What to do about Detroit’s Big Three
Dante Chinni
Posted: 11.19.2008 / 8:43 AM PST
It’s hard to get the vast, diverse American population to agree on much, but it seems that most of them may be united on one thing: their feelings about the US auto industry.
We asked people in the 11 Patchwork Nation communities what they think about a loan or bailout for the Big Three automakers and found startling uniformity in their answers, which were marked by anger, disgust, and frustration.
But in the end, for the most part, there was also resignation that with the economy struggling, something has to be done to keep the automakers afloat – provided a lot of strings are attached.
On Tuesday, the chief executives came to Capitol Hill to plead their case to the Senate Banking Committee (the House hearing is Wednesday) and heard skepticism from the panel.
“Why should we believe your firms are capable of restructuring now when you weren’t able to do it under more benign conditions?” said Sen. Richard Shelby (R) of Alabama. “What would you do with the money if you were able to get $25 billion, and how would you pay this money back?”
Lawmakers on the Hill and observers think it is unlikely any aid bill will make it out of the Congress – at least this week.
That would probably be a mistake according to most people, liberal and conservative, in our 11 Patchwork Nation communities.
“We haven’t bought an American car in years – only Toyotas and Hondas since 1990,” wrote Katha Hartley, a Democrat who lives in Eagle, Colo. (our growing, diversifying “Boom Town”). “However, too many people have jobs related to the auto industry, so we must do something dramatic such as giving them loans.”
But, Ms. Hartley said, “we must also demand oversight and, probably, changes in leadership and/or corporate goals and objectives.”
Her words were echoed by Heather Lemon, a Republican also in Eagle, who wrote that she would support a bailout “only in conjunction with making it more like the way Toyota works.” She continued, “In other words, no unions demanding wages that will ruin it. And retooling, so cars [that] people want are being built. It may be necessary, but only if we get our money’s worth.”
Similar sentiments were voiced in Ann Arbor, Mich., our collegiate “Campus and Careers” community, which sits close to Detroit.
“The auto industry has made many mistakes, but they are being vilified and receiving the brunt of the frustration and fear that is ingrained in us because of the total global restructuring of the economics and financial systems we were accustomed to,” wrote Jesse Bernstein, president and CEO of the local chamber of commerce. “Hopefully, calmer heads will prevail and a program of financial support with conditions requiring increased mileage standards soon, restrictions on executive pay, and requirements to pay dividends as soon as possible will be implemented.”
Mr. Bernstein also noted that Detroit’s automakers are, in part, hamstrung by having to pay employee health insurance, which some automakers in other countries do not need to do.
Paul Dimond, a lawyer at the Ann Arbor offices of law firm Miller Canfield, wrote that the country “can’t afford adverse ripples flowing from such major failure; but any loan should contemplate over longer term complete restructuring of union-management relationship.”
We heard comments like those from a broad swath of our communities – people in Lincoln City, Ore. (our small-town “Service Worker Center”), Los Alamos, N.M. (our wealthy, educated “Monied ’Burb”), and Hopkinsville, Ky. (our “Military Bastion” near Fort Campbell).
And a survey from pollster Peter Hart last week, paid for by General Motors, found that 55 percent of respondents favored the government giving loans to the automakers, while 30 percent opposed such a deal.
Patchwork Nation also received responses from some who vehemently oppose aiding the Detroit car companies.
“Bad idea. Not necessary,” wrote Kristi Bohannon, a fast-food franchise owner in Nixa, Mo. (our socially conservative “Evangelical Epicenter”). “The market punishes bad behavior and should be left alone to do so. Let the automakers reorganize, file bankruptcy, or whatever any other business has to do to survive.”
In Sioux Center, Iowa (our agricultural “Tractor Country” community), Donald King, a professor at local Dordt College, says some are seeing a disturbing trend. “What I hear here … is that this is not the role of government and more to the point, it is not the best use of borrowed money to reinvigorate the economy. I’ve heard the phrase more than once from businessmen and women: ‘throwing good money after bad.’ ”
In some ways, the biggest hurdle for the Big Three in our communities and in Washington is the timing of their predicament. Their loan-seeking comes after this fall’s massive $700 billion financial-industry bailout, and some voters’ tempers are short.
In fact, in the e-mails opposing aid for the automakers, there was a further sign of the populist uprising that we saw around the time of the vote on the Troubled Asset Relief Program.
When the initial vote on the bailout failed in the House, we noted a strong correlation between a few of our community types and congressional districts that voted no. The correlation centered on lower investment in Wall Street.
That was only one vote, of course, and the esoteric world of global finance does not have the same kind of pull as the auto industry. But if lawmakers end up voting on a loan or bailout package for the Big Three, it will be interesting to see where the no votes come from.
November 19th, 2008 at 9:27 am PST
As much as I don’t like a lot of the mistakes of the Big Three, I don;t think we can just let them go under.
November 19th, 2008 at 12:36 pm PST
this country has taken this to far. WAKE UP !!!!!. the auto industry has done this to their self ,so now they half to pay the piper just as everyone else has to. if the government steps in it will be the biggest mistake this country has made. let them file bankruptcy and reorganize. fire the people that lead them to this.
November 19th, 2008 at 1:13 pm PST
I’ll tell you what led them to this - the Governments “free trade” market. How many US manufacturing plants do we have in Japan? None. How many non-Chinese joint venture manufacturing plants in China are there? none. How many UAW plants do the foreign manufacturers have here in the US? none. How difficult is it for a US auto company to set up shop in other asian countries? Impossible. The Japanese and Chinese support their own countries. Same with Korea. Hyundai won’t do business directly with US companies - they require a Korean company as the ‘middle-man’. What does that tell you? Here we actually have Americans buying foreign cars and wonder why our economy is falling apart. So you think the big 3 are something we can live without? How many jobs and families supported by those well-paying jobs have been funded by these same companies for over 100 years? We are in-debted to those companies for supporting our own economy for that long. They need help. If they can’t ask the US Government for that after all they have done for the US economy for the past 100 years, then who deserves it? Banks?
November 19th, 2008 at 1:21 pm PST
I’ll tell you what led them to this - the Governments “free trade” market. How many US manufacturing plants do we have in Japan? None. How many non-Chinese joint venture manufacturing plants in China are there? none. How many UAW plants do the foreign manufacturers have here in the US? none. How difficult is it for a US auto company to set up shop in other asian countries? Impossible. The Japanese and Chinese support their own countries. Same with Korea. Hyundai won’t do business directly with US companies - they require a Korean company as the ‘middle-man’. What does that tell you? Here we actually have Americans buying foreign cars and wonder why our economy is falling apart. So you think the big 3 are something we can live without? How many jobs and families supported by those well-paying jobs have been funded by these same companies for over 100 years? We are in-debted to those companies for supporting our own economy for that long. They need help. If they can’t ask the US Government for that after all they have done for the US economy for the past 100 years, then who deserves it? Banks?
I agree with the loan (not bailout) with strings attached to ensure it is spent wisely. (Not like the bank loans with no provisions.)
November 19th, 2008 at 2:08 pm PST
Let ‘em DIE!! The free market says that if you can’t deliver a good product, you don’t deserve to be in business. GM, Ford (Fix or Repair Daily,) and Chrysler have not been able to deliver a good product. Let ‘em DIE!!
November 19th, 2008 at 6:14 pm PST
Lots of folks are willing to let the Big 3 go under. Mostly Republicans, of course; they don’t have a lot of friends in the auto industry.
But there are several important problems with the idea of Chapter 11 bankruptcy.
First, would you buy a new car from a company that might not be there in a year or two?
Second, the Japanese don’t make cheaper vehicles in Japan. They build factories over here. Asian cars aren’t inherently better than American cars — they’re just more fuel-efficient and cheaper to operate.
Third, reducing the wages and benefits of union workers doesn’t do much to improve the performance of the idiots they work for.
Reorganize, yes. Infuse capital, sure. Change the top management, obviously.
Whose decision was it to go to the service economy, anyway?
November 19th, 2008 at 6:15 pm PST
Lots of folks are willing to let the Big 3 go under. Mostly Republicans, of course; they don’t have a lot of friends in the auto industry.
But there are several important problems with the idea of Chapter 11 bankruptcy.
First, would you buy a new car from a company that might not be there in a year or two?
Second, the Japanese don’t make cheaper vehicles in Japan. They build factories over here. Asian cars aren’t inherently better than American cars — they’re just more fuel-efficient and cheaper to operate.
Third, reducing the wages and benefits of union workers doesn’t do much to improve the performance of the idiots they work for.
Reorganize, yes. Infuse capital, sure. Change the top management, obviously.
Whose decision was it to go to the service economy, anyway?
November 19th, 2008 at 8:24 pm PST
And what about senior citizens who have investments in bonds related to the big three automakers? If these companies are allowed to implode, we lose chunks of our life savings that are critical to our financial survival and that we invested, in good faith, upon the advice of trusted financial counsellors. What happens to us? . . . our bonds become worthless paper! Many of us worked doggedly all our lives, scrimping and saving, following all the rules, with the goal of maintaining financial independence and dignity in our retirements. All we wanted to do was to be responsible citizens, paying our own way and staying off the public dole. And this is what we get in return? Believe me, I deplore the historically poor quality of Detroit’s products, the ridiculously high pay for its unionized employees who get $f75/hour to stand on a production line screwing parts on cars all day, and the fact that these companies’ managers steadfastly refused to see the need to help lead this country to energy independence and climate protection by producing and marketing earth/energy-friendly vehicles. And I brought these concerns to the attention of my financial counsellor when he advised me to purchase bonds in Ford and GM. But I was advised that “this country would never allow the automakers to fail” . . . you’re investment would be safe.
What really angers me right now is hearing all the whining on TV about the jobs that would be lost if the big three went under BUT NOT ONE MENTION OF THE FACT THAT THE FINANCIAL SURVIVAL OF MILLIONS OF RETIREES WHO ARE INVESTED IN THESE COMPANIES ARE ALSO AT STAKE! And none of us has time to recoup the losses.
November 19th, 2008 at 8:46 pm PST
Let Congress follow the precedent of the FDIC and force the Big 3 to be sold off to companies that actually know how to make money making cars. A bailout would just be throwing good money after bad, propping up businesses that have no justification to survive other than the misguided notion that it will preserve jobs. Might as well start adopting Socialist 5-year plans if we go down that road.
November 19th, 2008 at 10:58 pm PST
The Big Three has no plan for reviving itself — they only want a handout to save their skins.
It’s not American taxpayers’ fault that foreign manufacturers reacted to market forces such as the “green revolution” and higher fuel prices better than Detroit by focusing on alternative energy and smaller cars instead of gas-inhaling SUV’s and trucks.
It’s also not American taxpayers’ fault that the Big Three were suckered into the ultimate sweetheart pension plan — universal health care for life — by the UAW, the same union that helped American cars plummet in quality while soaking outrageous benefits.
Let the Big Three enter bankruptcy so they can shed some of these ridiculous expenses and be forced to reorganize with a more efficient business plan, leaders who actually perform better than a college freshman majoring in economics, better vehicles more suited to the current market and less influence from the UAW.
The U.S. auto industry and the U.S. economy will be better off in the long run.
I’m sick of Uncle Sam bailing out poorly run businesses in this country. The culture of dependence and entitlement grows by the day in America.
November 19th, 2008 at 11:23 pm PST
Global market rules say everything can be made and done cheaper in countries where they have no unions, minimum wages, environmental laws, child labor laws, or other hindering regulations or individual rights. Wheeeeee, we are in a race to the bottom. Heck even NY lawyers have outsourced their law clerk work to India.
What’s so sad is that instead of insisting that countries that want to trade with us do so fairly by observing the rules like freedom of association, freedom of speech, education, the right to strike, 40 hour work week and no child labor, which American union members fought and died to achieve, we have been convinced to believe that corporate rights to outsource for greater proffit come first. Instead of bailing out citizens, workers and homeowners who generally scrape just to get by we blame them and bail out the banks, CEOs and shareholders. Heck, the people can always find a new job for less pay at a company where the owners and CEOs get disgustingly rich. Meanwhile our nations wealth, generated by the sweat of the workers, continues to concentrate more and more in hands of the top half of one percent of the population.
You know the non-union workers at Toyota make half what the union guys get. But then again the Koreans make half of that and the Chinese make a tenth of that so once we lower our expectations to the Toyota level we can look forward to the Chinese level.
A single worker used to be able to support a family, now it takes two. If we keep going this way soon we’ll have to put our kids to work to pay the bills. But hey, we’ll lay down like lambs and do whatever it takes to ensure our CEOs and the rich “investors” continue to get richer even if it means we have to lower our standards to those of third world countries, give up retirement, medical insurance and dreams of college for our kids.
Alternativly we can demand that the massive wealth of the US is invested in green energy jobs, infrastucture, healthcare, education,regulation and oversight to ensure the greedy wall street “investors” don’t tank our banking system again. We the people have built the wealth to do so with the blood sweat and tears of our labor and the labor of our fathers. Along the way we the people have also been convinced that we don’t deserve our fair share of the wealth while the elite “investors” deserve billions.
November 20th, 2008 at 12:03 am PST
To “We the People” - I agree whole-heartedly with everything you’ve said about the current corruption of the U.S. industrial/financial system that takes more and more from the workers who create products from our own blood, sweat and tears to enrich the powerful CEO’s and the wealthy elite. However, keep in mind too that many investors are NOT the wealthy elite . . . millions of investors are just like me, average members of the quickly sinking American middle class who worked our fingers to the bone all our lives, scrimping and saving to be responsible citizens, funding our own retirements to stay off the public dole. If the Detroit “big three” go under, millions of us will lose investments critical to our financial survival. And we’re either already retired and completely dependent upon these investments or soon to be so. We have no time to recoup the losses we’ll suffer if the automakers in whom we own stock or bonds go belly up making our investments nothing more than worthless paper. In taking out our completely reasonable, justifiable, righteous anger against these companies and their egregiously incompetent management, we must try to remember we also risk harming millions of innocent citizen-investors who desperately need the income from their investments just to survive!
November 20th, 2008 at 12:10 am PST
BTW - I believe we must find some way to prevent having the automakers declare bankruptcy in order to prevent unnecessary loss of jobs and investments of average American citizens that are dependent upon these companies. HOWEVER - I also wholeheartedly believe that whatever we do to fund their survival MUST be contingent upon replacing their incompetent, reactionary management and refocussing and retooling the companies to produce quality cars that are efficient and run on alternative, environmentally green fuels. In other words ANY BAILOUT MUST HAVE MAJOR STRINGS ATTACHED THAT WILL FORCE THE AUTOMAKERS TO FINALLY DO THE RIGHT THINGS!
November 20th, 2008 at 10:05 am PST
November 21st, 2008 at 11:36 am PST
If the automakers keep doing things the way they’ve always done them, they’ll keep getting the same results they’ve always gotten.
As much as I don’t like to see workers have to change or lose their jobs, the entire industry must be reorganized to match the current working models, which happen to be our foreign competitors.
If Detroit chooses to keep its present union heirarchy as it is, then it will NEVER be able to successfully complete with the world market.