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Helping the auto industry

Helping the auto industry

Posted: Monday, December 1, 2008 9:09 pm
By: Douglas Cohn and Eleanor Clift



WASHINGTON — A newspaper columnist in Detroit said she didn’t know until the debate over bailing out the Big Three automakers that Detroit was a dirty word. Resistance is widespread in Washington among Republicans and even some Democrats to writing a government check to give the carmakers more time to clean up their act. If they haven’t done it by now, what makes anyone think they will reform because of a cash infusion? Wouldn’t that be the same as rewarding them for bad behavior?

There are good arguments for letting the Big Three go under, if that’s where they’re headed. But there are better arguments for helping them out. If one or more of the automakers is forced into bankruptcy, the ripple effect could cost some three million jobs, which would push up the unemployment rate to 10 percent. Lawmakers are rightfully angry at a management that spent more money on lobbyists to stave offgovernment regulations than it did to develop fuel-efficient safe cars. But now’s not the time to practice tough love.

If the economy were doing well otherwise, the collapse of such an iconic industry would be a shock that could be absorbed. With the economy teetering on the brink of a worse recession, the automakers should get their check but with conditions. President-elect Obama has talked about the need for a car czar or overseer to force a change in the corporate culture that allowed such a proud industry to fall so far behind the times. Labor contracts will have to be reorganized to take into account the changing social compact. Cradle to grave benefits once taken for granted can’t be sustained, but neither can the excessive pay doled out to executives who aren’t delivering.

When Good Morning America’s Diane Sawyer asked the CEO of Ford, who received a huge signing bonus, if he would work for a dollar a year in 2009 as a show of goodwill in exchange for a government bailout, he said no, that if you want talent you have to pay for it. He’s right, you have to pay for it, but not the large sums commanded by auto executives, and not when they have taken their industry into the ground.

Personalities aside, we need the American auto industry to survive and prosper because there are national security implications. Who do the critics think built all those trucks and tanks during World War II? We need a manufacturing industry capable of building planes, ships, tanks and trucks. 

We have Boeing for planes, and we have a shipbuilding industry in Pascagoula, Mississippi, that former Senate leader Trent Lott carefully nurtured during his tenure in the Senate. We can’t give up our own truck and auto building capacity in a fit of pique over a group of executives who aren’t worth what they’re being paid.

Truth is, if you dig a little deeper, the automakers are finally beginning to adapt to the 21st century. General Motors gets high marks for the way it’s conducted itself in China, where it now has 10 percent of the market, and is positioned to capitalize on China’s growing prosperity and the expansion of its consumer class. The Chevy Volt, a fully electric vehicle, is almost ready to be marketed. The carmakers are integral to putting in place a national electric grid, a big step towards freeing U.S. independence on foreign oil.

It’s hard to understand the resistance by the Bush administration to funneling $25 billion from the $750 billion financial industry rescue package to the automakers. It seems ideological. Bailing out the titans of Wall Street is one thing; extending a helping hand to a heavily unionized industry based in a blue state will have to wait until after the new Congress is sworn in. 
Published in The Messenger 12.1.08

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