Just say no to the auto bailout
The chief executives of Detroit's Big Three auto makers appealed in dire language for U.S. taxpayers to help their industry, but couldn't dispel doubts in Congress that have clouded prospects for a government-led rescue.
In appearances Tuesday before the Senate Banking Committee, the leaders of General Motors Corp., Ford Motor Co. and Chrysler LLC, together with the head of the United Auto Workers union, argued the shaky U.S. economy couldn't withstand a collapse of any of the companies.
The chief executives of GM and Chrysler said they could run out of funds without the government's support. GM CEO Rick Wagoner said the package is needed to "save the U.S. economy from a catastrophic collapse."
That the companies were convening -- "hat in hand," as Sen. Christopher Dodd (D., Conn.) said -- before a congressional panel reinforced the depth of their difficulties and the possible diminishment of their political clout. Extending a helping hand to Detroit auto makers, long a central part of the nation's manufacturing base, doesn't appear to be a given.
One question is whether the auto makers can muddle through to January when a new Congress convenes with strengthened Democratic majorities and a Democrat in the White House. The complexity of a possible intervention -- and the political divisiveness it has wrought -- could be too great to overcome this week.
On Monday, Senate Democrats introduced legislation that would set aside $25 billion to help the industry, drawing from the $700 billion fund created to stabilize financial markets. The legislation would allow the auto companies and parts suppliers to receive "bridge loans" of at least ten years with favorable interest rates. But there is resistance among many senior Republicans and the White House. If no decision is made this week, the issue will be kicked over to the new 111th Congress.
In the late afternoon session, Republicans largely condemned the industry's request. Even some Democrats committed to helping the auto makers showed little enthusiasm for the task at hand.
We don't want to see this bailout go through, and I'll tell you why. The auto industry has suffered from self-inflicted wounds which includes a refusal to restructure themselves as the times changed. They refuse to sell assets that they have. And let's not forget the unions that continue to demand higher salaries during collective bargaining that the auto execs cave to. In a nutshell, the auto makers dug their own grave, and instead of letting the market swallow them up, they're trying to save their skins.
We know that a lot of this bailout money is going to end up going to the unions. It almost feels like they're looking for a payoff, and the second payoff they'll get will be Card Check. The problem is they can't seem to convince anyone on Capitol Hill that they're really in the dire straits they claim they're in. Are we saying that they don't need to money? Of course not. But why didn't they see the writing on the wall as oil and gas prices soared? Why didn't they change up what they were making -- from the larger SUVs to more economical cars?
This is why auto makers like Toyota, Honda, and Nissan are selling cars, and the Big Three aren't. They have always produced economical cars. Even their smaller SUVs are fuel efficient. Why didn't the Detroit auto makers do the same thing? Because they were counting on the prosperity of Americans to buy decked-out cars and trucks. That prosperity lasted until gas prices spiked, and people were dropping a hundred bucks on a single fill up.
The auto makers dug their own hole. Will some people lose jobs? Probably, but they'll find new jobs in the auto industry. But if GM is that shaky, then maybe it's better if they're gobbled up. We shouldn't be rewarding mistakes and failure, and that's what this bailout will eventually do. It'll reward their failure, and keep those same executives in place. That's not changing things for the better. That's begging for a handout, and refusing to change one's ways.