First, we offer a sampling of voices from this week’s heated debate about a potential federal bailout of the US auto industry. Then, we provide our analysis of where things stand.
Columnist, New York Times
“Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.”
2 Kevin Depew
Executive Editor, Minyanville.com
“With continued bailouts we will emerge from a lost decade with an economy and society crippled by the cost of bailing out businesses that operated with irresponsibility and a near total disregard for not just taxpayers but for their very own shareholders.”
3 Jim Cooper
House of Representatives (D-Tenn.)
“It’s time for new management and stringent conditions. It’s Uncle Sam. It’s not Uncle Sucker.”
4 The Wall Street Journal
“Barack Obama and Nancy Pelosi now want to bail out Detroit once more, while mandating that the Big Three build “green” cars. If consumers really wanted green cars, no mandate would be necessary. Washington here is just marching Detroit deeper into an unsustainable business model, requiring ever more interventions in the future.”
5 Jonathan Tasini
Labor activist and UAW member
“Would I have liked the union to be more aggressive about pushing the auto companies a decade ago to move towards more fuel efficient cars? Sure. But, respectfully, the union does not control those kinds of decisions—it doesn’t control the board and, as recent history has shown, has struggled mightily to just preserve its wage base (and has had to agree to some painful wage and benefit concessions).”
“If Detroit needs more taxpayer bailouts to survive, we ought to demand some serious and real concessions in return, starting with an immediate cease-and-desist order for Detroit to drop its lawsuits against California, Vermont, Rhode Island, New Mexico and any other state that passes clean cars legislation requiring more efficient, less polluting vehicles.”
Columnist, New York Times
“There seems to be no one who believes the companies are viable without radical change. A federal cash infusion will not infuse wisdom into management. It will not reduce labor costs. It will not attract talented new employees…In short, a bailout will not solve anything—just postpone things.”
Senior Fellow, Center for American Progress
“If we are going to bail out Detroit, the deal has to be based on meeting the new fuel economy standards of 35 mpg by 2020, and meeting them increasingly with hybrids. The deal has to be for multiple plug-in hybrid car models. And most important, the deal has to include a management team that is wholly committed to that inevitable transition…The potential risks the bankruptcy of Detroit poses pale in comparison with the all-but-certain risks of continuing on our path of ever greater oil consumption and ever greater greenhouse gas emissions.”
Stripping Stipulations from $25 Billion Loan
After a week of heated debates over the federal government’s possible role in saving Detroit automakers from financial ruin, the likelihood of a comprehensive bailout package is dim. Instead, it appears that limitations for how Detroit spends a $25 billion loan package—signed into a law a few months ago— will be lifted, allowing the Big Three to raid the funds for the cash necessary to remain open for business, while continuing to lose billions of dollars each month.
The goal of the $25 billion loan was to help Detroit retool to produce vehicles with higher fuel efficiency. It’s uncertain how this transition might take place if the loan funds are redirected to helping the automakers survive the economic downturn.
The United Auto Workers’ Union and and a coalition of key Democrats warn that if the $25 billion, and more, is not immediately provided, one or more of the Big Three automakers could run out of money as soon as January and be forced into bankruptcy. The UAW and Democrats cite figures that as many as 2.5 million jobs are threatened.
Stalemate Until Obama
Despite the sense of urgency from all sides, it appears that President-elect Obama will be left to sort out Detroit’s predicament in January. Obama described the situation back in May 2007 like this:
“For years, while foreign competitors were investing in more fuel-efficient technology for their vehicles, American automakers were spending their time investing in bigger, faster cars. And whenever an attempt was made to raise our fuel efficiency standards, the auto companies would lobby furiously against it, spending millions to prevent the very reform that could’ve saved their industry.”
An Obama bailout would most likely force auto companies into compliance on labor, fuel efficiency, and the development of advanced auto technologies (like hybrids). Some politicians and pundits are also calling for a boardroom massacre—the replacement of current executives with new leadership chosen by the government to ensure that the auto companies comply.
What would happen if the companies cannot survive until January 20? Not everyone agrees that the threat of bankruptcy—real or exaggerated, now or years later—should be enough to force Washington into handing over yet another blank check to another failing industry. Many conservatives seem to be rooting for Chapter 11, as it would void labor commitments that they (and Detroit automakers) have held responsible for the failings of the American auto industry.
This debate is showing no signs of letting up. Yet, chances are good that an Obama administration will be left to figure out how to save Detroit, while at the same time guiding it towards producing a new generation of cleaner and greener vehicles.