Monday, November 10, 2008

Bailing Out Detroit's Big 3--Good Idea/Bad Idea?

One of the things in the news recently has been the recent meeting between officials of the Big 3 U.S. automakers and Congressional leaders Nancy Pelosi and Harry Reid in an effort to get government help to shore up their dwindling finances (you may insert the B-word--bailout--here if you're so inclined). The automakers' angle is pretty much "We're too big to be allowed to fail," and the meat of the discussion went like this:
Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers' balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.

The discussions also touched upon allowing the automakers to tap into the $700 billion bailout of Wall Street firms and the nation's banks that was passed by Congress last month. Treasury has so far rejected auto-industry inquiries about accessing that pool of money.

The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress, as part of energy legislation, to help automakers convert to making more fuel-efficient vehicles in an effort to meet the demands of car buyers and new federal rules.
I've weighed in on the U.S. auto industry--and why I chose a car from outside their ranks--in a previous post. Among my main points:
[D]uring all my recent car-shopping, I never once considered a domestic automaker, and I think the main reason was at least the perception of a lack of quality. Having just come off a year where my aging car was in the shop for three major issues, the last thing I wanted was a new car that had similar problems right off the bat.

But is it just a perception of low quality among domestic automakers, or is there any truth to that? (We'll set aside for the moment the question of which car is more "domestic"--a Ford truck made in Mexico, or a Honda Accord made in Ohio?) I can only go on anecdotal evidence, but it seems like the people I know who drive domestic vehicles have their cars in the shop more often than those with foreign--especially Japanese--ones.

[...]The jury's still out on what caused the once-mighty domestic auto industry to fall so far. Did they rest of their laurels while the once-upstart Asian companies took over the mantle of innovation? Are the unions here to blame? (I'd have little trouble citing that as a cause myself.) One of the presidential candidates blamed our own government regulations; it's probably a little of all of that.

Don't get me wrong--I'd love to see the American auto industry rebound; I'd love for a lot more of everything we consume to be made over here. But for me personally, while Detroit was sleeping, Tokyo rose up and created something that a lot of us could wrap our hearts and minds around, and, having just bought my third Honda vehicle in a row I don't see myself going in a different direction anytime soon.
I'm not sure where I stand on this bailout idea. Part of me thinks that the government has given too much money to ailing corporations already, and I'm not a fan of $25 billion going to a union-controlled anything. But on the other hand, the government did bail out Chrysler in the late '70s/early '80s, and that move netted the Treasury some $350 billion when all was said and done.

L.A. Times writer Joel Stein had an interesting take on the situation: Test-drive a bunch of domestic cars to see if their makers are worth saving. Needless to say, there's some funny stuff in this column:
Shortly after getting to the Glendale Dodge dealership, I realized that evaluating cars was going to be more difficult than I'd anticipated, because the only thing I know about cars is that, after 19, women don't want to have sex in them. While waiting for a salesperson, I also realized that Phil Collins wrote many more songs than I remembered. Luckily, my method of car evaluation is exactly the same as most car buyers: Does it look cool and hook up to my iPod?
But among all this, Stein has a solid point to make as well:
[N]o matter how much I liked these cars, I don't think the government should use taxpayer money to give life-support to dying, poorly managed, market ignorant, technologically outdated industries other than newspapers. As sad as it would be for American icons like Chrysler to die, and for thousands of people to lose their jobs, propping up failure prevents innovation.
And of course, he threw in the "other than newspapers" clause because he works for one; your mileage may vary.

But really, the first thing that crossed my mind when I read about this situation was, "Why can't they just make cars that suck less?" Humorist Scott Ott says pretty much that in this Scrappleface post from today (and it's even funnier that he has those words coming out of Pelosi's mouth). Read the whole thing, which expresses the way I feel about unions in a nice package of biting satire. Here's a sample:
“You autoworkers think your big union bosses have your best interests at heart,” she said, “and so you march in lockstep to the polls where you vote for union-backed political candidates whose campaigns you funded through your union dues. Those politicians, many of them lawyers, then go to Washington and listen to the siren song of union lobbyists to increase the regulatory burden on U.S. automakers, driving up the cost of production so it’s tougher for your company to compete with foreign car makers.”
In the meantime, you have folks like myself driving around in Honda Fits and experiencing total satisfaction with same. (What's not to love? I've been filling it up for less than $18 a tank for the past week, I got just shy of 40 MPG on my recent roadtrip, and the sum total of my "maintenance" during the past ten months has been three oil changes and two tire rotations.) If a U.S. automaker made a car that could hold half an unlit birthday candle to mine, I'd certainly check it out...and if they do make such a car, either their publicity machine is sorely lacking, or they just need some more time to build a reputation for reliability like that which Honda has enjoyed for decades.

What do you think--should the Big Three get a bailout/loan/whatever? Are they really "too big to fail," or would the economy survive their loss? Feel free to chime in below in the comments.

A roadtrip for Rover: No matter who made the car, hilarity will ensue if the dog starts driving it.

1 comment:

Anonymous said...

Accountability, accountability, accountability!!!! Chrysler had Lee Iacocca but who does GM have? I think A LOT of strings need to be attached to the bail out money---a lot more than were tied to the financial bail out! And before more money is handed out anywhere, the "why" and "how" of each company's problem needs to be found and addressed!!!! Else it's like having a "poor little rich boy" get in trouble with the law and him saying "no biggie, daddy'll fix it"!!