The American auto industry car tsars took their corporate jets to Washington to plead poverty, but the Big Three's warnings of catastrophic job losses haven't convinced senators to ride to their rescue

North America is the land of SUVs. Sitting among the beasts in the 'parking lot' that these highways so often become, the plight of the so-called Big Three auto makers seems surreal. It seems there are plenty of their vehicles around me, belching fumes from gas guzzling monster engines. Add to that gas prices sinking back down to under 85 cents a litre – eat your heart out Kiwis – and it's quite a leap to imagine the industry is in crisis.

With the first snow of the five month season already here, contemplating a North American winter without SUVs actually sends shudders down my spine. But turn to the 24-hour news zone on my TV and radio and there's an endless supply of suits arguing the case for or against bailing out Chrysler, General Motors and Ford. The Big Three have prostrated themselves on Capitol Hill, pleading with the House Finance Committee hearing for just a little morsel of the $700 billion bailout fund. A measly, tiny, almost unnoticeable tinsy little $25 billion. Gosh, it’s not even a bailout, they cry; think of it as a loan. It would be much better to lend them the money now than reap the consequences of three million lost jobs later.

In many other areas this would be called blackmail. For such a morsel of the bail out action the auto giants are promising little in terms of reorienting their dinosaur ways, preferring to scare the mags off senators with tales of the hideous domino effect that would hit car assembly plants, the parts industry, suppliers, retailers and consumer dependent business in places like the car kingdom of Detroit.

That last bit is quite plausible, but it would also be the case if the steel industry went belly up, and that’s the argument of those opposing the car bail out – what next? Where will it stop? The car tsars who have fronted to plead their case have done so in terms worthy of the Old Testament prophets – “catastrophic”, “economic devastation”, “extremely dire”. You get the picture.

Strangely, they are not to blame for any of this, as they’ve been busy restructuring, slashing wages and pension funds, “furloughing” staff, becoming fuel efficient and developing hybrids. They chorus that it is the financial crisis, not them. As a result people have no access to credit to buy cars. Conveniently missing in all this is the realization that other auto makers – Toyota and Mitsubishi, for example – are not beating a door to the Capitol, despite falling sales forecasts.

The prospect of an immediate slice of the bail-out action – even the little crumb the humble car makers are coveting – does not look good owing mainly to the lame duck session the US government will be in until Barack Obama is sworn in on January 20 next year. The outgoing Bush administration is heavily anti any car bailout – but then Bush didn’t endear himself to those in strife when he so blithely joked this week that in the last eight years he’s never seen a traffic jam. Such is the life of a President – or a car company CEO it seems. Republican Senators have rightfully balked at the executives (some of whom made up to $28 million last year), jetting in to Washington in plush corporate jets and demanding 25 billion now, fast, otherwise all hell will break loose. Not exactly the panhandling conditions their ‘furloughed’ workers may now be conducting. The arrogance is breathtaking. The ignorance of perception a clear indication of an impoverishment of policies.

There’s a basic Republican vs. Democrat argument underlying all this. The Republicans have little empathy with blue-collar auto-workers and parts-makers. The Democrats however are tight with the United Auto Workers Union, receiving donations and appealing to the workers for their votes. There is of course no guarantee the Democrat majority, once sworn in, will even deliver the requested respite for the automakers. A number of Democrats don’t want to extend the mess of the financial bailout. The CEOs have argued they are fast running out of cash, but even if put on the dole they can’t guarantee they won’t be back, (hub)cap in hand, in six months or so.

The executives can, of course, eloquently and humbly argue every legal reason under the sun for being bailed out, rather than facing the humiliation of bankruptcy. Sure Chapter 11 bankruptcy brings with it a host of lengthy legal issues and potential confrontations with unions, but certain airlines have had to face that music, have restructured and come back fighting. That was back in the days of real capitalism, however. Now, as Karl Marx spins gleefully in his grave, capitalism has morphed into a strange hybrid suddenly absent of the tough love that allows players to sink or swim. The type of capitalism being currently practiced has given the inefficient auto industry every reason to believe it too is a rightful recipient of public money – money being borrowed from overseas and adding to the trillions of dollars the US taxpayer already owes.

This Clayton’s capitalism is also behind the arguments coming from some quarters that while bankruptcy is inevitable, it's better to delay it for a while given the mess the rest of the economy is in. Oh to have a spare $25 billion to put off the inevitable.

So can the supposed model for world democracy and birthplace of the Model T, face the prospect of not manufacturing its own ‘vee-hickles’? Not easily it seems. It would be a turn for the worse if the new, 21st Century, environmentally-conscious 'anointed one' began propping up a 20th Century dinosaur – unless the new hybrids can run on cheeseburgers. Then the president-elect solves the obesity epidemic at the same time.

Barack Obama will need some fast footwork to prevent this latest headache being a lurch backward, instead converting it into a perfect opportunity to prove his talk of a new environmental vision. Inversely, his biggest issue will be the little people. Tens of thousands of them contributed to his campaign of hope.

For now, the overwhelming sign is that the House Finance Committee regards an auto bail-out as anything but auto. It would be nothing more than a tourniquet on a dying body, and despite the ominous tales of doom, they won’t be hitching their wagons to Ford, Chrysler or GM. If anything, these wagons are in the ditch, and those who’ve driven them there may soon experience what the rest of us know about running on empty. It gives a whole new meaning to the economy tanking.

Comments (5)

by Will de Cleene on November 20, 2008
Will de Cleene

Well punned, Ms Young. The sooner the US gets past their auto erotic fixation, the better.

by Adolf Fiinkensein on November 20, 2008
Adolf Fiinkensein

Let them go broke, I say.  Talk of three million job losses is arrant bullshit.  The plants won't burn down.  All that will happen is that the stock burn instead and so they should.  New investors (possibly Chinese, Japanese or Russian?) will pick up the pieces for a song and re-employ maybe 2.8 million workers without their featherbedded retirement schemes.  However, they will have jobs and they will produce cars.

 

That's life in the land of the free.

by Lane on November 20, 2008
Lane

Agree - the issue with bailouts, be they in the auto industry or the finance sector (which is still collapsing despite the billions thrown at it already) is that, as you say, they simply delay the inevitable. Why does America (and other conutries) think you can have a blinding binge on debt - then wake up without a hangover?

by Peter Salmon on November 20, 2008
Peter Salmon

TARP was not intended for cars.

The problem is the huge oncost brought about by the featherbedding caused by the UAW.

Problem the unions now claim they raised US$400 million for Obama and want their pay-off.

Intellectually, I suspect he knows he should not bail out the grossly inefficient US auto manufacturers, but politically does he have the will to stare them down?

It is here, that the potential problems of a Democratic President, Democratic Senate and Democratic House of Representatives come to the fore.

We saw in the first Clinton term th eproblems this caused. I will wager that Obama will be secretly hoping for the Congress to over reach itself very quickly and for some Republican success in the mid-terms so that he can rein in Congressional excess.

If Obama gives way on the auto industry then I think we will see wrose problems down the track, including greater protectionism

by Richard Thomson on November 21, 2008
Richard Thomson

It might be not be easy being an auto industry executive in the US these days, but it sure seems to beat life further down the corporate hierarchy.

A very good article here, from the New York Review of Books, discusses The Big Squeeze: Tough Times for the American Worker, by Steven Greenhouse, a labor and workplace reporter for the New York Times (you can read chapter one here). 

Greenhouse, NY Books says, "writes about factory employees and retail clerks, truck drivers and store managers, computer technicians, middle managers, and engineers. They all face similar difficulties: they have lost their places in what was once a secure and confident middle class."

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