Bleeding Detroit

Do we need to bail out the auto industry...again?

I know, the last major bailout was nearly thirty years ago, but the situation in Detroit isn't really any better. US car manufacturers have been losing market share and money - hemorrhaging might be a better term - amidst a market changing from oil-centric to eco-friendly.

Back in September, $25B was approved for a bailout, but that money is gone, or close to it. The plan Obama supports, along with Congressional Democrats, calls for part of the $700B financial industry rescue package to be applied to the automakers, essentially giving the US government (and by extension, taxpayers) a share of those companies.

Is that really the best course?

We know our auto industry has been flagging over the last few decades in the face of increased global competition and car line-ups that do little to address the public's growing clamor for alternative-fuel cars (electric, fuel cell, bio-diesel). Hybrid cars are purchased as fast as they can be produced, but Detroit is stuck with lots full of SUVs due to at-one-time great demand that has just collapsed over the last eighteen months (high gas prices, cheaper options, no or few hybrid options). Now they have to convert those SUV plants over to Something New.

So should we just give them money to do that, subsidizing their R&D and day-to-day operations? What's to stop them from seeking more and more every few months? GM and Ford have both burned through billions in the last quarter, coming perilously close to running out of cash (Ford's cash supply might only last until April, if things continue as they have). I'm sure the desire to profit is there, but what evidence do we have?

I would propose a different approach.

1) Eliminate their corporate taxes for fiscal years 2008-9, refunding anything already paid. Corporate taxes increase the cost of their goods, making the end product on the showroom floor all the less desirable by the consumer. This lowers '09, '10 and probably '11 model-year price tags, making them more competitive in the traditional fuel market.

2) As part of Obama's NuEnergy push, provided he can get it passed, set aside a chunk for R&D credits for companies that show marked improvement towards utilizing green tech now, in the short term, not five or ten years from now. It's another way to funnel smaller amounts of cash to targeted areas of the company. We want to promote profit, not just slow the descent into oblivion. The way to do that is to help Detroit capture more of the green market in the mid- and long-term (5 and 10 years out).

3) Perhaps some union busting is in order. If Obama is going to lower taxes, those union workers (Joe the Car Maker) will be getting more scratch from their paycheck at the end of the month. Constant renegotiation for higher wages and health care coverage could be frozen to keep costs down, and they could allow qualified, non-union workers to be hired at various parts of the process. I guess this is a dream of mine, to offer jobs to people who need them for wages that are respectable rather than keep them out because they don't pay union dues. Free labor, right?

I don't doubt there are better ways still to make Detroit work again. Bottom line: they need abandon, by force, their old models (car, economic, labor) to prosper in this economy. Better availability of private-sector health insurance will help Detroit cut even more. Maybe the unions should use their clout to cut a good Blue Cross/Blue Shield deal outside of Gm, Chrysler and Ford. There's a better model out there, a more efficient way to run this industry while still rewarding the workers that make it great.

What the Democrats want to do is simply take money and try to stuff it in the cracks, hoping it'll keep the industry together. The problems (and I'll be saying this for the next four years) cannot be solved just with money but with corporate realignment.

It might almost be better to let one car company go into bankruptcy to prove that change isn't just needed in our legislative and executive bodies, but our economic and manufacturing ones as well.

-Hooper