The big three stooges

What are we to think of the Big Three automakers plea to Congress (and each of us) for a $25 billion bailout, euphemistically known as a bridge loan or rescue package?

During the disastrous trip to Washington by the auto companies’ three CEOs (stupidly arriving on private luxury jets), the three men were unable to say exactly how much they need and how it would be spent, provide assurance they wouldn’t be back in a few months demanding more money and, finally, explain why Americans won’t buy their products.

You don’t give your last tourniquet to a dead man, said one lawmaker. What is at the end of the bridge, another demanded. Why are Toyota’s U.S. operations able to sell its cars, and you can’t sell yours, another congressman asked.

General Motors claims it could run out of operating money by year’s end. At one point GM CEO Rick Wagoner testified his company might need $5 billion a month. Five billion dollars a month!

The three CEOs rejected filing for Chapter 11, a form of bankruptcy that would let them restructure and rewrite contracts. Even though Delta Airlines did it and emerged able to buy rival Northwest, the automakers said that flying passengers is not the same as building cars. They argued they might never emerge from bankruptcy.

The arguments against letting the domestic auto industry go under are powerful. A total of 3.3 million jobs could be lost. Every state would be adversely affected. Sales of $156 billion in supplies and raw materials would be lost. The government would have to pick up pension obligations for hundreds of thousands. The country might go into full-scale depression.

This is not a matter of labor giving more concessions. Workers gave back significant wage and health care gains in 2005 and 2007 for active workers, new hires and retirees. Scott Paul, head of the Alliance of American Manufacturers, warns against a cultural bias in giving white collar workers a bailout for their industries while denying it to blue collar workers.

There is also the argument that the 1979 Chrysler bailout worked. The loan was paid back, the government got an additional $500 million and the nation got the family minivan.

Along that line, a bailout could give Detroit time to revolutionize itself. For example, the arrival in 2010 of the Chevy Volt, a viable electric car, could be a huge boon. Detroit insists it’s learned that green is not a bad word.

Few dispute that the auto makers have been mismanaged. Their long resistance to standards for more fuel efficient cars is the biggest example. Alan Mulally of Ford says the companies need a new business model. Wagoner said they don’t. Mulally is closer to what the country believes.

When Rep. John Dingell, D-Mich., the auto industry’s best friend, lost his powerful post heading the House Energy Committee after 28 years to environment-oriented Democrat Henry Waxman of California, it was a significant indication of how important energy efficiency has become.

True, the credit crunch is hurting auto sales. And the deplorable cost of health benefits is disastrous to many companies, including automakers.

Ford, Chrysler and GM chairmen say they would accept congressional conditions for a bailout, giving the government an equity stake in their business, putting limits on executive compensation, ending golden parachutes and accepting higher fuel efficiency standards.

They have to convince lawmakers they know what they are doing and will make sufficient sacrifices to make their companies viable.

We don’t know how deep this recession will be. Everyone is frightened. But that does not mean Congress should pass out taxpayer dollars to every industry that comes begging, particularly when they arrive in private planes.

While nobody wants Detroit to fail, the Big Three do not have their act together. They went in one week from talking merger to seeking a bailout. Congress will revisit the issue after Thanksgiving. What happens is up to Detroit.

 

(Scripps Howard columnist Ann McFeatters has covered the White House and national politics since 1986. E-mail amcfeatters(at)nationalpress.com.)

9 Responses to "The big three stooges"

  1. barak  November 25, 2008 at 9:43 am

    OH MY! The vultures are certainly having their feed. These jerks spent more on fuel for their trip in their private jets than I earn in a year, and they are begging to grab a slot at the trough.

    Hogs get slopped. Pigs get butchered. They deserve to be immersed to their noses in slop and then be butchered!

    I wonder if I go to Washington with MY hand out I could mooch a few million…

    Better hurry before the Bush garage door shuts to begging traffic!

  2. ralphcat  November 25, 2008 at 10:45 am

    Barak – What part of the word LOAN don’t you understand?

    Like a bolt out of the blue, fate steps in and sees you through — Jiminy Cricket

  3. k0k0peli  November 25, 2008 at 10:54 am

    Ah, the bailouts. Bailout money is already going for dividends, executive bonuses, etc. Tax money, straight from our pockets to their Swiss bank accounts. The thieves will be rewarded, the taxpayers punished. Who expects anything else?

  4. gazelle1929  November 25, 2008 at 4:54 pm

    Ms. McFeatters:

    You said:

    “This is not a matter of labor giving more concessions. Workers gave back significant wage and health care gains in 2005 and 2007 for active workers, new hires and retirees.”

    I believe you are wrong on this. UAW union members can cost the Big Three $73 an hour for wages and wage-related costs such as health insurance, payroll taxes, pension contributions, etc. The foreign car companies which build cars in the US say their costs are at $48.00/hour.

    Even if you cut that difference down to say $15/hour, when you multiply it times 8 hours a day times 260 days a year times 250,000 employees you get an excess labor cost of almost 8 billion dollars. And that doesn’t include any overtime.

    UAW says smugly, “We are not giving away any more. We have a contract.” Yes, they do, but their contracts are with companies so close to bankruptcy as makes no difference. UAW, in its typical arrogance, says they will not give any further concessions. “We have a contract.”

    So what happens when the Big Three go through a Chapter 11 restructuring? No more contract. And the union members are going to be wondering what hit them. UAW will probably say, “We have a contract.” And the bankruptcy judge will look at the $8 billion extra and say, “No, not any more.”

    What happens if the Big Three fold their tents? UAW says, “We have a contract.” But contracts require that there be two parties. Closed businesses don’t have contracts, nor do they have employees. It’s that darned simple.

    Yes, the unions gave concessions back in 2005 and 2007. And their members STILL cost the Big Three around $8 billion more per year than the payroll costs of the non-union employees at Toyota, Hyundai, etc. As the song goes, “But that was yesterday, and yesterday’s gone.”

    Admittedly, the Big Three management is stupid, unutterably stupid, but the UAW leadership is being not just stupid but criminally stupid. They are helping to kill the goose that lays the egg. No, it’s not a golden egg anymore, but having a job at $48 an hour including benefits is far better than having to stand on an unemployment line.

  5. John1172002  November 25, 2008 at 7:57 pm

    The real answer is simple. Do not bail out Detroit. Nationalize the automotive industry. Make smaller cars – no more Hummers – ALL diesel-powered, and all with the kit built-in. What is the kit? You should know. The kit is the one you can buy off the Internet for about $600, that will allow you to get free or cheap used french-fry oil from McDonalds and similar places, strain it, and use it as free or at least cheap diesel fuel. so your car smells like a french-fry. So what, if it gets you where you want to go for nearly free? Or would you rather pay Exxon obscene profits by buying their nearly $4 per gallon gasoline? BTW, you can rest assured that they have long-standing contracts with the Arabs to buy their oil at far less than the “spot” price of oil which is what you see on the stock market.

    John1172002

    Some Texas village is missing its’ idiot. However, they just called and offered us money to keep him.

  6. John1172002  November 25, 2008 at 7:58 pm

    The real answer is simple. Do not bail out Detroit. Nationalize the automotive industry. Make smaller cars – no more Hummers – ALL diesel-powered, and all with the kit built-in. What is the kit? You should know. The kit is the one you can buy off the Internet for about $600, that will allow you to get free or cheap used french-fry oil from McDonalds and similar places, strain it, and use it as free or at least cheap diesel fuel. So your car smells like a french-fry. So what, if it gets you where you want to go for nearly free? Or would you rather pay Exxon obscene profits by buying their nearly $4 per gallon gasoline? BTW, you can rest assured that they have long-standing contracts with the Arabs to buy their oil at far less than the “spot” price of oil which is what you see on the stock market.

    John1172002

    Some Texas village is missing its’ idiot. However, they just called and offered us money to keep him.

  7. Warren  November 25, 2008 at 9:30 pm

    I agree with you about not bailing out the automakers, but for a different reason. I totally disagree with any premise that the government will cause automakers to build cars that people want to buy better than the automakers themselves, who have a profit motive whereas the government does not. Governments only have political motives. The only way your scenario works is if the government tells the automakers what to build and then legislates what the public can buy. Worse than the old Soviet Union.

    The reason I don’t approve of a bailout is that we are institutionalizing irresponsible financial behavior. Like never before. If we bail out the automakers, where do we stop until every darn small business in the US is on the government dole and is partly owned by the government?

    This thing has to get pruned somewhere.

  8. woody188  November 25, 2008 at 9:43 pm

    Should have started pruning with the banks. They don’t make anything, only create debt out of thin air. Nothing but economic vampires eating off the rest of us.

    Kind of cheap of Ann to change the name of this article and re-post it. Must be off for Thanksgiving already.

  9. Rhoddy  November 26, 2008 at 7:57 pm

    These guys don’t get it. When I worked for Hercules Incorporated in Wilmington, DE it was in big financial trouble – a new CEO came in, his name was Dr Joyce, one of the things that he did to get the company back on its feet or at least to a point where the company would be worth taking over by another company was sell the assests, real estate, golf course/country club, art collection and corporate jet. Everyone flew economy even Dr Joyce and hotels were Hampton Inns or equivalents.

    It must have worked because I was laid off from the company almost 4 years ago and Ashland just purchased it this week.

    Detroit may want to call in Dr Joyce as a consultant I’m sure he could get them back on their feet. Dr Joyce was the nicest prick I ever met.

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