General Motors CEO Richard Wagoner; Chrysler CEO Robert Nardelli; and Ford CEO Alan Mulally beg for a bailout (photo courtesy Associated Press)
I am no fan of governments wasting hard-earned tax dollars on dubious schemes, and I railed against the $700 billion bank bailout (actually $850 billion after fine print clauses), which I argued was the most blatant episode of corporate welfare in human history. Couple that debacle with the $2 trillion in emergency loans from the Fed to unidentified banking and financial concerns, and it appears that Americans will be on the hook for untold trillions of new debt, monies that will weigh down economic growth for decades.
So I suppose I should fire up my keyboard and scoff at the idea of American auto executives flying on private jets to Washington in search of tens of billions in more government handouts. After all, these are the incompetent corporate leaders - whose lack of vision and seeming inability to produce vehicles that consumers will buy - drove their companies to the brink of bankruptcy, and who might lead the Big Three into complete dissolution.
And yet, I shudder to think of the effects to the American economy should GM, Ford, and Chrysler implode, as millions of workers have direct links to the financial health of American automakers. Moreover, the income and jobs of untold millions more workers indirectly depend on a vigorous auto industry, ranging from waitresses at diners near factories to employees at retail outlets in towns and cities with a heavy automobile industry presence.
Like Toledo, for example.
At least 15 thousand jobs in my community are directly involved in producing vehicles and component parts for American automakers, and perhaps 20 percent of the local economy revolves around this industry. However, the wages and taxes of autoworkers are about all that keeps a city like Toledo afloat, even after three decades of gradual downsizing and outsourcing.
If the American auto industry collapses, you can kiss goodbye the future of cities like Toledo, Dayton, Akron, Detroit, and Flint, which are Rust Belt centers that are already reeling from an over-dependence on auto manufacturing and related industries. Now, those of you in post-industrial power centers like San Jose or Seattle might not lose sleep over the collapse of Midwestern industrial cities, but I do.
Call me selfish, if you like, or call me stubborn for continuing to live in the Rust Belt, but I think that the U.S. auto industry is too important to simply shrug our collective shoulders and allow to wither. Besides, $25 billion pales in comparison with the $2.7 trillion that Congress and the Fed have already committed to "save" financial giants like AIG and JPMorgan-Chase.
Of course, keeping autoworkers and employees in related industries gainfully employed helps prevent declines in consumer demand for big-ticket items like appliances, housing, and electronics. The financial ripple effects of 1-2 million more unemployed auto industry workers would far exceed the the costs of infusing cash to stabilize the Big Three and position the American automakers for success in the coming decades.
Such federal beneficence, however, should come with appropriate conditions, not the least of which could include either a preferred lender status or a substantial preferred stock position. As a taxpayer, I insist that any bailout of the automakers comes with verifiable benchmarks for transitioning to vehicles with higher fuel efficiency and new energy technologies, as the Big Three utterly failed to prepare for global energy challenges, despite over three decades in advance notice.
I still cannot fathom how none of the major American automakers did not have a highly fuel efficient and inexpensive vehicle in a ready-for-retool-and-rollout mode, even after such previous experience as getting pimp-smacked by the Japanese in the 1970s and 1980s in meeting sudden consumer demand for energy efficiency. Heck, Indian automaker Tata Motors figured out how to design and produce a 60 MPG car for $2,300 (admittedly with much cheaper labor costs and lower safety and environmental standards). Why is it that GM, Ford, and Chrysler cannot (or will not) produce similarly inexpensive vehicles with high fuel efficiency?
It seems to me - even with high wage UAW workers and EPA/NHTSA regulations - that an American automaker should be able to produce a car that people can afford to purchase and to drive. In the 1970s and 1980s I owned a few used cars that fit this profile, like a used VW diesel Rabbit that got over 50 MPG in the city, or this rusty 1976 Subaru wagon I bought for $400 that ran for two weeks on $8 (the fuel gauge was broken, but I think I got 40 MPG in this 4-cylinder, 5-speed clunker).
So, I am all for bailing out the Big Three, but we should demand that these companies produce vehicles that meet the needs of American consumers in an world in which rising energy costs will continue to ratchet up pressure to change our ways. To ignore the collapse of American automakers is to sign the death warrant for dozens of American cities.