Detroit Bailout
Let me get this straight: The idea of the bailout is to let us buy all those great low-fuel efficiency, high-emission sport utility vehicles and dual axle pick-up trucks with crew cabs and iddy biddy beds that General Motors, Ford and Chrysler manufactured last year without having to insure, fuel, maintain, drive, park or, um "own" them. I can see lots of advantages to keeping these misbegotten monstrosities off the road. (Maybe we could use them to for artificial reefs in the Gulf of Mexico?) But rather than pumping tens (or is it hundreds) of billions of dollars into paying American automotive industry employees to keep building these, these, things; let's spend a lot less paying them not to build any more of them. We can accomplish that by devoting a fraction of the cost of an industry wide bailout towards extended unemployment benefits
Actually I think the idea of the bailout is to not "buy all those great low-fuel efficiency, high-emission sport utility vehicles and dual axle pick-up trucks with crew cabs", but rather to prevent a domino effect with an industry that may contribute as much as 10% to the US workforce, thus avoiding economic disaster. The cost of unemployment benefits and lost income tax revenue will be but the tip of the iceberg as the US tries to fill the vacuum left by the absence of Detroit in our economy.
"We can accomplish that by devoting a fraction of the cost of an industry wide bailout towards extended unemployment benefits"
I think the costs of a bailout with provisions for restructuring the companies with an eye toward greatly increased energy efficiency will in the end prove to be a good investment. Bloomberg news puts the real cost of a collapse of the US auto industry at around $200 Billion.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ad09qxbiElB8&refer=home
November 16, 2008 2:25 AM | Reply | Permalink
You're right about the costs. This is going to hurt.
But the fact is, the "Big Three" "American" auto makers, with the culpability of the United Auto Workers, have made have failed; throwing a lot of money at them will not change that.
I'm all for "increased energy efficiency," but we don't need to rescue those three to get that. There already are fuel-efficient cars in the market place and I expect we'll see more, with or without a bailout; so any government-imposed mandates in that regard would be more about making the industry product more competitive than burning less fuel. You have to question the business acument of any corporate culture that requires a mandate (and a government handout) to be persuaded to make a product that is competitive, as opposed to a good fit for the current assembly line.
And if the idea is simply to keep 10 percent of the workforce employed, I'm not at all sure making cars and trucks under the direction of that particular set of executives under those particular labor agreements is (a) the most productive use of their time or (b) the best value for the money. There must be something more useful we could have them do.
And if we're the ones who are paying them, we're the ones who should be deciding what that is.
And it doesn't have to be making cars.
Still, while I don't agree, I concede you make some a good point and I appreciate your thoughtful response.
November 16, 2008 3:03 AM | Reply | Permalink
My take is what will have the least impact on real people, families, in the auto industry and not in the auto industry. I agree that in a true laissez-faire economy we would let them go under to be replaced by a more competitive business model and in time that would be great, (I think). The question is what transpires between the new jobs being created and the unemployment initiated by their failure. It will be many years before that particular hole is filled and in the meantime people are going to get cold and hungry.
One of the subtexts of the recent spate of 'too big to fail' failures seems to be that unless we go back to a localized economy, (not likely in the foreseeable future), we are going to be forever confronted with the interdependency of US corporate success and the success of the population at large. In the late 1800's and early 1900's monopolies in the US were busted up to ensure competition in the market. We live in a world now where even if the companies do not have a monopoly on their sector of the economy, (and with corporate mergers going ahead the share of these companies is increasing as we speak), they have a large enough piece of the pie to threaten the financial solvency of the nation should they fail. The conundrum seems to be finding the right balance of oversight and regulation to ensure these companies do not put the US citizens, let alone the world citizens at risk. In that sense the US legislature/executive branches have failed miserably, (what else is new ; ).
We were all caught in the increased demand for petroleum resources by China and India, etc. and the concurrent startling increase in oil prices. It seems to me that there are sufficient resources in the federal government to have identified that problem before it was upon us and initiated higher fuel efficiency standards some time ago.
This is beside the point, but I remember reading in the Weekly Reader, a publication for grade schoolers in the 1960s that the world was going to run out of petroleum around 2050, (wish I could find that copy now). I've been waiting for that one to get a hold of the legislators and executives imaginations for the last 40 years. There is a grand disconnect on this one in this country in general due to decades of some of the lowest fuel prices on the planet. I'm rambling now. Time for bed.
November 16, 2008 4:32 AM | Reply | Permalink
Sorry about the typos in my reply.
Bad proofreading.
I don't deserve a bail out either.
November 16, 2008 3:06 AM | Reply | Permalink
where are you getting this "10% to the US workforce"? Do you realize what you are saying? do you you realize how many people GM even employs?
November 16, 2008 3:06 AM | Reply | Permalink
>rather to prevent a domino effect with an industry that may contribute as much as 10% to the US workforce,
I'm getting sick of reading this misinformation. It's like reading crap out of the Bush administration. Do you even know what you are talking about? 10%?!!! We have about 190,000,000 employed people. 10% would be 18.6 million people. Where do you get these numbers? It's fear mongering. GM employs around 266,000 and those are the most at risk. Certainly the 3rd party parts suppliers will be hit but imagining that it's going to be over 1,000,000 is just silly.
Even if it was 1 million. 50 billion divided by 1 million is still $50,000 per person. I'd rather just extend unemployment benefits for 2 years and we would still be better off. All this scare mongering just makes me think back to why we went into Iraq. Misinformation form people that want to make some easy money.
November 16, 2008 3:04 AM | Reply | Permalink
I admit I threw that figure,10% out without checking my source. I did read that the total auto industry employment including suppliers, sales force, manufacturing, transportation, etc. could be that high. If I can find it I will reference it. As it is, I said it could be 'as high as' 10%. If you want to talk numbers the employed US citizens and otherwise are numbered at 146,089,000, not 190M. http://www.bls.gov/news.release/empsit.nr0.htm. Upon my cursory research the failure of the Detroit 3 would amount in a loss of 3M jobs in the first year. http://www.theglobeandmail.com/servlet/story/RTGAM.20081110.WBdriving20081110173124/WBStory/WBdriving.
Not 10% I will grant you, but significant enough to compound the economic problems we are now facing.
November 16, 2008 3:58 AM | Reply | Permalink
146,089,000 is the civilian labor force, but lets not quibble over that and thank you for agreeing that you pulled 10% out of thin air.
>Here's what's at stake. The Center for Auto Research says, "Should all of the Detroit Three's U.S. operations cease in 2009, the first year total employment impact would be a loss of nearly 3 million jobs in the U.S. economy
But we aren't talking about all three, we are talking about just GM. I wish people would stop using figures that don't relate to the issue at hand. It just makes me ever more skeptical.
November 16, 2008 10:48 AM | Reply | Permalink
I wish we could edit comments. You were talking about the whole of Detroit, I apologize. I'm still unconvinced with the 3 million as that includes third party part producers and people would still need to buy repair parts and service but granted the number would be above just the direct employees of the big 3.
November 16, 2008 10:54 AM | Reply | Permalink
On this morning's Meet the Press Sen. Carl Levin (D-MI), in arguing that General Motors (GM) already was making the changes to its business practices that commentators like Tom Friedman were saying ought to have been made long ago, noted that GM already had announced plans to lay off half of its hourly work force and a third of its salaried employees.
So, whatever we decide upon for the number of jobs at risk, we need to cut that number by almost half when positing the number to be saved with a bail out.
We need to also remember that any number suggested as total jobs in the economy related to the automotive industry will include a very large number of jobs that are not at risk, including some jobs that would be made more secure by the failure of the Detroit Three and jobs only tangentially related: automotive rental agencies (not at risk), automotive repair shops (more secure), automotive t-shirt designers (only tangentially related).
November 16, 2008 1:58 PM | Reply | Permalink