Two Clawdie Awards Today For Auto Bailout Dissections

Today, for the first time ever, The Lion awards two simultaneous Clawdie awards to letter writers in today’s Boston Globe.

The first goes to the following letter:

GENERAL MOTORS needs a bailout. We need its constructive capacity to work for a better America. But the management and marketing segment that has been getting it wrong for decades should face the judgment of the market. We do not need the people who dismantled the Los Angeles light rail system merely to increase the market for their inefficient products. We do not need the people who decided to profit from adding lead to gasoline, thereby poisoning our air. We do not need the people who decided to put a military vehicle on public roads. We do not need the people who helped kill the electric car.

The stockholders have been largely wiped out, and the workers are being thrown overboard. What GM seeks to bail out intact is exactly the part that should be cut loose.

Public monies should serve the public purpose. We need energy-efficient transportation that the country and the planet can afford.

Bravo! Let’s expose the Ozian wizards and hang them out to dry.

And the second goes to:

THE DAY Barack Obama supports a bailout of Detroit, he loses all claim to being an agent of change and becomes just another Washington politician.

America needs automotive manufacturing jobs, but the auto industry has shown no signs that it can provide them. No industry has been so poorly managed, so resistant to change, and so unresponsive to its customers and employees. Let it fail in hopes that a reorganized entity or Honda and Toyota can get the job done.

Are you listening, Mr. Obama?

One of the points supporters of the auto industry bailout harp on is the loss of many jobs if the Big Three fail. But that ignores the fact the country will want to buy just as many cars no matter who makes them.

Foreign manufacturers are already building cars in factories in the United States, cars that are more fuel efficient than anything coming out of the Big Three.

Does anyone think they won’t step up and increase production to meet the demand caused by the failure of the American firms?

Yes, there will be economic dislocations. Yes, jobs will be lost. And in time those jobs will be recreated by manufacturers who are smarter and better than the management of the Big Three has been.

Continuing on the path the Big Three have laid out for the last hundred years is nothing more than a sure disaster. Giving them money to continue their ways would be foolish. Even if the government imposes so-called conditions on the loans, American management has shown itself adept at ignoring the public good and the laws, so we can be pretty sure they’ll wiggle out of whatever conditions legislators in hock to the industry decide to impose.

As for the unions, they’ll whine and bitch and moan, but they’re just another part of the problem. Their benefits are part of the reason the industry is sinking. When health benefits amount to around $1500 per car, there’s a problem. And an argument for national single-payer health insurance for everyone.

There will be jobs for autoworkers and workers in associated industries if the Big Three fail. Maybe not right away, maybe not where the workers want to be, maybe not with the all the same benefits and suchlike, but there will be a market, there will be manufacturing, and there will be jobs. Maybe the boys in Washington should be pointing the taxpayers’ money at supporting the workers during the interim and helping other auto manufacturers ramp up production instead of bailing out the failed and destructive management of GM, Chrysler, and Ford.

[Full disclosure: The Lion drives a Ford Focus and likes it.]


9 Responses

  1. It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn’t have any real effect.

    This time it’s the car industry.

    While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable – so this time let’s target unemployment, create AMERICAN jobs and pump up the economy all at one time.

    Consider the following:

    Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that’s not all direct but due to suppliers. GM alone has over 1300 suppliers. (That’s a lot of jobs!)

    1 in 10 Americans makes all or part of their income due to the automobile industry.

    Money turns over 5 times in a year.
    Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
    (This isn’t magic, it’s simply how the economy works.)

    Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.

    Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
    Foreign competitors have worked off-shore collectively to meet various US gov’t. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.

    Make no mistake; it’s no surprise that once again government has been a major part of the problem.

    Here’s the solution.

    Instead of either shipping cases of cash off to car makers; or sending us all another check:

    Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that’s domestic. (Civic = 70% Ford Explorer=80%)

    Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.

    This would bail out the car industry without giving them a dime directly
    Further it would reduce the overall age of the nation’s cars which would in turn;
    increase overall fuel economy
    & decrease pollution.

    Strengthen the dollar!

    Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported …like gas!


    Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
    That would give the economy good swift kick right where it needs one!

    Pays for itself!

    Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
    What is the income tax on 65,000 anyway?
    (Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)

    Another Stimulus Package?

    I’m sure you’ll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV’s usually made in Malaysia or some such place.


  2. First whiff of bullshit is the “1 in 10 Americans makes all or part of their income due to the automobile industry.” The only place you find such a stat is from GM as part of their pleading for a bailout.

    Second whiff of bullshit is the magic 5X turnover, and it has several piles:
    • Where does this 5X turnover stat come from?
    • Even if true, it doesn’t magically multiply the amount of money in circulation but rather refers to home frequently that amount is passed around, or “turned over”; thus, “65K in 12 months due to the 5 turnovers” is a gross misunderstanding of the process
    • If you’re talking about the money the governments (state and local) make on this alleged 5X turnover (beyond the initial $6500 ($20,000 – $13,500)), that’s problematic to calculate because you’d need to know both how much of that $13,500 the car makers would actually spend, putting it into circulation to be turned over, and the taxing situation for the receivers of that money

    A google search has this diatribe show up on numerous sites. My guess is, Mr. “Authentic Connecticut Republican”, that you are either affiliated with the auto manufacturers or are their knowing or unknowing surrogate. Your plan clearly serves the domestic auto industry, and the claim that the plan will “increase overall fuel economy & decrease pollution” is laughable. Yes, sure it will, but not nearly as much if say those vouchers could be used for buying foreign cars, since THEIR average mpg far exceeds their American rivals.

    It’s also laughable to suggest that the government is responsible for making it too hard for the auto industry to afford R&D to develop better cars. BULLSHIT! They’ve happily been chugging out gas guzzlers and haven’t given a damn about fuel efficiency. Only Ford has made any serious attempt, but even that is far behind Honda and especially Toyota.

    You know what’s truly an “authentic Republican” idea? Free market capitalism, where companies rise and fall due to the demands of the market. Failure to meet the demands of the market = death, and here you are asking for a life preserver! “Authentic Republican” my ass. You’re in the pocket of GM and it’s obvious to even your alleged brethren, who flat out ignore you on right-wingnut websites and blogs.


  3. Rest assured: Obama will firmly support a bailout. The last thing he is going to do is begin his presidency of “change” by laying off tens of thousands of likely supporters. Someone said that no person is strong enough to face the world with both eyes open at all times. This is certainly one of those times. While the truth is that these inefficient behomeths ought to be allowed to fall by the market wayside, far fewer than enough people are willing to swallow it; regardless of the cost, we’d rather bill the future, shut an eye and watch Dancing with the Stars.


  4. I drive a Lamborghini Gallardo Superleggera because it’s absolutely amazing to drive, looks greats and I can make most my money back on it. Even though Ford, GM and Chrysler have made some good cars over the years, who wouldn’t prefer a Lamborghini or Ferrari?

    American car brands aren’t sexy, everyone’s got one, and foreign manufacturers can make better and cheaper cars. What’s Obama going to do ban foreign cars or place ridiculous taxes on imported cars. We’ll retaliate and that will hurt the American car industry even more. Bailing out an unprofitable industry with tax payers money isn’t going to help.


  5. Clearly, the auto companies must be allowed to file for bankruptcy. At that time, the government should move in because when you’ve filed for bankruptcy, full transparency is demanded, as is justification for every company decision. This will allow the government to purge management and dictate terms like higher fuel efficiency and fewer models. Management is insisting that they’re not to blame, their business plans aren’t to blame, their cars aren’t to blame, but rather it’s the global economy. BULLSHIT! They must be vilified both as the architects of this situation and as stubborn fucks who resisted government terms for a bailout so that when they file for bankruptcy, it’s all at their feet, not Obama’s.

    Also, it will force the labor unions to demand less in pay and so forth. They’re to blame here as well, but no, Obama can’t say that BUT if the car companies are bankrupt, you can’t get blood from a stone, and if the union leaders remain stubborn, then you lay everything at their feet like the auto execs, which again saves Obama from backlash from the auto workers.

    Btw Steph, if you’re going to come in here talking about Lamborghinis, you are SO far out of touch on this whole thing that you should just shut the fuck up. Thanks.


  6. @ Phillychief

    Pleasant, but I thought my contributions were welcomed by the blog author, and I think comparisons with European manufacturers are relevant. Whatever price range your in, American cars aren’t as good as their foreign competition. The entire American automotive industry is predicated on flag waving because there is no other reason to buy American that I can see. Bailing out an uncompetitive industry with taxpayer’s money won’t save that industry or jobs long term.


  7. steph –

    “I thought my contributions were welcomed by the blog author”

    They most certainly are.


  8. Interesting.

    Months ago I read that the European automobile industry was looking for a financial bailout of its own–billions in loans.

    Yeah. That makes sense: pay $200,000 for something that spends most of its time in park. Sexy.


  9. @ Steph

    When we’re discussing burger joints and your criticism is their burgers fail to compare to your Kobe beef sashimi, you’re fucking out of touch. Likewise when talking about the American auto market and auto industry and making a comparison to a Lamborghini. Wtf?

    Now your most recent comment actually is applicable. I suppose a little prodding is what’s required to pull your head out of your ass. Whatever. Welcome. I agree, their cars are subpar, but they’re also hampered by legacy costs which the Japanese don’t have and one of their arguments is that after 2010, those costs will be gone so the bailout is to get them to 2010. Not good enough for me, as I stated above. They’ve been notoriously lazy. They didn’t change their plans until the Japanese kicked their asses in the 80s, and then when the SUV craze hit they again stopped caring. Essentially, if they don’t have to, they won’t improve, so let them file for bankruptcy and then the government should move in. I do think the American auto industry must be saved, but not in its present form. Let it go under and be reborn, not given a lifeline to prolong this current piss poor existence.


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