician's long gone. Though realistically, the Japanese could survive without the subsidies. Because back in Japan, people will buy Japanese no matter what, and for the last 60 years have bought the Japanese version no matter what, even while American products are kept out. There's a high surcharge for this devotion, and this kind of unity has saved the Japanese in the face of numerous HDTV and Betacam flops, and it will save them in the future. Renault and FIAT fare only slightly worse from close government support, while for us, Detroit remains the spanking boy of our national anti-union attitudes even while taking on the competition with fewer subsidies than anyone else."
"You might be wondering why this industry is unique, and the answer is, it isn't. The plane industry is super tough as well, and between the consolidations of the major plan manufacturers and the inherent subsidy of military plane buys, only Boeing and Lockheed have survived from the old days. But instead of bashing Seattle for not being competitive with the innovative French, our commerce department sues the EU for its Airbus supports. And the results are pretty remarkable. Back in 2001, all the headlines were doom-and-gloom for Seattle, how they didn't make the planes people wanted to buy. (Huge monstrosities like mini-cities in the sky). A funny thing happened - Airbus stumbled with quality problems, delayed deliveries, lack of attention to fuel savings, and a shift in industry attitudes. Just 8 years later, Boeing is the smart one, Airbus is considered a mismanaged mix of too many national chefs."
"So today, I'm answering Detroit's call for $21 billion in loans. Instead of a loan, I'm going to make it a contingent gift, since it's so much smaller than our largesse to Wall Street, which in all likelihood will go unpaid anyway. This present to Detroit will be contingent on current auto workers converting their benefits to be in line with other industries, as many have complained, while the government will grandfather and take over the older ones. And it will be contingent on management receiving reasonable benefits as long as they're getting Uncle Sam's benefits. And it will provide subsidies to counter-balance our cross-border wars as long as the South continues to distort the industry. And it will be contingent on the auto makers continuing to show commitment to new fuel-saving technologies, such as GM has with the Chevrolet Volt."
"While it's not good for the government to play winners and losers in the market, the sad fact is in the year 2009 we're stuck doing that anyway. We're not trying to pick the future - we're trying to salvage the present. Detroit is not just about cars, it's about people and their creativity and productivity. Some talk flippantly about bankruptcy as if a fire sale at a car factory will produce more than 20 cents on the dollar or keep more than a fifth of the jobs alive. While it's true that the IT downturn of 2000-2001 let a lot of unemployed computer whizzes start new great companies, this will happen in Detroit anyway. But the larger portion will be thrown into counter-productive turmoil, at a time when Detroit's capabilities are needed to finally work on fuel efficiency, greenhouse gases and global warming, after 8 wasted years of denial. In fact, if we'd kept CAFE standards up to snuff over the last 25 years, Detroit likely wouldn't be in trouble - continuing pressure towards innovation brings out its best. But instead we tilted the field towards a mixed message of monster cars, half-ass gas mileage, and flirtation with hybrids and ethanol. We had no problem subsidizing corn ethanol to the tune of 60 cents a gallon while putting on tariffs to keep cheap Brazilian ethanol out, but then we call corn farmers "Middle America" and auto workers "greedy union workers". We demand auto workers cut benefits, while latest reports have employees of bailed-out financial institutions on track to receive their highest bonuses ever. This class warfare can't continue."
"While Detroit has made some big mistakes that we should acknowledge, we shouldn't exaggerate them either. Just 2 1/2 years ago GM managed to sell 4 million cars worldwide - losing traction to Hyundai, that's true, but no one guaranteed #1 forever. We're talking about solid, professional performance, not absolute rankings. Chevrolet also had good performance for the 2006 year. We'd be foolish to think that an energy crisis that bumped gas up to $4 a gallon and a financial crisis that required trillion dollar bailouts didn't have a drastic effect on our auto industry, far beyond an auto exec's skills in predicting and managing. If the captains of Wall Street couldn't guess their own performance, how should Detroit? If Fannie Mae couldn't keep mortgages sound, why is it surprising that foreclosed homes would adversely affect Detroit? And where are the nay-sayers who say "Wall Street? Fannie Mae? They make obsolete products no one wants to buy, they're dinosaurs - don't give 'em a damn dime." Too big to fail. That's the ticket. Well, here's my take - Detroit may be small enough to fail, but I don't want it to fail. I don't mind if there are mergers, some down-sizing, structural changes, diversification, foreign ownership - these are all just reactions to market forces. But there's not going to be a fire sale. There's not going to be a panic in Detroit. We're going to manage the transition for our auto makers just like we're helping out all our other troubled sectors. We helped Chrysler out 30 years ago, and it paid off wonderfully - even turned Lee Iacocca into a national hero, an icon of how we can dig our way out of any slump."
"And let's make it clear - I'm not an auto salesman, I'm not an auto worker. I've never worked in the auto industry. Second guessing people who sold some 8 million cars between the 3 companies just 2 1/2 years ago would be a huge mistake. This is an industry that requires years of planning to implement a successful change, and tons of strategy sessions to anticipate and countermand the competition. We are here to assist with structural issues, to help weather the storm, not to captain the industry. We helped out a captain in distress off the coast of Somalia recently. That doesn't mean we want to run his boat or even could. Just like those union ferry captains helping that union pilot pull the passengers from the Hudson River, we're just trying to do what we can to get them through a bad situation. A famous person not long ago said the most fearsome words in the English language were, "Hi, we're from the government, we're here to help." Fortunately he was wrong."
"Government is helping with the recent flu outbreak, with fires you see on CNN jumping the highway, with freak events like 4 hurricanes in a month in Florida, with crime sprees and spikes in gas prices and security threats and spurring job growth in the 90's and ensuring equal access for all and helping those who are down and out, to carry out those improvements in education we're all clamoring for and to ensure our retirement funds are there safe and sound. The public is all the time waiting for government to be there, to help, sometimes to lead, sometimes to support. And this assist to Detroit is just one more way of saying the days of neglect, like when New Orleans foundered under Katrina and our justice system foundered under politicization and our moral values foundered under uncertainty and fear, are over. Now more than ever, this government has got your back. Now it's time for you to do the heavy lifting."
