Thoughts from a Yellow Dog Democrat living in Olympia, in the great BLUE state of Washington

I am a liberal because it is the political philosophy of freedom and equality. And I am a progressive because it is the political path to a better future. And I am a Democrat because it is the political party that believes in freedom, equality and progress. -- Digby

Friday, December 05, 2008

Auto Company Bail Out

I grew up in Detroit and still have friends that work in the auto industry so I've been watching the events surrounding this bail out with a lot of interest. I have so many emotional responses that it's hard to come up with a cognizant solution or overall opinion. Here's some of the facts and issues I'm struggling with:

- The troubles at the auto companies weren't sudden occurrences like the executives testified to this week. They have been on a downhill slide for awhile -- at least 2006.

- The market for auto loan backed securities is still working and hasn't dried up like they said.
- Credit unions started experiencing declining vehicle lending beginning in 2005 so this wasn't a sudden occurrence.

- Imported car sales exceeded domestic auto sales in July 2008 but they had been gaining market share for decades

- GM had the exclusive patent on the hybrid engine and decided in the 90's to license it to Honda and Toyota. We know where that went.

- Since 1990 US automobile manufacturers have spent $59.8 million in lobbying and influencing Congress (including PACs and direct contributions. Add another $198.6 million from auto dealers.

- The GOP 2008 Platform targets and blames unions for our economic problems
and we could see the anti-union/labor commitment from Republican members of the Senate Committee on full display during the hearings.

- The Detroit Free Press describes the impact on the number of workers best (also check out their great interactive map):
The automotive industry directly employs more than 2 million workers in the United States. That is more than 43,000 workers, on average, in every state, and includes employees who engineer, build, distribute and sell both foreign and domestic cars and trucks. In all, those jobs generate $65 billion in income for those workers, or about $29,437 per job. While Michigan is the top state for automotive-related employment, with more than 240,000 workers, even Alaska employs nearly 2,500 workers in the auto industry.

- But I think Daniel Gross interprets the testimony right:
But it almost doesn't matter whether the Big Three file for Chapter 11 protection. To a large degree, the markets are treating the auto companies as if they're already in bankruptcy.
The sad fact is that the U.S. auto industry has essentially failed. Even if car sales come roaring back from their current anemic pace next year, there's no guarantee the Big Three will return to health, that they'll be able to stay current on debt payments and raise capital from tough-minded investors. The executives and union leaders speak as if the bailout money is simply needed to tide them over until the sun comes back out. Exuding and instilling such confidence is a big part of their jobs. But increasingly, it seems that the federal funding they're requesting is necessary to help manage failure, not to stave it off.

So what do we do? Do we have every man, woman, and child in the USA give them $115 so they can dissolve the companies in an orderly fashion? I guess we do -- otherwise we shock the economy into a depression and it may take us decades to recover. This way, for $115 we might be buying some time so these 2 million workers can be absorbed in other industries. A slow death is preferable to the quick death of bankruptcy.

But PLEASE let these CEOs be banned from EVER managing anything ever again.

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