Saving the auto industry from itself
Chevrolet once marketed itself as the “heartbeat of America.” Today, the heartbeat of the American auto industry is weak — but at least it still has a pulse.
On Thursday, Congress decided to wait before voting on whether to provide cash-strapped U.S. automakers with another $25 billion to tide them over. But the congressional leadership also said the House and Senate will reconvene in early December to consider more fully a bailout that may yet save the auto industry.
There is a catch: General Motors Corp., Ford Motor Co. and Chrysler LLC will have to present Congress with a concrete plan indicating that the industry has what House Speaker Nancy Pelosi, D-Calif., called “some path to viability.”
For millions of American workers and thousands of businesses, large and small — including thousands in Missouri and Illinois — it’s crucial for Congress to act quickly. But for all American taxpayers, it also is essential that Congress demand accountability and safeguards for the billions of dollars it’s being asked to provide.
Top executives of the Big Three and officials of the United Auto Workers union were in Washington earlier this week asking for a cash infusion of $25 billion. Among the ideas discussed was one by Sen. Christopher “Kit” Bond, R-Mo., to take money Congress earlier had approved to help retool plants to make fuel-efficient cars and use it, instead, to provide liquidity to the industry.
Mr. Bond and a few other Senate leaders still are pushing that plan, but it was clear even before Thursday that there aren’t enough votes to pass a hasty bailout. Postponing action spares the industry from almost certain defeat.
There are some legitimate reasons for the lack of support. Congress has been criticized, for example, for acting too quickly last month to pass a $700 billion bailout bill for the financial industry. More than a month later, the results of that plan are far from clear.
But much of the blame also lies with the auto industry’s own history of mismanagement, poor judgment and arrogance.
To their credit, U.S. automakers have begun shedding costs in recent years, and, more importantly, they have improved the quality of the cars they make. They also have embraced, albeit belatedly, hybrid technology and have started offering smaller, more fuel-efficient cars.
But for decades before that, auto makers, unions and congressional enablers of both parties fought tooth-and-nail against efforts to enact higher mileage standards. Instead, Detroit continued to churn out over-sized, gas-guzzling SUVs, while overseas manufacturing companies set standards in the design of comfortable small cars, quality control and practical, appealing hybrid technology.
As recently as a few days ago, the industry’s poor judgment was on display again as executives flew to Washington on plush corporate jets to ask for a government bailout. One must wonder if they have any real understanding of the financial concerns of ordinary working Americans.
Now, it’s time for those executives to earn their hefty salaries. On Thursday, Congress gave them a reprieve: Come back in two weeks, they were told, with a plan that shows how U.S. automakers can become profitable and what they will do to make sure taxpayers’ money will not be wasted.
The failure of the America’s car makers would send a tsunami of economic repercussions through an already weak economy. It could cost as many as 3 million jobs — at a time when unemployment is at a 16-year high. If the Big Three were to end up in bankruptcy, it is difficult to see how they could emerge from it and continue operating. Financial markets that already are tightening could collapse, endangering taxpayers’ substantial investment and a recovery.
Congressional leaders were right to insist that the automakers develop a clear plan for using bailout funds properly and a longer-range plan for remaining a viable business. If the companies fulfill that assignment, then Congress must act as quickly as possible to save the auto industry while its heartbeat is still detectable.
> More than a month later, the results of that plan are far from clear.
On the contrary, the results are quite clear: Liquidity is still lacking. Banks are still failing - but not lending. Homeowners are still losing their homes. Unemployment continues to climb. And the line for handouts continues to grow. So this bailout was a great success, because it contributed to solving the most important problem politicians face: Creating and reinforcing our dependence on the good graces of the politicians.