How About Let's Not Demagogue The Auto Industry Crisis?

Michael Scherer over at Swampland writes today about what a swell idea it would be to have Mitt Romney, who has been demagoguing the auto industry crisis, as "auto czar."  (Mitt's dad was head of an auto maker that is no longer in business, I guess this somehow qualifies him as an expert in the field.)

This, however, is my favorite part:

According to Bloomberg, Obama's transition team is already investigating the possibility of a "swift, prepackaged bankruptcy" to save the industry.

Except officials of the Obama team were swift to deny this-- two days ago.

Now, maybe you think the denial is crap, but it is nonetheless part of the story. 

Here's another part:

• Nobel laureate Paul Krugman: "If GM goes under, which looks like a real possibility, then that's a huge blow to huge anti-stimulus program at exactly the wrong moment."
• Former Treasury Department Director Nouriel Roubini:  "Giving essentially $50 billion of low interest rate loans to automakers is a way to help them… there are about 2 million jobs directly/indirectly related to the auto industry… We have no choice…"
• Digby:  "You simply can't wipe out a million jobs or more as we are just going into a terrible worldwide recession. It's like telling someone they have to go on a diet when they are in the middle of a heart attack."

Krugman and Roubini, you'll remember, "got it right." Digby just says it better than anyone else.  

Conventional wisdom around an auto industry bridge loan seems to be minted by Richard Shelby, and nobody is pointing out that the non-union factories in his right-to-work state would stand to benefit from a Detroit collapse.

This is largely because the UAW has, without question, executed the worst, most non-existent public relations campaign ever.  It's just shocking how bad they are at this, leaving everyone to scramble in their defense.  Tying their fate to the automakers and leaving it to the CEOs to present their case seems fraught with risk. (If I was Gettlefinger I'd be on a plane to China looking for buyers to save my members' pensions, but nobody asked me.)

But the breezy lack of concern for what the impact of a bankruptcy would be (managed or otherwise) on an economy where one in ten jobs is tied to the Big 2 1/2 is pretty gobsmacking in its own right, especially coming as it does from a class of people who are openly hostile to labor and think retirees and their pensions can be easily reduced to statistics in some spread sheet.

If people are going to juggle with economic knives here using Time Magazine as a stage, it is too much to ask that they be able to use the Google?

Comments (22)

1. Yepper...

   It's the UNIONS that have driven the auto companies to ruin...

   Yep!

   LOL

   Posted by TexasFlood at 11/23/2008 @ 10:13pm

2. The Big Three spent the better part of thirty years ignoring the American consumers' needs and wants for vehicles. They turned their noses up at greener technologies, and paid lip service to improving fuel efficiency, only to abandon it as soon as the price of gas dropped again. They were subservient to the unions, paying outrageous wages and benefits for jobs that were mostly low-skilled and repetitive in nature. Quality was an afterthought, evidenced by hundreds of recalls a year for serious vehicle defects. In other words, the "Big Three" have spent thirty years shooting themselves in their collective feet.

   Now that the SUV bubble has burst, and fuel efficiency is no longer the exclusive domain of "tree-hugging liberals," they find themselves begging the government (i.e., the taxpayers) to bail them out of the mess they brought upon themselves.

   The only solution is to let them fail. Is it a tragedy that many jobs may be lost? Of course. However, where was this sympathy for farmers and steelworkers and so on? Is the auto industry the only industry that's worthy of a bailout? Perhaps we could have stopped the steep decline of industry in the US if we had taken more aggressive approach to exports, outsourcing and tariffs -- yet this is simply not discussed by Obama or anyone else.

   If we allow GM, et al. to fail, the companies that emerge will retain their best assets and be rid of their worst. It's not anti-union sentiment; most other unions are far more reasonable than the UAW. Kettering, former GM boss, once said that the US auto industry overbuilds versus the market and demand by a factor of two. This was true in the 40s and is still true today.

   Let them fail. I'm tired of rewarding the failed business practices of others with my taxes.

   Posted by Paralyse at 11/23/2008 @ 10:53pm

3. Possible stupid question: why lump the three of them together as one entity? Their structural problems (which are myriad but not universal) seem to offer three different solutions. Chrysler signaled its intentions when Daimler sold it a couple of years ago, they should just be allowed to fade quietly in the night. Ford seems to be the most responsive to the needs of consumers (witnessed by its lowering recall rates and increasing consumer score marks) and is also the least likely of the three to go under, so it may be just fine even without assistance. Let's be honest, the big fly in the ointment is GM. They are a dinosaur, they insist that they cannot move with the speed and dexterity to manage the current crisis, and they should be the ones most likely to go under either bankruptcy or conservatorship. Yeah it's gonna sting. But it's stining everywhere. And that's not going awayn any time soon. But we should start looking at them as three seaprate businesses instead of one huge monolith with one blanket solution.

   Posted by yutsano at 11/23/2008 @ 11:37pm

4. Anti-labor union busting at the very time when work, labor and higher wages is most needed. It takes a deflation tottering on the verge of depression to clarify the class warefare that has gotten us to where we are, and the failure of Ayn Rand and her followers ( Greenspan among them), Milton Friedman and all those efficient market theorists who still don't get it, or still try to use what is going on for their own benefit regardless of consequences.

   Reaganism and Thatherism has failed. Unfortunately after a generation of teaching and writing the same explanations, there isn't a coherent alternative. It isn't a failure of union PR, but the end of the road for union collaboration with corporations that goes back to Walter Reuther and his conversion to US corporate cold war liberalism.

   It is really is time for a change, and the direction of that change is obvious because reality and current ideology has gotten so far apart it reflects a kind of insanity.

   Charlie M.

   Posted by cmsandia at 11/24/2008 @ 12:55am

5. discussion on the daily kos has centered around the bailout or no bailout without much concern for union workers so I would have to say that the UAW dropped the ball on this. The should have sent off email and had phone calls with the netroots as soon as this happened and reinforced the coalition with the Sierra Club and other environmentalists. Instead they allowed perceptions that unions are anti-green to remain and flourish in the netroots and let themselves be identified with the Auto Companies. Worst. . . P.R. . . .job . . .ever.

   Posted by dinobot_armagedden at 11/24/2008 @ 06:56am

6. Never mind the Right....this is a good quote for those on the LEFT so wrapped up in their "anti-corporatism" they're saying "Let GM fail, serves 'em right!"

   "Nobel laureate Paul Krugman: "If GM goes under, which looks like a real possibility, then that's a huge blow to huge anti-stimulus program at exactly the wrong moment."

   That's Paul Krugman, not Milton Friedman.

   Posted by Mask at 11/24/2008 @ 09:00am

7. Let them fail. I'm tired of rewarding the failed business practices of others with my taxes.

   Homeland Security, hundreds of military bases worldwide, two failing wars and who knows how many foreign interventions, clandestine or otherwise. The Defense Department and all its related subsidiaries have an annual budget of approximately 1 trillion dollars. Why don't you scream and shout about that misuse of your tax dollars?

   Posted by boing007 at 11/24/2008 @ 09:23am

8. However, where was this sympathy for farmers and steelworkers and so on?

   Posted by Paralyse at 11/23/2008 @ 10:53pm

   All shades of the left have been writing about farmers at least since the mass foreclosures of the 80's. And the gutting of the steel industry has not escaped notice, either.

   Posted by cka2nd at 11/24/2008 @ 10:25am

9. Why is it that so many Americans believe that foreign cars are so great? Myth one Toyota builds cars in America. No they assemble cars in America, parts come from China, Korea, japan. example, Connecticut use to be the bearing capital of the world, now it even imports parts for its submarine plants. Myth two, Japanese cars re not subsidized by the government, Really? who is going to pay for their retirement costs and their health care, and which sweat shops produce the nuts, bolts and steel? Myth three Honda and Toyota are so much better than American cars. Gas mileage is so much better. That is a blatant lie! reliability? there are as many Toyotas and Hondas in the junk yard as Fords and Chevys. Problem, people buy cars, drive the crap out of them and trade them in. They don't service the things then complain. Run a Toyota Camry out of oil and it will seize up just as fast as a Lincoln Continental. Honda pilot is no better on gas than a Ford Explorer. Folks Wall Street wants us to export the remainder of any industry we have left. Why? because that is where they have put their money. The, " It is good for the consumer"' lie.Who the hell produces, isn't it the consumer? Green technology, o.k., but why is it that we are exporting as much coal as we can mine? Why are we burning food (i.e. ethanol) that costs more to produce and competes with the food chain? 700,000 kids went hungry this year. When did we go collectively crazy? Are the car companies complicit with the soccer mom,? sure, but you can't load 7 neighborhood kids in a powder blue Prius. I drive a 91 Ford Festiva five speed standard, fifty miles per gallon. It is suicidal to drive it 65 miles an hour and it is produced in Korea by Kea Motors or Mazda.

   Posted by julien38 at 11/24/2008 @ 11:24am

10. Sorry for the double post, but I ran out of space. The ugly truth is that a large percentage of American cars are produced out of country. Transmission for the Ford Continental is produced in Mexico. All bearings for cars and trucks and planes are produced in China. The Ford Ranger is essentially produced in Korea. The point is this, it is virtually impossible to control quality. The simpler truth is that we have been had by the globalists. American ingenuity can't compete with people that work for sub human wages in sweat shop conditions. if we don't speak up, that makes us just as guilty as the "so called" wealth creating criminals of Wall Street. When I go to Vegas I know who wins, (the house). When I remain silent I soil the memory of all the people who put sweat equity, blood and lives in this country to leave it better for us. What is the gluttony crowd saying now that the great depression was caused by "protectionism". No. it was caused by greed, no regulation of criminal behavior, and the great dust bowl.

    Posted by julien38 at 11/24/2008 @ 1:00pm

11. I support Obama, but not ethanol subsidies...that kind of support is meaningless, when ethanol is a dead-end...

    as for domestic automakers, their troubles are all their own doing...bankruptcy will be less damaging in the long run...

    from Bloomberg opinion page: "Times are tough, and people all over the country have been losing their jobs. When an auto worker at one of the U.S. automakers who has worked at least 10 years loses his job, he gets a severance payment of $140,000. Most everybody else in the U.S. gets a minimal severance or nothing.

    And those who don't lose their jobs are compensated richly. The average cost of an hour of United Auto Worker member work is about $73. The average cost for an hour of work for a Honda Motor Co. worker in the U.S. is about $43."

    if you can't play by rules of globalization, don't go around force-feeding it to others....

    Posted by jrs112 at 11/24/2008 @ 2:26pm

12. why don't we hear more about the fact that "foreign" car production is almost entirely in the US now...the only difference is they don't have huge retirement burdens put upon them which makes them unviable and unable to put any $$ into research and development for new cars..ONLY bankruptcy will enable them to reduce retiree benefits in order to stay viable in the long run....giving more taxpayer money to another bloated industry is not even salve...it is just stupid...

    Posted by jrs112 at 11/24/2008 @ 2:29pm

13. GM and SUVs produces horrible vehicles which pollute the environment, harm our air, and cause long-term health problems, decrease our quality of life, ruin our roads, and produce angry self-absorbed drivers...ask any bicyclist if he feels safer next to a Mini or a Hummer, and actually look at the people driving for once..and see how angry the suv drivers are...it is everybody else's fault gas prices go way up, not their own for being greedy, selfish, and small-minded, this duplicity, double standards, denial, and total disregard for other in favor of me, me, me!!!! has led us to where we are as a country...

    look at how many SUVs still only have one person driving...in a related issue, watch the walmart commercial where the SUV driver when gas prices were $4.00 was shown filling up and them lamenting he/she could drive clear across town to "save" money at walmart...while driving past out of business signs of mom and pops...oops, they left that part out....they also left out flagrant violations by walmart of environmental laws, and overlooking by town boards, and giving walmart free passes on health standards, traffic studies, "producing" min. wage jobs....

    govt. fined walmart approx $100,000 for hiring illegals, which amounts to a couple hours of one register at one walmart...fair enough!!!! they REALLY learned their lesson!!!!will we ever learn ours??? boycott walmart if you REALLY want to buy American, don't buy piece of junk GM car....demand higher quality of life for all of us....and don't go whining and begging for another handout from US taxpayers....

    Posted by jrs112 at 11/24/2008 @ 2:37pm

14. Posted by jrs112 at 11/24/2008 @ 2:29pm

    So in other words, we have to let GM screw over their employees who actually worked for them for years and earned their retirment....

    to make up for management's screw-ups?

    Posted by Mask at 11/24/2008 @ 2:38pm

15. "The average cost of an hour of United Auto Worker member work is about $73. The average cost for an hour of work for a Honda Motor Co. worker in the U.S. is about $43."

    Posted by jrs112 at 11/24/2008 @ 2:26pm

    Read this New Republic article by Jonathan Cohn. It explains quite clearly how the $70/hr. figure is inaccurate, and how the spread between the foreign and domestic auto makers is much closer than the union-bashers would have us believe. (If the spread were that large, the pressure on the foreign manufacturers to unionize would be too great to resist.)

    http://tinyurl.com/6n8fep

    Adding legacy costs to the auto workers' hourly wage numbers is bullshit.

    Posted by drhammer at 11/24/2008 @ 2:52pm

16. This should be a people-pleaser:

    Regarding the auto industry, basically, Lyndon LaRouche was right about the coming collapse of what he terms the "physical economy" and the dangerous accumulation of paper "financial aggregates" (e.g., derivatives)as being an unacceptable load or brake on the productive side of the economy.

    Real wealth creation depends on the tangible creation of value, perhaps.

    Posted by schnellerheinz at 11/24/2008 @ 3:11pm

17. Citigroup Rescue: Raw Deal for Taxpayers, But It Had to Be Done Posted Nov 24, 2008 10:38am EST by Aaron Task - Tech Ticker - Yahoo

    Excerpt:

    'Expectations for a government rescue of Citigroup were fulfilled in the wee hours Sunday night/Monday morning. In exchange for $27 billion in Citi preferred stock, the government will inject $20 billion of capital in the struggling firm and guarantee $306 billion in troubled mortgage assets.

    The devil is in the details (see below), but Mark Dow, hedge fund manager at Pharo Management, said the government had to act.

    "You can Monday morning quarterback and say, 'They could have done it better,' but they had to do something, and they did." says Dow, a former staff economist at Treasury and the IMF. "I wouldn't be buying Citi shares, but the Fed and Treasury are committed to protecting the integrity of the financial structure, and that has to be applauded."

    Financial markets did "applaud" early Monday as Citi shares jumped more than 50% and major stock indexes rallied by more than 2.5% in the first hour of trading.

    But about those details: The deal is complex in its structure, but when all is said and done the government is on the hook for about $249 billion in toxic mortgage-backed assets in exchange for $27 billion in Citi preferred stock.

    The preferred shares pay 8% but, all in all, it's another raw deal for the taxpayer, which may explain why the deal's structure is so complex (they're hoping no one will notice).'

    How are we going to pay for all this? All of you will be screaming bloody murder once you start getting the tax bill for all of this. Didn't Paulson just do a flip flop on this? Get out your calculators folks. What will the increased tax burden (for debt) do to real GDP?

    Posted by OneVote at 11/24/2008 @ 3:28pm

18. AP Treasury, Fed continue extensive bailout efforts Monday November 24, 2:33 pm ET By Christopher S. Rugaber, AP Business Writer Nothing a few more billion can't cure: Treasury, Fed take more steps to fight meltdown

    WASHINGTON (AP) -- The government's latest effort to address the financial crisis is a $20 billion investment in banking giant Citigroup Inc., along with an agreement to guarantee hundreds of billions of dollars in possible losses. The step, announced late Sunday, is the latest in a long list of government moves to counter the financial meltdown:

    --March 11: The Federal Reserve announces a rescue package to provide up to $200 billion in loans to banks and investment houses and let them put up risky mortgage-backed securities as collateral.

    --March 16: The Fed provides a $29 billion loan to JPMorgan Chase & Co. as part of its purchase of investment bank Bear Stearns.

    --May 2: The Fed increases the size of its loans to banks and lets them put up less-secure collateral.

    --July 11: Federal regulators seize Pasadena, Calif.-based IndyMac, costing the Federal Deposit Insurance Corp. billions to compensate deposit-holders.

    --July 30: President Bush signs a housing bill including $300 billion in new loan authority for the government to back cheaper mortgages for troubled homeowners.

    --Sept. 7: The Treasury takes over mortgage giants Fannie Mae and Freddie Mac, putting them into a conservatorship and pledging up to $200 billion to back their assets.

    --Sept. 16: The Fed injects $85 billion into the failing American International Group, one of the world's largest insurance companies.

    --Sept. 16: The Fed pumps $70 billion more into the nation's financial system to help ease credit stresses.

    --Sept. 19: The Treasury temporarily guar

    Posted by OneVote at 11/24/2008 @ 3:39pm

19. --Oct. 8: The Fed agrees to lend AIG $37.8 billion more, bringing total to about $123 billion.

    --Oct. 14: The Treasury says it will use $250 billion of the $700 billion bailout to inject capital into the banks, with $125 billion provided to nine of the largest: Bank of America Corp., which received $15 billion; Bank of New York Mellon Corp., $3 billion; Citigroup Inc., $25 billion; Goldman Sachs Group Inc., $10 billion; JPMorgan Chase & Co., $25 billion; Merrill Lynch & Co. Inc., $10 billion; Morgan Stanley, $10 billion; State Street Corp., $2 billion; and Wells Fargo & Co., $25 billion. The $10 billion for Merrill has been deferred until its purchase by Bank of America closes.

    --Oct. 14: The FDIC says it will temporarily guarantee up to a total of $1.4 trillion in loans between banks.

    --Oct. 21: The Fed says it will provide up to $540 billion in financing to provide liquidity for money market mutual funds.

    --Oct. 29: The Fed cuts its benchmark interest rate to 1 percent, matching the low point reached in 2003. The rate hasn't been lower since 1958.

    --Nov. 10: The Treasury and Fed replace the two previous loans provided to AIG with a new $150 billion aid package that includes an infusion of $40 billion from the government's bailout fund.

    --Nov. 12: Paulson says the government will no longer buy distressed mortgage-related assets, formerly the centerpiece of the bailout, and instead will concentrate on injecting capital into banks.

    --Nov. 17: Treasury says it has provided $33.6 billion in capital to another 21 banks, with the largest stake being $6.6 billion to Minneapolis, Minn.-based U.S. Bancorp. So far, the government has invested $158.6 billion in 30 banks.

    --Nov. 23: The Treasury says it will invest another $20 billion in Citigroup Inc., on

    Posted by OneVote at 11/24/2008 @ 3:40pm

20. Posted by jrs112 at 11/24/2008 @ 2:29pm

    "ONLY bankruptcy will enable them to reduce retiree benefits in order to stay viable in the long run."

    I agree with your overall assessment of the US auto industry. I don't think they deserve a penny without total replacement of the management structure AND a viable business plan, just like you or I would need if we applied for a business loan. THEN we could consider the possibility of a bailout.

    But, I take exception to your offhanded throwing away of pension benefits. Job loss is bad, but these folks can find (hopefully) other employment and they've done nothing yet, to earn this money.

    Retirees, on the other hand, have already earned this money. One simply can't retro-actively take your pay back. Even if you think their benefits are too high. (Imagine if I could declare your last years earnings as excessive and take some back?)

    These folks are too old to find other work and they earned this money long age.

    I would rather fund the end of employee pensions, even with my tax dollars, than plants which make unsaleable items, run by known incompetents/felons, who stole the retirement funds.

    My 76 year old fathers pension gets trimmed annually. And his medical benefits. Now they keep sending him notices that he cancelled his insurance. If he doesn't stay in perpetual contact, straightening out their lies, he will lose his coverage, just when he needs it most.

    We cannot just abandon those who've earned their retirements. Most retirees are far too old to re-earn their retirement.

    Why should wall street speculators (who knew they faced risks of loss, but potentially large profits), be bailed out, while they guy who actually made patents and products, for 40 yrs., get left home/health care-less?

    Posted by Malcontent at 11/24/2008 @ 9:11pm

21. why is it simply because a company is BIG it gets the right to sit down with Congress and ask for federal tax dollars.

    screw the BIG companies. if they don't succeed in the market, they can fail like all the small companies.

    how does one even get the nerve to beg for money?

    Posted by urmygyro at 11/25/2008 @ 2:08pm

22. No, don't let them fail. America needs to do a hostile takeover of the industry. Automobile manufacturers are the poster child of our own greed and short sightedness. If we can fix that, it's possible that we could become a positive, forward looking country again.

    I think that we need to name names in the banking crisis, however. We can't just focus in on the moronic nosehairs that run the automotive sector. We need to actually create a list of these guys that 'signed off' on destructive policies. Sure, the villagers, the torches...Ooooooh!! But americans need to be inspired with a little hope that bad people are going to pay for screwing up. And I'm afraid that some very stupid people that only made 25,000 a year and convinced that they could afford a 300,00 dollar house.... they share some of the blame for this problem. It needs to be parsed in a careful manner, but the blame doesn't lie in just one direction... it's a multi-pronged, far reaching national screw-up.

    Posted by ficheye at 11/26/2008 @ 12:33pm