Saving Detroit
When it comes to bailing out the auto industry, count me in the “let them starve” camp. The auto industry has been outsourcing American jobs for 25 years now with little regard for the devastated communities they’ve left in their wake (seriously, re-watch Roger & Me sometime). The big three have also used their lobbying might to oppose every environmental regulation in their sights. And on top of all of that, their cars suck. Bailing out the auto companies whose single-minded devotion to SUV’s made them blind to the hybrid revolution is like bailing out a record company that hasn’t had a hit since “The Macarena”. Screw them.
That said, I am sensitive to the fact that letting the big three go out of business would be a pretty serious blow to our already fragile economy. But if the solution to what ails automakers is an infusion of cash, wouldn’t it be better to get banks involved? If we’ve already set aside $700 billion to help bailout banks in the hopes that it will free up lending, wouldn’t it be a better idea to just have Congress mandate that banks participating in the bailout must offer debtor-in-possession loans to the big three. That way, if an auto manufacturer fails, they need to file for Chapter 11 like any other company whose poor business decisions lead to their downfall AND the banks free up some cash and start lending again.
Obviously this is probably an oversimplification, but there’s gotta be a better way of saving the auto industry than just writing another giant check.
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Think about it this way: one part of the economy employs millions of working-class folks producing real, physical objects that are used by millions of people. Another makes a few people incredibly rich by moving around electrons representing various speculative “financial instruments”. Which one gets bailed out by the Feds?
Comment by SteveB — November 15, 2008 @ 1:28 pm
My thoughts have been leaning towards letting them fail as well. Similarly, I’ve been disgusted for years that they’ve insisted on pushing gas guzzlers and lower quality products, trying everything they can to avoid improving fuel ecomony and environmental impact. The impression is they have consistantly let foreign manufacturers lead the way in new technologies.
So why not let them fail if they can’t fix themselves? Yes, it will be very painful for a number of people in the short term. But will not other, probably more efficient manufacturers jump in to fill the void left by the failed company. Will not these other companies either build new factories or obtain and retool the old ones and hire people to work them? Would this not be better than bailing out the old guard and rewarding their failures?
Comment by Doug G — November 15, 2008 @ 11:44 pm
Wait a minute - so the need to cut costs which lead to downsizing and outsourcing is a reason to “let them starve”? Do you see that those actions are symptoms? It’s not like everyone sits around thinking of ways to stick it to the American workforce - it’s more of a struggle to keep costs in line. Do you think the Japanese are lining up to outsource to America and fill the gaps left by a potentially destroyed domestic industry? They’ll go to China and India first, then Japan. They’re in the same business, and they’re going to do whatever it is to reduce costs including outsourcing too (and I’m sure they do plenty, but you don’t hear about it since they’re in expansion mode).
It’s a good thing they get to rake in profits due to their socialized medicine, gov’t support of new technology and gov’t intervention of the yen/dollar exchange rate. If only the US gov’t wanted to support the US manufacturing base in the same manner.
Regarding gas-guzzlers and lobbying: The market wanted these large vehicles. It was a big enough carrot for Toyota and Nissan (only Honda showed some restraint, but they still dabbled) to go crazy with the huge vehicles.
Do people forget Toyota not only produces a huge number of SUVs but also lobbies against these same environmental regulations? You do realize that the foreign automakers have a large number of lobbyists pushing Japan Inc.’s agenda, right?
Lower quality? Perhaps in some segments more than others, but many US vehicles boast superior quality than the foreign makes. The way everyone talks about Detroit’s quality it’s like the wheels fall off 2 miles from the dealership, whereas the quality differences between the foreign and domestics are so slight that even Toyota is forced to downplay it when they find they’re behind statistically.
All things equal, why does everyone think it’s such a great thing for a huge sector of the US economy to fail? Keep in mind manufacturing is more than just assembly, it’s research, development, IT and all the other things that support the actual assembly.
For the imports, they do all those other things (outside a few design/engineering centers for “Americanization”) in their home countries. So when we talk about jobs, please remember there are more than assembly jobs involved here. While I suppose it’s better to have their assembly plants over none, I think it’s much healthier for our economy to have all of the process home-grown. .
We will not be able to subsist as a country of consumers and consumers alone.
Comment by GRS — November 16, 2008 @ 6:02 am
I’m very disappointed to read this. It underlines, again, the contempt many in the online Netroots world have for the labor movement and working classes. It is a contempt I do not understand.
I’m writing you from Detroit, the son of a proud UAW father and Union mother. Our fates, jobs, health - like millions of other working class families - are tied directly to the health of the Big Three. I have just as much anger and contempt for the executives of GM as anyone. Their greed, short-sightedness and belligerence has brought us to this point. Just as responsible, however, have been disconnected liberals that have pushed pro-corporate agendas, “Free Trade” policies and misplaced focus on celebrity environmental issues.
You and I may rightly want to punish the worthless managers of these companies but it should be clear that they will never, ever feel any pain. Instead it is the workers and their families that will suffer. Advocating abandonment of the domestic auto industry is the very definition of shortsighted. Not only will you destroy a huge chunk of our economy, you will alienate millions of voters. Just because they do not read and comment on blogs does not mean their votes are worthless.
Letting the companies fail is also shortsighted in that it ignores the enormous potential that exists with such a bailout. You want cleaner, more fuel-efficient cars? You want strong, healthy communities? You want National Health care? You want more jobs? Now is the time and opportunity to demand them. Reshape the auto industry into one you can be proud of. Hell, demand they invest in R&D for high speed trains. Throwing all of this away puts you further from these goals.
I am and remain a progressive but I am disgusted with the disconnect and arrogance many in this movement champion and display.
Comment by Chris Weagel — November 16, 2008 @ 8:52 am
In terms of why we should “let them starve”, I think you nailed it here :
The silence of the American corporations in these issues has been deafening (at least on universal healthcare). Instead, the lobbying muscle of the auto industry has been concerned with things that help their short-term bottom line, but screw over the American people. Free trade so they can more easily outsource, blocking fuel efficiency standards so they can continue to pollute, etc. These companies have been horrible.
I don’t want 3 million people to suddenly be laid off, but at the same time I don’t want to see corporations that have been detrimental to American progress to be rewarded.
Besides, if we truly care about free market economies, it’s important to reiterate that the reason the big three are in so much trouble is because they’ve made such awful business decisions. Selling cars to an American should be as easy as selling clothes to Sarah Palin, yet these companies were caught off-guard by the market’s desire for more fuel-efficient vehicles. The market is there, it’s just that Detroit’s cars aren’t as popular.
Comment by greg — November 16, 2008 @ 9:06 am
Besides, if we truly care about free market economies…
Who, aside from Ayn-Randian economics majors, “truly cares about free market economies”? I care about people, like the millions of people who will lose their jobs, their pensions, and their health care as a result of some misguided effort to “teach Detroit a lesson.” I care about the planet, and whether we can see this crisis as an opportunity to make the shift to a post-internal-combustion auto industry. But do I care how closely we’re hewing to some free-market ideal? Not a damn bit.
Also, what Chris said about the “contempt many in the online Netroots world have for the labor movement and working classes.” I’m amazed at the level of abstraction employed here, as if we’re just shootin’ the shit in an Econ 101 class discussion, instead of talking about repeating what was done to Flint a hundred times over. “Disconnect and arrogance” is putting it mildly.
Comment by SteveB — November 16, 2008 @ 4:35 pm
I don’t see how my contempt for the auto industry equals contempt for “the labor movement and working classes”. It’s not about teaching them a lesson, it’s about making sure we don’t throw away taxpayer money bailing out companies who are failing the old fashioned way, making a crappy product that nobody wants to buy. If we bail out the big three, what’s going to change that won’t make us need to bail them out again in ten years?
Of course, the whole point of this post wasn’t to just snidely say “screw ‘em” and change the subject. These failing companies should file for Chapter 11 bankruptcy like any other failed business and work with their creditors to become profitable again. Moreover, the existing financial bailout should be used to help the big three get back on their feet by making banks lend again.
I don’t want to see any auto workers laid off, but these are companies that lay off workers when they’re making money. It seems to me that whether or not labor is going to get screwed over is a foregone conclusion. If you think these companies are trying to get bailouts because of their deep respect for their workforce, you haven’t been paying attention.
In the long run, propping up the manufacturing industry is as short-sighted as subsidizing the agriculture industry. We need to concentrate on the next big industry that will drive our economy forward. Treat the disease, not just the symptoms.
Comment by greg — November 16, 2008 @ 6:59 pm
Yours is the first alternative I have herd offered instead of offering them just another government bailout. I do think there is an upside to bailing them out and having control is that one of the terms of the bailout would be a move towards a greener company better fuel efficiency and possibly a completely green car which would be great. Its a move i don’t think the auto industry would of done on its own for a very long time. Just my input.
Comment by Edward Alexander — November 16, 2008 @ 10:04 pm
Just like it would have been awesome if the $700 billion financial bailout came with a reinstatement of the Glass-Steagall Act.
Comment by greg — November 16, 2008 @ 11:23 pm
http://www.pbs.org/moyers/journal/09262008/transcript1.html
Comment by Doobie — November 17, 2008 @ 2:41 am
I don’t see how my contempt for the auto industry equals contempt for “the labor movement and working classes”.
Fine, you don’t have contempt for working people, you’re just indifferent to them. If “punishing” their employers means hundreds of thousands of people thrown out of work, that’s a price you’re willing to pay.
companies who are failing the old fashioned way, making a crappy product that nobody wants to buy.
So people suddenly discovered that Detroit makes crappy cars? In case you haven’t noticed, we’re in a severe recession (people don’t buy new cars when they’re not sure if they’ll have a job next month) combined with a credit crisis (which makes it harder for people to finance a new car.) It’s a global phenomenon that’s affecting all automakers.
These failing companies should file for Chapter 11 bankruptcy like any other failed business and work with their creditors to become profitable again.
And invalidate the pensions of millions of retired auto workers? You talk about the “bad business decisions” made by automakers, but the decisions they made that are having the greatest impact on their bottom line right now are: 1) giving their workers real pensions instead of the bullshit 401K’s that most American workers have, and 2) not shutting down all of their factories in Michigan and moving overseas or to “right to work” states. That’s what you’re really punishing them for.
It seems to me that whether or not labor is going to get screwed over is a foregone conclusion.
Are you concerned about how many workers get screwed over? Whether it’s thousands, or hundreds of thousands, or millions? Doesn’t seem so.
If you think these companies are trying to get bailouts because of their deep respect for their workforce, you haven’t been paying attention.
Wow. Really nailed me there. Yes, I think General Motors is a 501C(3) nonprofit constructed solely for the benefit of the workers.
In the long run, propping up the manufacturing industry is as short-sighted as subsidizing the agriculture industry.
Actually, I would be all for subsidizing agriculture, if it meant helping family farmers hold on to their farms. As I sad before, what I look at is the consequences of the policy for real people, not whether we’re holding true to some “free market” ideal.
We need to concentrate on the next big industry that will drive our economy forward.
I think we’re heard this before.
Comment by SteveB — November 17, 2008 @ 6:24 am
Look, it is simple. If there is a bail-out then give it to the workers, not the managers. Turn the big three into co-operatives. Let the workers run the industry, elect administrative staff and so forth. They cannot do a worse job than the bosses.
Moreover, the workers have a direct interest in making the co-operatives work, as do the neighbourhoods they are in. And we can all benefit from the well documented efficiency gains workers’ control produces.
So if there is to be a bailout, use it to create economic liberty in the workplace! Turn them into co-operatives.
Comment by Anarcho — November 18, 2008 @ 12:55 am
Detroit’s cars are crap. Steve, the big 3 have been floundering for much, much, much longer than this current recession. That’s why people haven’t been buying them, with the exception of the SUV bubble: They don’t last, and in a lot of cases they’re poorly made to begin with. There’s a reason they depreciate faster than Hondas and Toyotas.
GM and the others would not be in the terrible shape they’re in if they’d focused on innovation and quality instead of pandering to “Safety”-obsessed suburbanites who end up making the roads more dangerous for everyone who’s not in an SUV. It’s pretty likely a bailout of some sort is gonna happen regardless, eventually, and when it does, the only hope it has of succeeding is if it’s contingent on the ouster of these companies’ top management. They’ve been stagnant and tone-deaf for years, which is why the companies are in terrible shape.
As far as employee health care goes, I think this would be a fine opportunity to get a foot in the door for national health care — the government provides the health plan Obama stumped for on the campaign trail to retirees, the Big 3 get out of the crippling entitlement costs (or at least part of them).
Comment by brian — November 18, 2008 @ 8:42 am
Sounds good to me. Here’s another idea: let the oil companies that have been making record profits, years after year, loan ‘em the cash to save thier mismanged asses.
http://www.BusterGetMyPills.com
Comment by Danko Ramone — November 18, 2008 @ 8:29 pm
Let ‘em fail. IM from Detroit and the ‘Big Three’ as theyre known here have done more harm than good on their own, especially the UAW. Stories of drinking on the job, triple time on holidays while theyre away from work like at home with a radio… sleeping on the job, strikes are not stories but a reality. Let’em fail!
Comment by crashnburn — December 25, 2008 @ 10:57 am