When Toyota first burst onto the American auto market, they were a joke. Within twenty years, they were the source of great anxiety. They were going to destroy the American automobile industry. After so long, those fears were seen as unfounded and xenophobic by most Americans. Now, those old fears seem borne out, but whose fault is it-Toyota and the foreign auto industry in general, or the Detroit auto makers, the Big Three? Is it possible that it is they who are, in fact, the dinosaurs?
It would take a book, not a blog post, to trace the decline of the Big Three auto makers, but it's easy to delineate the decline in brief. You start with an overly grasping union, add overly restrictive governmental regulations and taxes, and finally, mismanagement at the highest levels.
When Detroit started turning out crap, right around the early seventies, to try and stay competitive, it was the beginning of the end. Then came the lay-offs, and reversals in labor gains.
In the meantime, Ford, Chrysler, and GM became American auto makers in name only. Ford and GM eventually got to the point where it outsourced much of its work to Mexico and other foreign nations, while Chrysler itself was brought by a German company. All three have tanked, as Toyota, who now seems to all but dominate the American auto market, is a major American employer. They are in fact possibly the largest single employer in the state of Kentucky.
Now the Big Three want a "bailout". Patrick Buchanan makes several good points. The Big Three should be given assistance. Restructuring by way of bankruptcy in their case is a band-aid solution which would not offer reassurance to American auto purchasers. However, if there is a bailout, it should come not with strings attached, but with steel cables. It should first and foremost come in the form of a loan-a low interest loan, granted, but nevertheless a loan, not a bailout. It should also come with the understanding that further manufacturing should be retooled to meet the current energy and efficiency concerns. No more gas guzzlers if you want a bail out. More-much more-fuel efficient engines.
I do not suggest that the Democrats in Congress force Detroit to start devoting all their resources to hybrids or electric cars, by the way, but they should certainly begin moving in that direction, and increase exponentially as the technology becomes more advanced. I have grave fears that the labor unions are going to demand their piece of the bailout pie as well, which would be self-defeating. Inordinate and inappropriate demands for higher pay and increased benefits, especially full scale medical coverage, would be inappropriate and unwarranted at this stage. These companies need first to survive and become profitable. When this is demonstrated, when and if the Big Three once more are successful, then any further deals should be worked out between the companies and the unions without government involvement, if at all possible, so long as the loans are paid back to the government. Repaying the taxpayers money must be the first priority. Repetitions of the same actions that got us into this mess is just more insanity. Yet, I strongly fear the Democrats will be inclined to push hard to affect the demands of Labor when it comes to apportioning any loan or grant to the auto industry, thereby rendering any such aid useless at best.
Yet, despite the very real contribution of the unions and the government itself for the current mess, the industry deserves the lions share of the blame. They had the opportunity to get in on the ground floor by creating fuel efficient vehicles, and refused to do so. They had to be dragged kicking and screaming toward CAFE standards they should have willingly and even eagerly pursued on their own initiative. They were more than capable of developing the technology to make such automobiles efficient, affordable, and profitable. Instead, they tried to compete with the monster from Tokyo by promoting an artificial demand for gas guzzling SUVs. All was well for a while, until the gas and oil crunch hit. When that happened, Detroit was swept away in a tsunami of its own making.
Now they are begging for help, but so far have demonstrated little if any willingness to rethink their marketing and business strategies. They went up into the Halls of Congress much like a bunch of homeless vagrants holding signs "Will Work For Food". Nine times out of ten, at least, such people expect you to drop a five or ten dollar bill in their box and move along. You should not actually seriously expect any work out of such a person unless there is an alley close by. So it is with the Big Three.
As for the monster that did in fact nothing other than sit back and watch while Detroit gorged on its own rotting carcass, get used to it. He just gets bigger and better every year. He is not going away.
12 comments:
I disagree.
The "Big Three" should not be bailed out at all period end of story.
And when union fuckwits start crying, say "Hungry? Eat your union card."
I don't look at a loan as a "bailout", a term that implies no requirement for repayment, more like a grant. I expect conditions to be attached-reasonable conditions, but conditions nonetheless. Plus, bear in mind the government bears some share of the responsibility here for their over aggressive tax and regulation policies towards the automakers. Some regulations are appropriate, but the feds have gone way too far over the years both in taxes and in regulations.
I agree with you on the unions, and I think that's why the loan should be approved now rather than later. Take my word for it, there will be a deal, but it will probably not come until Obama is sworn into office along with the new vastly expanded Democratic Congressional majority. When that happens, they will probably sweeten the pot for the benefit of the unions.
When that happens, as I'm sure it will, remember you read it here first.
Bailout, buyout, whatever you want to call it... it will be a subsidization of three automobile corporations that can't operate at a profit. It probably will not be a loan.
Of course such a thing will come with strings attached - they always do - and those strings will be in the form of new regulations.
And when the corporations still can't turn a profit over operation and production costs (and why should they now?) the government will come back, and offer even more money - in the name of keeping those UAW workers employed at building crappy, unmarketable cars a little longer.
It's a nice racket.
Of course its a racket. That original bailout was the biggest taxpayer rip-off in world history-and that's really saying something. You have to really be reaching to beat the Great Society. But, some of the Great Society was valuable, and some of this could be, when it comes to the automakers. It's a question of oversight. There's never enough of it, at least of the right kinds. By oversight here, I'm not talking about the Congress breathing down the automakers necks and involving themselves in every minutiae of production and sales, I'm talking about preventing that if anything, and in making sure the money is not thrown down a rat hole. Some of these people act worse than third world dictators with their hands out for foreign aid.
Like I said, all parties involved in this share some of the blame, the feds as much as the unions and the companies. But if everybody insisted it came in the form of a loan, and insisted on oversight, and stuck to it, this could work out in the long run.
The only stipulations I would add is that they make fuel efficient cars, for at the very least two thirds of their fleet. And really, why would they not want to do that to begin with? The joyrides of the eighties in vehicles that were doing good to get twelve miles to the gallon on the open highway is a thing of the past. If that starts up again, it won't be long until gas is four, five, maybe even six dollars a gallon-and more.
Like I said, the unions and companies should have to come to terms on their own, but it should not involve any of this money. I would suggest a profit sharing plan of some sort as a reasonable compromise. That way everybody has an added incentive to work toward success. It should not be coerced by the government, but it would be a viable alternative.
Executive salaries and bonuses as well should project an accurate reflection of sales and profits. That's only reasonable when you're talking about federal money involvement.
I know Chrysler employees that were paid not to work during every layoff periods.
Tell me how to feel their pain again?
Beamish-
There is going to be a deal. Here's the way I look at it. If you had to undergo a major operation, you might not like it. Who would? But the reality is, there will be one if you want to live. Knowing that, all you can do is keep on top of things, get a second or third opinion, and make sure you get the right doctor to do the necessary job, somebody that is qualified and at the same time is under appropriate oversight.
We can moan and groan for months over this, and probably will, but the reality is, it is eventually going to happen. The best thing to do in that case is to just insist on oversight and accountability, and to try to make sure the money is applied in a way that will make the most sense, or at least that will do the least amount of further damage.
The unions should get nothing out of this. If it works, they will get to keep their jobs. That will be sufficient. In the meantime, the government should relax if not eliminate some of its more strident and unnecessarily harsh regulations.
The companies should be obliged to come up with a real plan though, one that might work, not just come before Congress with their hats in their hands to get more money to keep doing the same old shit. They should have to do some things and stop doing others, and they should have to stick with it. And the money should be paid back.
If they don't pay the money back, or they can't, then the simple answer is for the government to take the company or companies and then sell it to the most qualified highest bidder, somebody that can make it work.
I strongly fear the Democrats will be inclined to push hard to affect the demands of Labor when it comes to apportioning any loan or grant to the auto industry, thereby rendering any such aid useless at best.
Bingo. That's why the Big Three should be dismantled and replaced by Small Thirteen, without unions and pensions...
The problem with the analogy is that we're talking about three failing corporations, not three people with failing health.
But, to keep the analogy going, surgery is needed to stop the patient from bleeding from a sucking chest wound, and Doctor Government is offering free blood transfusions to keep the blood puddle on the floor growing.
If we wanted crappy cars built by a government-run corporation, we'd import them from Russia.
Beamish-
I know it wasn't the best analogy when I used it, but it was the best I could do at the time. The point is, it is eventually going to happen, and the best thing to do is try to fight to insure there is as much oversight and transparency as possible, and to at least try and make sure there is a viable plan in place, and insist it's a loan, not a grant or giveaway.
It's a waste of time to try to prevent something that is going to happen regardless of what you say or do.
Sonia-
That's going too far. The unions have a place, that place just shouldn't involve any government loan to the automakers. Like I said, if the loan helps save the companies, then that will save their jobs, and that should have to be sufficient. Government should get out of the arbitration business. If unions can't make it on their own, they shouldn't get government assistance. Neither should the automakers, but I do recognize that the government is partly to blame for this mess, so it seems only right they should try to rectify the matter, provided it is a loan, not a giveaway or a "bailout".
Beamish-
"If we wanted crappy cars built by a government-run corporation, we'd import them from Russia."
That's been happening anyway, with CAFE standards and catalytic converters, etc. Look at all the things the government requires, like seat belts, etc. I don't think anything is going to change in that regard, except Congress is going to push for them to build more fuel efficient automobiles, which they should do anyway.
If Congress really wanted to help the automakers, they would just declare an end to taxes on them, and insist on certain things in return. That would free up enough money for them to develop fuel efficient vehicles and develop others using alternative energy sources. It would also save jobs.
Congress though should insist on certain things in return for that tax free policy, other than just letting them keep on doing the same old shit that obviously hasn't and never will work.
I think it will far worse when the government actually owns all the controlling shares in these failing companies.
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