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: Bush and Detroit -- A bailout that won't enhance the Republican's legacy |
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| | From:  tc101 (Original Message) | Sent: 12/12/2008 3:27 AM |
WSJ DECEMBER 9, 2008, 10:18 P.M. ET
Bush and Detroit -- A bailout that won't enhance the Republican's legacy.
It's easy to see why Congressional Democrats and an Obama Administration would be eager to bail out Detroit auto makers in exchange for an equity stake and a chance to dictate business decisions. Democrats want Detroit to stop making big cars that run on gasoline, and they hope to protect their friends at the United Auto Workers. The mystery is why President Bush would go along for this ride.
This is all the more puzzling given that the President was once a principled opponent of precisely the kind of taxpayer bailout he now seems prepared to accept. Asked by the Journal about a possible Detroit bailout in an Oval Office interview in January 2006, Mr. Bush said General Motors and Ford might instead try to produce "a product that's relevant." For good measure, he added that "I think it's very important for the market to function."
Nobody can argue that this was a case in which the market didn't function. Ford, GM and Chrysler were in obvious trouble long before the current credit panic. The companies were bleeding cash and piling up liabilities when the rest of the U.S. economy was posting solid quarterly gains. They were losing market share as their foreign competitors -- building cars in the U.S., with American workers -- were gaining. Yes, they were hampered by fuel-efficiency standards that forced them to build cars, at U.S. plants with UAW contracts, that they couldn't sell. But those fuel standards also applied to Honda, and in any case won't be eased under the terms of this bailout.
Nor can it be argued that a rescue for Detroit is of a piece with the financial services bailout. Without credit, no market can function, as millions of Americans looking for loans are now discovering. The provision of public capital to the banking system through the Troubled Asset Relief Program was unfortunate but necessary as a way to prevent a larger, global financial collapse.
Last we checked, consumers had options other than a Buick, Mercury or Chrysler Sebring if they needed a new car. Bankruptcy for any of the Big Three would exacerbate the recession and mean pain for laid-off workers and their families, but it poses no systemic risk to the U.S. economy. It also offers the companies the legal protection to modify labor and other contracts, or to sell their businesses in some economically rational way, rather than postpone the day of reckoning for another few years, at huge taxpayer expense.
No wonder, then, that polls show Americans opposing a Detroit bailout by 61% to 36%, according to a CNN survey last week. That margin is probably higher among the voters who twice put Mr. Bush in office and might expect him to govern according to some discernible conservative principle. When Harry Truman seized steel mills in 1952, at least he had the excuse of having the Korean War to prosecute. In the current bailout debate, the Administration hasn't even been able to bargain for passage of a Colombian or Korean free-trade agreement.
Mr. Bush is holding out for terms, and some kind of "master" or "czar," that could prod the companies to restructure. The White House also wants to remove the demand in the draft Democratic bill that the companies not challenge "state" (read: California) fuel-efficiency rules that would doom the companies to pursue the same loss-making strategies that got them to their current pass. That's certainly helpful as far as it goes. But the problem with this bailout is its premise as well as its details.
Bailing out companies because they claim to be uniquely American sets a precedent for every other poorly managed and politically connected U.S. industry. As for a car-industry "czar," note how quickly House Speaker Nancy Pelosi rejected the idea of former General Electric CEO Jack Welch for the job. She wants a "public sector" type who will impose the decisions that Congress wants. A bankruptcy judge would have a much more independent hand.
It's also becoming increasingly clear that the real goal of Democrats isn't to save jobs per se, but to tell Detroit what cars to make and how to make them. The goal is to turn GM and the rest into Big Green Machines that will stop making SUVs and trucks and start making small cars that run on something other than carbon fuel. If consumers don't want to drive them, well, the next step will be to impose subsidies or penalties and taxes to coerce them to do so. Giving the federal government an equity stake could also lead to protectionism, as the politicians attempt to shield Detroit's mismanaged assets from competition by citing the interests of the UAW, the environment, or some other "social" good that has nothing to do with making cars Americans will want to drive.
None of these measures will save Detroit in any real commercial sense. For precedents, consult the history of France's Renault, S.A., or perhaps of Jawaharlal Nehru's industrial policies in postwar socialist India. But a bailout will harm consumers, harm the auto industry as a whole, put taxpayers on the hook indefinitely, and bring the U.S. commitment to market principles further into doubt.
If this is how Barack Obama wants to begin his Presidency, so be it. But Mr. Bush will not enhance his legacy by helping Congress and the Sierra Club nationalize Detroit.
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| | | From: Kat | Sent: 12/12/2008 3:41 AM |
The mystery is why President Bush would go along for this ride.
bush is doing it because he is getting something out of the deal. He does nothing that does not benefit him and his cronies in some way. |
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I for one am sick and tired of this 'auto bailout' BS. First off, why doesn't the banks that recieved THEIR bailout and the UAW get together and work out a viable solution between themselves and help the industry? Why burden the taxpayer any more than they already have been burdened? Does the banks see a BAD RISK involving re-payment and therefore, not interested in saving this industry? Why does the federal government think that they can operate and/or control the industry when their own Senate cafeteria is bankrupt? Who, in heavens name, can give benefits such as these to 700,000 RETIRED workers who contribute nothing to the profitability of the company - as GM is saddled with now? What guarentee can the industry AND the UAW can give us that they will be viable next year, or the following year or even ten years from now? Why not give every family say $30,000 with the express intention of buying an American made auto? What the hell is the difference? How can Toyota and GM each sell over 9 million vehicles each in the same year world-wide, yet Toyota made a $14 billion profit and GM show a $26 billion loss? Something doesn't jive here. Why does the government try to force these companies to produce these hybrid cars when the general public wants a comfortable, reliable pick-up, or a sedan or a SUV? Why are federal restrictions, such as CAFE, forced down these companies throat when the general public gives a rats ass about the phony 'global warming' scare? Why has nothing being done about producing more fuel for the internal combustion engines that has been proven a reliable and efficient method of fueling our vehicles? Why cater to the whims of a few who have NO absolute proof that the carbon emissions are causing this ?global warming? panick? As it stands today, they aren't any closer to the truth than I am in my belief in denial. This 'NANNY' state situation does not sit well in my belly. The 'Big 3' need to file Chapter 11 and get their own companies in line with comparable competition. It is called the 'free market system' and has always worked. I care less about anybodys legacy be it a Dem or a Rep or Rudolph the Red-Nosed reindeer. I want this nation to stand up a be a nation again. |
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| | | From: tc101 | Sent: 12/12/2008 10:34 PM |
| Harold, This is all about paying off the UAW. If Detroit goes into bankruptcy, they lose their cushy contract and auto workers won't want to pay the union does that the union leadership relies upon for their high paying jobs and the political power their buy with their members dues money. |
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| | | From: John N | Sent: 12/16/2008 9:39 PM |
While I have no love for the UAW or unions in general, I have to agree with Bush and Obama on this one. For GM to go under is not something we need in the current economic climate. The auto industry in Detroit will have to restructure and the UAW will have to wake up to reality or Detroit will go the way of the steel industry. |
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I don't know John N. For weeks now, we've been hearing about the woes re: the auto industry. Now Ford says they don't need the bailout, but the other two are asking for thr alms. In another post, I showedthat GM and Toyota sold the same number of cars world-wide, but GM showed a hugh loss while Toyota showed a huge profit. All of them, upper management and union workers have been living way high on the hog and there are strict restrictions for the US auto makers in the design and manufacter of their products. The US auto producers are being forced to produce a product no car buyer wants. We are comfortable in what has been made in the past and now they think I will buy a auto that has to be charged with juice every 50 or so miles? I don't think so. I enjoy the heft and the comfort of my full-size pick-up and I have pleanty of steel surrounding me while I am driving. There is no plausible reason for us not finding enough petroluem product to economily drive WHAT I WANT TO. These da*n tree huggers cry global warming while just this week, and today, Louisiana had snow and from Las Vegas to the southern part of California has snow right now. And I'm not talking about the mountainous region. In fact, 2008 is proving cooler than previous years so this global-warming BS is just that, BS. Meanwhile, we follow and believe these clowns with little or no proof of such an occurance happening. Back to the WELFARE the auto industry wants, WE should demand a strict accounting of all functions that invole the companies. To put our grand kids at such risk to pay back - we better make a damned good return on the investment. Management and labor unions can rot in hell first. They laid in their bed, now they can re-make it. |
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