Rescue Detroit, or not?
Here at the Opinion Manufacturing Division, we're torn about whether Congress should bail out U.S. automakers. (See our latest, guarded editorial here.) The Big Three employed close to 240,000 at the end of last year, according to the Center for Automotive Research in Ann Arbor, with several hundred thousand more working for parts suppliers. But in contrast to foreign-based car makers, which grew through much of the past two decades, the trend for the Big Three has been remarkably bad since the mid-1990s, according to the Commerce Department. In other words, GM, Ford and Chrysler don't appear to be in a temporary fix. On the other hand, the credit crisis has hit them particularly hard because, as with home builders, a high percentage of customers have to borrow money to buy their products.
On the plus side, last year's contracts with the United Autoworkers Union will move the huge cost of retiree health care off of Detroit's books and onto the union's. But that shift is being phased in over four years, and the Big Three need help now. So readers, we ask you: Should Washington stand aside and let the market work? Vote in our unscientific poll, and then share some of your thoughts in the comments section. Would bankruptcy ruin an automaker's brands, or would it be a necessary prerequisite to new management and labor agreements? And if you think GM, Ford and Chrysler are too big to let fail, how can the government provide aid without simply forestalling the inevitable? Are these jobs so important that taxpayers should subsidize them?
BAILOUTS ARE COMPLEX BEASTS, but one should be implemented to save the U.S. Auto Industry.
Here is a workable plan -
http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html
There is much creative talent hidden inside the U.S. Big 3 that has been smothered by mismanagement and the UAW.
Posted by: PacificGatePost | November 13, 2008 at 12:53 PM
We must not as a nation forget the role the high cost of our dependence on foreign fuel played in the demise of our automakers. The exorbitant cost of gas the past year has done serious damage to our economy and society. We need to take lessons from our mistakes.WE also need to get out from under the grip our dependence on fore gin oil has on us. Why not take some of these billions and invest in America becoming energy independent. Driving an electric car would cost the equivalent of 60 cents a gallon. The electricity could be generated by solar or wind power. Green technology would create millions of badly needed new jobs. What America needs is a green revolution. It is time for us to move forward with alternative energy. I just read Jeff Wilson's new book The Manhattan Project of 2009. I highly recommend this book to anyone who is concerned about the downward spiral of our economy and it's effect on our society and would like to see our country become energy independent!
www.themanhattanprojectof2009.com
Posted by: Sherry | November 13, 2008 at 03:17 PM
The Big 3 are not willing to help themselves........so the goernment should say NO to a bailout.
Posted by: Links (Rick) | November 13, 2008 at 04:44 PM
If we are to provide loans to the automakers we must insist on radical changes to the industry, it's leadership, the union's stake as well as the political systems that allow this failing industry to remain dysfunctional.
Specifically I would hope:
Product needs to be redesigned to be more fuel efficient and hybrids and alternative fuels need to be a priority. This should be non-negotiable.
Leadership needs to be changed and/or salaries for executives reduced by 25% with salary caps for highest paid leadership.
Detroit and its politicians must diversify it's revenue stream to include other industries. A plan should be developed immediately to attract other industries and not have one industry holding the power to put this large a number of our workers out of jobs. Ideally, alternate manufacturing jobs working towards providing more sustainable energy.
Unions must be willing to give up some of their stake as well and be willing to renegotiate their stakes to bring them in line with other related manufacturing jobs.
The federal government must also change and be willing to be more involved in demanding compliance with changes, be willing to walk away should participants not be willing to participate, and be willing to negotiate with foreign automakers on taking over our failed industry if necessary. Further they should explore the means to help workers with retraining and relocation if necessary.
Posted by: Catherine | November 14, 2008 at 07:58 AM
A bail out will only work if the unions agree to contribute capital and perminantly cut all their cost to match other manufacturs of autos in the US. Also, management must be willing to perminantly give up 50% or more of their compensation and benefits before bail out money is made available.
Even after the above is achieved the goverment must take a collateralized position to guarantee pay back if the company survives.
Posted by: Clarence Fuqua | November 14, 2008 at 08:57 AM
We should repossess the homes of the senior management teams, sell them, and use the proceeds to pay off the companies' debts and provide 3 year severance plans to each non-managerial employee. Each senior manager should then be required to work the line at a competitor's manufacturing plant in Japan so they can get a sense of what a successful and profitable company should really look like (see, e.g., Nissan, Toyota, or Honda).
Posted by: Robin Hood | November 14, 2008 at 10:17 AM
First, there is no "Big Three" in the equation. GM and Ford are publicly held companies and Chrysler is not so any bailout should not include Chrysler period. GM and Ford workers should be taken care of by their Unions not taxpayers so their plight should also be thrown out. There are a few bailout ideas being kicked around and the ones that involve throwing out the executives and board members are the only ones worth looking at. Long story short, GM and Ford engineered their own failures so if they continue to exist as companies they will need to be rebuilt from the ground up management-wise. Otherwise, let them fail.
Posted by: Ron | November 14, 2008 at 11:29 AM
It seems to me as if the UAW wants everyone but its members to contribute to a bailout. Mm would be stuck with more debt it likely can't repay, the taxpayers would pony hp more tens of billions of dollars -- but what would UAW contribute? Nothing. Indeed, UAW wants another $25 billion n cash for its health fund.
This is ridiculous. In essence, UAW posits that there are only two choices: (1) toss more government money into companies that lose money habitually or (2) let those companies tank, and have the entire economy suffer.
Enough of this blackmail. UAW wages and benefits need to go down -- now -- as part of any bailout.
Forget about mandates for MPG or "green" technology. Let the market decide what buyers want to buy. The notion that building SUVs got the Big Three into this mess is simply wrong. SUVs and trucks, until the recent big drop in sales, were the only vehicles that made the Big Three any money. Had they made even more small cars and not so many SUVs they'd have ceded the high-margin SUV and truck business to their competitors, and lost even more money.
For goodness' sake, let's keep Uncle Sam out of the business of setting Five Year Plans for industrial production, be it in the auto industry or in other sectors. All the federal government should do now is make some loans conditioned on stringent conditions regarding wages, benefits, and corporate accounting for the cash. If the UAW will not play ball, perhaps it is time for bankruptcy.
Posted by: Jim Symanski | November 14, 2008 at 02:51 PM
Imagine one solution that would revitalize Detroit and the larger economy, create
thousands of new jobs, largely eliminate the need for foreign oil, drastically reduce
green house gases, and greatly improve the U.S. transportation infrastructure. This
sounds too good to be true, but all that’s lacking is political willpower. We have
the ability to solve many of our problems in one fell swoop, what we need is the
political leadership to make it happen.
How can such progress be achieved? It can by realized by constructing networks of
Personal Rapid Transit (PRT) systems in major cities in the U.S. PRT is a public
transportation concept that offers on-demand, non-stop transportation, using small,
independent vehicles on a network of specially-built guideways (source Wikipedia).
The guideways would be built throughout a city, and are sufficiently small to have
stations within office buildings. A passenger would walk to a PRT station and enter
a waiting vehicle. The passenger would select the destination (much like using a
GPS in current autos) and sit down for a relaxing trip. The vehicle would be automatically
driven and routed to the passenger’s destination. The electric vehicles use no oil,
have no pollution. PRT systems have been studied in the U.S. and throughout the
world for decades. A pilot project (ULTra) is currently under construction at London
Heathrow Airport and will be operational in 2009. Two other PRT systems have been
planned: one in Masdar City, Abu Dhabi, UAE with a completion date of 2011; another
in Daventry, Northamptonshire, UK with a completion date of 2012.
Instead of bailing out Detroit with millions of dollars to produce products that
fail to be competitive, Detroit would be retooled to build vehicles for PRT systems.
They would be building vehicles for the future. The construction of the guideways
throughout the U.S. would create thousands of new jobs. The operation and maintenance
of the PRT systems would likewise create many new jobs. Electric power for the PRT
systems would be provided by new wind, solar, nuclear, or clean-coal power plants
– more jobs. The dependence on foreign oil would be drastically reduced as millions
of cars would be removed from the roadways. The savings in foreign oil expenditures
would be billions of dollars per year. Pollution would also be greatly reduced by
removing the cars. Of course the transportation infrastructure would be significantly
upgraded.
All that’s needed is for a major political leader to enthusiastically champion the
building of PRT. Imagine defining a mission statement as JFK did for the moon landing.
A statement such as “Our goal is to transport most employees in a clean, safe, personal
vehicle to and from work in half the current traveling time and at one-tenth the
current cost, and to do so by our country’s 250 birthday.”
Posted by: Harry Webb | November 15, 2008 at 09:37 AM
I'm curious.
Could I set up a shell company, hire all my friends at sky high salaries and huge pensions and sign up with the Pension Benefit Guaranty Corporation, pay the first months premium, then declare bankruptcy and we would all get those huge pensions paid by PBGC?
Just wondering.
:-)
Posted by: tony | November 15, 2008 at 11:21 AM
Points to ponder-
Bailout is a purposely negative word. This should be considered an investment by the Federal Government.
UAW has made billions in consessions to the 3 over the last 20 years.
While it is easy to say no bailout, even Ronald Reagan's White House supported one with Chrysler.
We are not just talking about 240,00 employees-but will directly affect another 3 million PEOPLE in subcontractors, suppliers, dealerships, etc. If you want to start a Depression, killing 3 million in jobs is a good way to do it.
It is irresponsible to talk about the Japanese and European profitability since they have government health care and retirement programs that do not cost those companies the billions the 3 need to pay out and into.
This country needs to maintain a manufacturing base with good paying middle class jobs. Not everyone is cut out to be an entrepeneur or day trader.
The bailout should include the Federal Government taking an equity stakehold [i.e. become a shareholder] in the companies.
If the Republican party lines up against this investment by the Federal Government, there will be hell to pay when deepens the current recession.
And lastly-the Republican Party is against this investment because they want to destroy Union Labor in the United States and want everyone except themselves on minimum wage with no protection for the worker.
Posted by: Gene R Whitaker | November 16, 2008 at 11:01 PM
Those who are advocating that the government allow the domestic auto makers to fail after dumping 700 billion on Wall Street are attacking the old Detroit of the 1970s & 1980s. Detroit has made great strides in quality and technology in this century and has cut their labor cost by 50% in the new contract as well as shifting the responsibility of the retiree medical obligation to the union starting in 2010. Detroit is on the verge of developing a new generation of renewable energy vehicles that can help propel the U.S. into this new technology. Our transplant motor vehicle industry conducts all such research overseas. The argument is more than a question about how best to create a new Great Depression for this century. It is also about the future economic stability of our country.
Posted by: Don Goodwin | November 17, 2008 at 08:26 AM
Ford, GM, & Chrysler have resisted calls for more fuel efficient autos for years saying the public wouldn't buy
therm. No Bail Out. Let them declare chapter 11 and re-organize.
Posted by: Lynn Nelson | November 17, 2008 at 08:56 AM
The American car companies have had more than 30 years to change and become competitive and result is that they still haven't learned the lessons well understood and practiced by the major Japanese companies. Bailouts will only perpetuate their dim witted approach to designing cars. Let them go under and let the Japanese build more factories in the US and hire the workers chained to bad companies.
Posted by: Gary | November 18, 2008 at 09:44 AM
Throughout my full 18 years of life and just getting involved in government issues and starting to learn more about this system, I say... REJECT THE BAILOUT FOR THE BIG THREE. The White House should not send any more money to the failing auto industry on top of the already approved loans. Why should taxpayers throw more money at a company that cannot prove that it has a long-term path of success? This rescue plan in which was said the $25 to $50 billion will be taken out of the $700 billion Wall Street bailout, should be off limits to Detroit.
Posted by: Dillon | November 19, 2008 at 12:10 PM
Hasn't Chrysler already been bailed out once? Apparently they didn't learn their lesson last time. What makes us think that they would learn it a second time?
Posted by: Deepwater805 | November 20, 2008 at 01:35 AM
How stupid is the Big Three for signing a JOB BANKS program with UAW.?
Do most of you know what that is?
Since 1984 the auto manufacturers have been paying all laid off employees full wages and
benefits to sit idle at the Union Halls for the full work day. The workers were never laid off
as we all know what the term means.
Today they have limited it to four (4) years with Chrysler but not with GM and Ford.
So if we give the bail out we will still be paying the laid off employees full wages with benefits.
Are you making so much money that you can afford to pay this people to sit on their rears?
People, please know the full facts before you say bail them out. That is why the cost of the
cars are so high and the quality not up to par because of the job banks program. The autoworkers literally can not be fired.
Posted by: WHYILEFTLA | November 21, 2008 at 10:48 AM
I have never seen so many people so out of touch with reality. Does everyone in California think UAW workers make $70.00 an hour? In all of California, are the beautiful SUV's GM makes the only vehicles GM makes??
Did the Malibu (Car of the Year), or the other models that get 30 MPG not make it to the dealerships in California? This has nothing to do with profitability of manufacturing automobiles, this has to do with people not getting credit to purchase automobiles! Please read the paper, listen to the radio, watch the evening news! One of our Senators said it right "AIG is NOT the middle class!". Somebody should ask how easy it is for an American company to sell their product in Japan...and then how easy our "government" makes it to sell their products here! Someones hand is in someones pocket!
Posted by: rich breaks | November 21, 2008 at 01:29 PM
We need innovation and Ford, GM and Chrysler have not changed with the times. They have been losing money for years. If we put money in they will not change. They will lose that money also. The people will find jobs again. Investing in the companies would be a waste of time, money and create just another thing that the government has to monitor. Let them regroup if they can and do it differently this time. They are old school. It seems we need innovation. My opinion is no.
Posted by: Gwen Castelda | November 22, 2008 at 03:37 AM