Thursday, December 04, 2008

Auto Industry Bailout, Take 2!

"Bailout" is officially Merriam-Webster's word of the year. And this week, the auto companies want their slice.

Humbled from their last (failed) trip to DC, the auto executives are back-- asking for a $34 billion rescue package-- this time making with the sweet talk (rather than last time, when they threatened to take the entire U.S. economy down with them, which admittedly was a bit harsh). "We made mistakes, which we're learning from," GM chief executive Rick Wagoner said. I'll never hit you again baby, I swear. In lieu of roses and chocolates, the execs came with PR gimmicks... like road trips to DC and pledges to work for $1. I'm sold!

The AP article I linked to doesn't seem to have a lot of specifics on what mistakes the executives made. The most specific was this from Ford CEO Alan Mulally: "We produced more vehicles than our customers wanted, then slashed prices." That's like burning down a house and then apologizing for not rescuing the cat on your way out. The way I see it-- and I am obviously no expert on the auto industry-- is that the industry, like the financial sector, is a victim of hubris and gluttony. While Toyota was leading the pack with cars like the Prius, the 'Big Three' were still pumping out gas-guzzler after gas-guzzler, which was very profitable for them... in a very short-term and destructive way. They thought the good times would last forever, and there was no planning for the future.

The executives are also using their workers-- while simultaneously scapegoating the unions and their demands for 'salaries' and 'benefits'-- as the emotional justification for the rescue. After all, we can't (no, seriously, we can't) allow all of these people to end up out of a job. The sudden concern for the workers is laughable given that these companies have spent the past few decades laying off as many workers as possible, outsourcing those jobs, etc, with no regard to the effect on the economy or the communities that depended on those lost jobs. They've mostly seen their workers as obstacles to wider profit margins.

Let us also remember that these execs spent millions lobbying against the very changes and regulations that might've saved them from this abyss. Again, very much like their free-market bank counterparts.

Now they are asking Congress for, basically, a blank check. Understandably, we've given blank check bailouts to the financial sector, so why should the auto companies be held to a higher standard? This is their argument.

Here's what they'd get from me if I was in charge (and this is why I never will be)... They would get the bailout/loan in exchange for several conditions, which would be agreed to in legally-binding contracts signed by all of the executives of these companies (who, yes, would be working for $1 from now on, though they would be encouraged to resign and make way for new leadership). The first is that the companies would pledge to end their outsourcing, and work to maintain U.S.-based production of their products, with full protections for their workers. Start putting Americans back to work. The second is that the companies would be mandated to produce only vehicles that met a certain fuel-economy standard, not the weak-tea by-2020 mandates they got in last year's watered-down energy bill, but starting today. Add in some tax credits based on the % of hybrid or electric vehicles they produce. The third is that the companies should also begin to invest in, and produce, alternative transportation options (light rail, etc), much in the same way they were used in WWII to make tanks and bomber planes. Plan for the future.

What deal will they get, though? Definitely not my dream one above. Instead, they will likely get all most of what they are asking for-- after a long fight in Congress-- with some minor (likely non-binding) conditions attached. And, as usual, we'll have merely plugged in some cracks in the wall rather than addressing the foundational issues that brought us more. More on that in a more general sense later this week.

[UPDATE: As for the unions/UAW, they are already offering their own concessions.]

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