Weatherdem's Weblog

Bridging climate science, citizens, and policy

Auto Industry Bailout


The Democratic-led Congress continues to push for an auto industry bailout of at least $25 billion.  When this was first proposed, little was mentioned about executive pay or ensuring American automakers would change how they do business.   The original $25 billion offer was a giveaway, just as much as Bush’s Bailout has been a giveaway to banks.  Remember, the portion of the $700 billion given away so far hasn’t been used to buy bad assets, it’s been used to buy other banks.  Actions taken in countries around the globe has done more to thaw the frozen credit markets than the obscene corporate welfare check Bush’s government wrote.  So the original $25 billion corporate welfare check everybody in Washington wanted was as immoral as Bush’s Bailout.

A few more things about this auto bailout.  I don’t care as much as most other people do how bad it would be for a company like GM to fail.  I am keenly aware that thousands of jobs would be lost in multiple industries across the nation.  I have a two-part response to the “too big to fail” argument.

First, GM made this bed.  They did so deliberately, with full knowledge that foreign car makers were shifting their approach in America.  GM and others have fought against universal health care for decades, which has only multiplied the amount they are forced to spend on their own employees health coverage each year.  Their operating expenses are higher because of their actions.  GM and others also fought against increasing CAFE standards for decades.  They worshipped at the free-market altar, convinced some magical hand would take care of everything.  Obviously, they were wrong.  Meanwhile, GM has been making cars with better fuel efficiency in every other market across the world because foreign governments were adult enough to mandate those efficiencies.  GM squashed every technology that would wean the industry off fossil-fuels.  So when GM says they need billions of taxpayer dollars to retool everything in America, I don’t have a whole lot of sympathy.  They made business decisions to build inefficient vehicles so they could maximize their profits.  Did they pass those profits along to their workers or to America as a whole?  No, the profits were privatized, as was their right.  Now that GM is in trouble, what do they do?  They ask for a handout from the government they spurned for decades.  They ran a bad business model and want their losses socialized.  Did they make their request with an offer to change their business model?  No.  It’s only being discussed because millions of Americans correctly viewed GM’s request as the stinking pile of manure it is.  Here’s where the politics comes in: the auto industry has spent millions of dollars on lobbying Congress for decades (instead of using the money for improved technologies).  That wallet padding has corrupted a number of elected officials, Democrats and Republicans alike.  Instead of making more objective decisions, lawmakers are willing to bend the American taxpayer over the table for GM’s sake.  That’s immoral.

Which leads to my second point.  Thousands of jobs will be lost if GM fails.  That’s beyond dispute.  But what about the millions of jobs already lost this year?  And more to the point – what about Americans?  Where is our bailout?  Industries across the board have constructed unfair playing fields Americans are forced to play on.  Where is our bailout?  Where is our relief?  Why don’t we have living wages?  Why don’t we have universal health care?  Why don’t we have the most technologically advanced vehicles on Earth?  Why has American ingenuity been kicked to the curb time and time again?  Where is the talk of capping executive compensation, of closing the loopholes corporations have generated to get around what little control there is?  Where is the talk of splitting the Big 3 automakers up to increase competition?  Both parties are too willing to give corporations whatever they damn well please and every time they do, it’s living, breathing Americans that suffer because of it.

News came this morning that House Speaker Pelosi wants some of the appropriated $700 billion to go to the auto corporations.  Not surprisingly, Bush is pushing back, saying that if Democrats want money for the autos, they need to do it in a brand new appropriation.  This makes sense for two reasons.  Bush’s cronies want all the $700 billion to go to themselves.  There has been zero oversight or transparency that the money is actually going to where Congress authorized it to go (I don’t see much mention of oversight or transparency with respect to the auto bailout either, surprise, surprise_.  That’s a scandal by itself, but I think Americans are incredibly scandal-fatigued by this “administration”.  That $700 billion is sitting on top of an already large pile of debt America possesses.  Bush’s cronies are going to walk away with most or all of it and the rest of us will be left holding the bill.  Bush and the Cons also want to destroy more unions.  They’ve been very efficient at doing so over the past 8 years, neatly continuing what St. Ronnie started in the 1980’s.  The longer the automakers go without any assistance, conditional or not, the more likely they are to fail.  If they fail, thousands of union jobs will be lost.  It will be harder to get those back than it will be to create new jobs period.  That’s another big reason why Pelosi’s crew is working so hard to hand the auto corporations cash quick.  Unions will be rightfully upset that not enough was done to save their employers.  I definitely support those unions, but I don’t see a viable long-term solution being discussed in Washington.


2 thoughts on “Auto Industry Bailout

  1. In the case of the auto-makers’ bailout, it’s a relief to have a national issue where the issue is so straightforward: American cars tend to suck therefore people are not buying them. If GM and Ford don’t want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.

  2. It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn’t have any real effect.

    This time it’s the car industry.

    While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable – so this time let’s target unemployment, create AMERICAN jobs and pump up the economy all at one time.

    Consider the following:

    Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that’s not all direct but due to suppliers. GM alone has over 1300 suppliers. (That’s a lot of jobs!)

    1 in 10 Americans makes all or part of their income due to the automobile industry.

    Money turns over 5 times in a year.
    Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
    (This isn’t magic, it’s simply how the economy works.)

    Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.

    Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
    Foreign competitors have worked off-shore collectively to meet various US gov’t. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.

    Make no mistake; it’s no surprise that once again government has been a major part of the problem.

    Here’s the solution.

    Instead of either shipping cases of cash off to car makers; or sending us all another check:

    Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that’s domestic. (Civic = 70% Ford Explorer=80%)

    Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.

    This would bail out the car industry without giving them a dime directly
    Further it would reduce the overall age of the nation’s cars which would in turn;
    increase overall fuel economy
    & decrease pollution.

    Strengthen the dollar!

    Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported …like gas!


    Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
    That would give the economy good swift kick right where it needs one!

    Pays for itself!

    Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
    What is the income tax on 65,000 anyway?
    (Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)

    Another Stimulus Package?

    I’m sure you’ll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV’s usually made in Malaysia or some such place.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s