The Peculiar Politics of Bailing Out Detroit

Detroit -- As of this morning, it appears that the Bush administration and Republicans in Congress are perfectly prepared to let General Motors go into bankruptcy, and that President-elect Obama and the Democrats in Congress are trying to simultaneously reform and rescue GM. Since the auto industry has been, after Big Oil, the most faithful business handmaiden of the Republican Party, you might find this a mite peculiar. And since House Speaker Nancy Pelosi comes from the metropolitan area with probably the lowest percentage of Detroit-made vehicles of any in the country, it seems stranger still. 

Let's be clear: The management of GM doesn't deserve to be bailed out, and it's not clear to me that a bailout would work -- certainly not as long as the company continues its "change as slowly as possible" pace. Tom Friedman put it caustically last week when he mocked the idea that a corporation should require federal assistance to "innovate":

I could not help but shout back at the TV screen: "We have to subsidize Detroit so that it will innovate? What business were you people in other than innovation?" If we give you another $25 billion, will you also do accounting?

But let's be clear about something else: GM's stock value last week was down to $1.5 billion not because it doesn't have factories and business relationships worth vastly more than that on the open market. It's because it also carries very large pension and healthcare obligations that, should the company go bankrupt, would actually fall on the rest of us. 

So the choice facing the federal government is not whether to spend billions on a bailout. It's whether to bail out the company now, in the hope of rescuing it, or to bail out the medical, pension, and unemployment costs of GM retirees, workers, and suppliers after a bankruptcy. 

And the media are back to their old tricks. You could read dozens of mainstream media articles quoting Republican Senators such as Richard Shelby on the evils of subsidizing GM without ever once being reminded that Shelby and many of the other Republicans ganging up against a bailout come from states that don't have GM, Ford, or Chrysler plants but do have German or Japanese transplants that would benefit greatly if GM went under. 

A major goal of the Bush administration in pushing GM into bankruptcy is to get at the union contracts that provide middle-class wages in states like Michigan, Wisconsin, and Delaware. Breaking these contracts in a bankruptcy court, the Right reasons, would be another blow at the idea that workers ought to have living standards similar to those of managers -- what Barack Obama infamously called "spreading the wealth." GOP blogs make it clear that this is all about the United Auto Workers -- and who cares what it does to our economy.  

But you'd never know that from the media.

Comments

[Paul from Potomac]

Carl,
The unions and environmentalists became victims of the ultra-right-wing extremists during the Republican administrations since LBJ left office. Living wages are synonymous with bankruptcy, say the Pubs. Clean carbon is not important, just that it is our carbon. Profits are what's needed, not sanity.

The black hole of coal has no soul.

We must ally ourselves with the unions to demand an end to corporate governance. We need new leadership which places family, survival, domestic jobs with living wages, and clean alternative energy as the cornerstone of a new day.

Our soul must be filled with light and hope.

[Chris Yoder]

And the nexus between bailing out GM/Ford/Chrysler and the environment is?

[N. Sukumar]

What goes around comes around. No tears here for GM. If the proposal is to bail out GM as is, I say no. But if the proposal is to remake GM in a new model, then it might be worth it. I agree that environmentalists and labor must stand together on this. But UAW union president, Mr. Gettelfinger, said during a press conference, "We're here not because of what the auto industry has done. We're here because of what has happened to the economy." This is a remarkable statement that seems to be allying the union with the management and against taxpayers! Until and unless Mr. Gettelfinger and others in the unions acknowledge that GM is in the position it is today precisely because of what the auto industry has done, because of actions and decisions taken by the management to kill the electric car, drag their feet on production of hybrids and oppose fuel economy standards, and not due to the vagaries of the economy in general, they have little chance of getting sympathy from the environmental community or taxpayers.

[RCC]

Yes, the Detroit automakers made large, thirsty SUVs. But people often neglect to point out that the Detroit automakers also sell many fuel efficient cars. Chevrolet makes several cars with over 30 mpg. Saturn, a division of General Motors, has produced many small, efficient cars over the years. Ford may have produced the Excursion SUV, but Ford also produced the small, efficient Escort.

Perhaps it is easier to demonize the manufacturers for producing SUVs than to blame the consumers for demanding them. I often hear pundits say that Detroit doesn't build vehicles that people want. Actually, they did build the vehicles people wanted. Fuel efficient models such as the Saturns and the Ford Escorts moved slowly off the lots while the public paid a premium for SUVs.

Meanwhile, praise has been heaped on Honda and Toyota, yet even Honda and Toyota produce and sell SUVs and pickup trucks.

The Detroit automakers provide a decent wage for its many workers, something that is quickly disappearing in todays economy. The Detroit automakers also support an extraordinarily large number of retirees with a means of support through pensions. That is a liability that does not hinder foreign competitors such as Toyota and Honda.

If the Sierra Club really wants to be both environmentally AND socially responsible, it will encourage people to buy one of the MANY domestically produced (shouldn't we "buy local"?) efficient cars, such as the ones mentioned, rather than cultivate a sense among the public that the Detroit automakers are evil or incompetent for responding to marketplace demand.

By the way, I am tired of hearing about how Toyotas and Hondas are built in this country. They are MERELY assembled in this country, and contain a much higher percentage of imported parts than the cars of Detroit-based automakers. And the auto business is more than just assembling cars. I'm also confident that the bulk of engineering and design of foreign cars is done overseas.

If the Sierra Club wanted to help domestic industry and its workers, it could LOUDLY throw its support behind the aid package to the automakers that is about to be debated in the senate, upon the condition that reasonable fuel economy increases are met. Of course, the long-term viability of the industry depends on people actually purchasing the vehicles. Isn't it better to encourage the purchase of products produced in this country with environmental regulations and decently-paid workers than to have our domestic manufacturing industry collapse and have more manufacturing shift to places like China, with little or no environmental regulation and appaling working conditions?

[RCC]

I hope people will consider the information in this article:
http://freep.com/article/20081117/COL14/811170379

[RCC]

FYI, I am a member of the Sierra Club and I work in the domestic auto industry.

[Dr. James Singmaster]

Carl; Your point is well taken, but it has no relevance to Sierra Club's mandates does it? This ends up being kind of negative for you and the Club as you wander into political and labor issues instead of sticking to environmental issues.
The environmental issue that no one wants to talk about and that the Club ought to be raising a todo about is the looming crises that will be developing from our present handling of the massive messes of organic wastes and sewage. The germs, toxics and drugs in them are not being contained in present dump operations as witnessed by EPA's calling a conference in Dec. on risks of drugs in DRINKING WATER. And reports of expanding ocean dead zones from waste and nitrogen runoff that may soon seriously reduce seafood supply and the survival whales and porpoises ought to be Sierra Club concern. I have sent you several times a pyrolysis program to handle these messes with many benefits and urge you to get it to the attention of Club members.
Dr. J. Singmaster

[UN]

WHAT DOES GM PENSION PLANS HAVE TO DO W/ THE ENVIRONMENT?

WHY DOES THE SIERRA CLUB CONTINUE TO IGNORE THE UN REPORT ON MEAT CONSUMPTION/ CATTLE FARMING

[kenton dunbar]

The United States Automobile Industry is surpassed only by the oil industry in the degredation and devastation of this planet. This industry has perjured, distorted, misinformed, cheated, bribed, extorted, lied and deceived the American public, as well as the world, since its inception over a 100 years ago!
They have definitively, purposely and effectively resisted every effort made by politicians, city suprevisors, mayors, city councils, governors, congressmen/women (the ones who are not in the industry's pockets), presidents, environmentalists, ecologists, university research deparments, the American Lung and Cancer Societies, state and local heallth deparments, Centers for Disease Control and Prevention, the rediculous and superficial corporate lobyist controlled EPA, numerous state Air Quality Branch organizations, etc., etc., etc., to clean-up the internal combustion engine, porduce fuel efficient autos, or at least install effective smog, contamination and air pollution control devices on their products and give the public some clean air relief.
Every effort at made by the above over the last 50 years to motivate action has been met by the "Big Three" with the following, "we don't have the technologies," "it's impossible," "we don't have the money," "we don't have the engineers," " we're at a competitive disadvantage," "jobs will be lost," "the public won't like having to pay the bill," "it will take ten years," "we can't change our models that quickly," "it will make cars unsafe," "it will be too disruptive," etc., etc., etc.
For a complete, thorough and extremely well referenced, documented and footnoted discussion of the above, I cannot reccommend highly enough Jack Doyle's "Taken for a Ride"--a Master Piece of research and an excellent example of disciplined, restrained and dispassionate writing on a topic that could easily cause one to lose control and degenerate into diatribe.

[Sally]

Interesting article at Detroit Free Press, and I will check out "Take a Ride". Yes, "Buy American" should come back in this economic environment. I believe that most auto companies, of whatever nationality, have factories/assembly plants worldwide; the goal of the "bailout" to keep profits in the American economy is a good thing, IMHO.
As to union contracts and retirement benefits, there has to be a balance between reasonable wages and competitiveness; management, unions, and legislators must consider these complex issues seriously. In these days of global competition and automation, auto workers may not be able to command the good deals they have gotten historically since WWII, but neither should they be dragged down to the lowest level. As in any negotiation, compromise is the key.
Really, however, the main Sierra Club issue I see here is pressuring the administration to stand firm on CAFE standards, and ensuring that local economic issues don't keep us from protecting the environment for the future.
I agree with the above commentors that polluted drinking water, sewage disposal, agribusiness,and mountaintop-removal mining are areas in which I would expect the Sierra Club to take a leadership position.