Wednesday, February 18, 2009

OMFG

Seriously? Automakers want 14 BILLION more dollars? So now the bail out will cost almost $40 billion? Seriously?

Now, look. I actually have immense sympathy for American car makers. They're under intense foreign competition, and frankly, other foreign car makers don't get stuck also having to finance their workers' health care. In my opinion, back in the 1990s when Hillary-care was on the table, GM and Chrysler should have gone to Washington and said, "Look. We don't know that this health-care plan is the best option. But we do know that the current system of health-care in the United States will bankrupt us. It is not fair to keep making us finance our workers' health care, when other companies with less unionized labor get to shirk their responsibilities. Let's come up with a system of health care of shared responsibility, and shared benefits."

But they didn't. Because, and this is where I stop having sympathy for American car makers, they have consistently been myopic. Why else would GM invest so much money and time into developing the EV1 and then throw it under the bus? Because they couldn't see a day when gas would hit $4.50 a gallon?

I know people are going to lose their jobs. I know that car companies provide good work for blue-collar labor.

But ... this isn't going to work. We can't keep throwing money at these failed companies.

Instead, we'd be much better off using that $40 billion to establish job re-training programs. Or let's spend $10 billion building the infrastructure so that we can get the country ready for a world of all plug-in hybrid vehicles.

But throwing money at the makers of gas-guzzling automobiles is kind of like throwing money at horse carriage makers at the advent of the Model T-era.

It's ain't gonna work.

17 comments:

Joyce said...

I'm sooo frustrated! Why are we doing this? If we keep taking money from well run businesses and responsible citizens and give it to poorly run businesses and folks who got themselves in too much debt, what is going to happen?? Or are they just printing a bunch of money and throwing it into the economy? I haven't had economics since high school-not claiming to be an expert or anything- but IT DOESN'T MAKE SENSE!!

Billie said...

Did you know that Toyota Priuses are languishing in the car lots and they can't keep Ford F150's in stock? I forget what the other vehicle was.

How short our memories are.

Farmer's Daughter said...

Where's my bailout? Why must I work my ass off to pay taxes that they give to people who mismanage their money and act irresponsibly (not the workers, the CEO's).

If my taxes are going to these company, they should give me a new car. I'll give them my 1997 explorer, and they can give me a hybrid. I think that's a fair trade.

ruchi aka arduous said...

Joyce, I'm frustrated too. What the government is doing seems to be the: let's throw spaghetti at the wall and see what sticks kinda thing.

Billie, yeah it's ridiculous. I read an interesting article that favored a minimum price for gas ... basically the government set a certain dollar amount as the minimum amount per gallon. I'm not exactly sure how it worked, but it's an interesting idea, as long as it doesn't mean that that much more money is just going to the oil companies coffers. But it would also have the effect of immunizing us from shocks due to the price of oil rapidly rising and falling.

Abbie, I think it's a fair trade too!

Natalie said...

I dunno, Ruchi. This sounds a little too "us vs. them" to me.

I don't disagree that it's frustrating. It feels that we're throwing good money after bad. We're propping up an industry that might make more Enviro-Sense to let fail. It seems doubtful that the buffoons who got us to this point are also the same geniuses who can pull off a max return on bailout money invested. And we all feel like we want out piece of the pie.

But, BUT, what got us into this mess isn't something that happened yesterday. And it's not the fault of all those folks who would be out of a job without a bailout - think about the intertwined web of complexity that is out economy. I'm not suggesting that those running the show presently (both in DC and in industry) aren't complicit. They are. But we are where we are b/c of hundreds of smaller decisions made over 25+ years.

Not feeling the love? Well, think about all the things we (personally, in our own lives) have gotten b/c our economy was "so robust". Education, leisure time, computers, the internet, green power, drinkable water, cheap travel. I could go on and on.

In fairness, I think the "robustness" of our economy was artificial and we could have achieved much, much more with better oversight and planning. But the truth of it is that we benefited from *that* economy that just collapsed.

So those of us who fancy ourselves "responsible" have been so in PART b/c of those greedy, myopic SOB's. We are all connected. Should we throw money at them without demanding changes? No. But it takes money to make money. And if we let the last large scale sector of manufacturing in the US fail, what money are we going to use to fund all those cool, green, innovative changes we want to make. It needs to be done incrementally. Unfortunately, it should have been started years and years ago!

And to those pining for "my bailout", I would say that 1) this bailout is more of a "stitch in time" and is actually costing you less than the cost of no action; and 2) the Republicans finagled quite a few tax refunds/reductions into the stimulus bill that should make their way into your pocket directly.

ruchi aka arduous said...

Natalie, I see your point, and I'm not against all bailouts, or the greater stimulus package. But, I don't think that the auto bailout makes economic sense. This isn't because I hate car manufacturers because cars are evil. It's because I don't think there's a financial pay off to propping up a dying industry. That's why I think we should use the money on job re-training or on infrastructure building. I get that car manufacturing was once an important part of the American economy. I get that a lot of people rely on the good jobs at these auto companies. But to me, this money is just prolonging the inevitable ... and probably not prolonging it for very long.

So yes, I'm not opposed to bail outs of everyone. Not opposed to the stimulus (though I think it's too weak and actually needed to be much bigger.) But I am opposed to this particular bail out.

Is it us versus them? Maybe ... but I don't really think so. To me, this is more about facing economic realities, and then doing something to holistically help those affected (job re-training, universal health care etc), rather than throwing money at the problem.

Natalie said...

I agree. The bailout is basically prolonging the inevitable. Yes. We need to refocus our economy. Yes. Not a moment to waste time or money. With ya.

So we let the auto industry fail. Then what? Tens of thousands, if not hundreds of thousands, of Americans without jobs. There's nothing to presently - as in tomorrow - to fill the void. We need to buy time to ramp up a new, better system. There might be numerous "shovel ready" projects that will get underway shortly, thanks to the stimulus. But many of those projects aren't exactly "holistic".

The men and women of the UAW (and auto-associated industries) don't know how to build bridges or fix roads or work on the grid. And they live where cars are built, not necessarily where the bridges, roads or grid are. So now we're talking about immediate re-training. And possibly relocation. Not to mention housing and food assistance. Yikes, that's a hefty tab. All the while with far fewer citizens paying into the tax system.

I do feel the auto industry days are numbered. It's a crumbling leg of our economy. But without it, I don't see how we have any leg at all to stand on. In essence, I think we need that broken leg to keep us propped up long enough to figure out who's doing all this training and where and at whose expense and to what end. Without it, we'll end up in a much bigger hole.

We need time to think, plan, smartly foster new industries and not fall flat into another mess. I don't think pulling the plug and entering into free-fall is going to help us. In fact, I think it's very, very dangerous. We are all but one industry away from being a 3rd world economy - where we export raw materials and import finished goods and have huge unemployment numbers. (On the flip-side, if you're bailing out said industry you're probably already a 3rd world economy!)

What I'd like to see, although I'm not holding my breath, is the auto industry forced to lead the charge into a better system. I agree that they would have been wise to champion Universal Health Care long ago. Now's a great time to start. And make them have a vested interest in a system of "plug-in stations". And require them to figure out ways to retrofit existing cars to make them more efficient. And so on.

Di said...

Ruchi I totally agree with you! No we shouldn't be bailing out the auto industry. It's a dying industry and let's face it what is going to change in the next 6 months to stop them wanting ANOTHER bail out? Nothing much! Things are getting worse right now and for EVERYONE not just auto. Sure they were a big industry but they got complacent and now they pay the price. Thats nothing to do with the economy that's business! Survival of the fittest.
What next? McDonalds bail out? KFC?

ruchi aka arduous said...

Natalie, I see what you're saying, and maybe you're right. Maybe we need to prop up the auto industry for a few years to give us some time to come up with a game plan. But ... then we better come up with a game plan. We can't assume the auto-manufacturers are going to heal themselves.

Unfortunately, I think too much of the focus is on short term (read the next year or so) stimulus, and not enough on long-term growth.

Also, yeah, I think the government is going to have to spend TONS of money on re-training, housing, and food assistance. And they are going to have to run up an even bigger deficit while doing so, because like you said, fewer people will be paying in.

Natalie said...

Yes, agitating for a new, better system is where you and I come in. And I mean that as more *you* than me. :-)

I am, however, going to a roundtable discussion today with a couple of Congressmen, some economists, oceanographers, physicians (for social responsibility), and other activists. The topic is Repower, Refuel, Rebuild America. Hopefully, they'll be talking about this new holistic plan and how I can get involved.

Yvette said...

Bit of a difficult issue for car makers all over the world. Just thought I'd reassure you that plenty of other car manufacturers pay for their employees health care. All car manufacturers operating in Europe ('cept the UK) have to pay by law for at least half of their employees health care. so that sure isn't the reason for the companies to be needing such bailouts. And anyway if a person spends their life at your factory, why shouldn't you pay towards their health care?

Rosa said...

Natalie, if the concern is people needing income, wouldn't we be better off paying expanded unemployment benefits, than in propping up old-economy companies with demonstrably poor managers?

That would stop the top management from making $500,000 - I'm pretty sure the unemployment cap is lower than that in every state. And it would let other companies pick up the failed company's assets for cheap - I bet there's a little startup out there that would do something awesome with the existing electric car R&D. The next great home greywater system designer or fancy bike-truck maker might be languishing in a GM engine shop right now, daydreaming about retiring and following her dreams.

Robj98168 said...

I wouldn't mind if the automakers would diversify, Like they use to (Ford made refrigerators) but alas they just keep on going on the same sorry business model. I kinda think it is karma. I am with Abbie- Where's my bailout??? I bought a home I could afford, keep up the payments, PAY TAXES- now I wanna bailout and an electric car. Or else. Personally I think we should all refuse to pay income tax!

Natalie said...

Rosa, I'm not sure where these entrepreneurs will be getting the capital to start up these new ventures. Despite the taxpayers "gifting" the US Banking System $350+B (with much more to come) money is still not flowing. (As I understand it, this is why the auto industry went to the gov't. No bank would extend them credit so they could restructure.)

Stimulating the economy in the form of funding entrepreneurs sounds like a great plan to me. If the banks aren't lending though, we'd need another mechanism for moving Federal money into the hands of prospective businesses. That would require more than a few months of arguing in DC, I would think. So again, let's get the ball rolling on a new better idea (whatever it may be), then let the auto industry struggle to survive the old fashioned way.

With about 500,000 folks losing their jobs EVERY MONTH, why would we want to add to that on purpose? That would just be negating the positives of the other stimulus bill.

I agree. It sucks. But this is what we have to work with. The big goal right now is to slow the rate of the downward spiral. The economy is circling the drain. Our options are severely limited.

Young Snowbird said...

So if the economy is circling the drain, and each month 500,000 additional people are losing their jobs, and the banks aren't lending money to the auto industry (because they can see the companies are hemmoraging on the brink of death), what is our need for a huge, old school auto manufacturing industry when demand has fallen 30%, virtually NO ONE is currently buying cars and fewer and fewer people are making enough money to get credit/buy a car? We should keep building cars that will just sit and rust in the lots? Pay higher than average wages to workers so that they can make products that no one can afford to buy?

The industry has to shrink to survive this soon-to-be extremely protracted economic abyss. People will still lose their jobs in the auto industry by the tens of thousands, if not 100,000 more within the next two years, even WITH more bailout money. The time to force a change in their business model is now, not two years from now when no money is left anywhere to help them stay alive. It takes 14-20 months to retrain to be a solar installer, electrical worker, etc. Do it now, so that we have folks ready when the need is there.

Natalie, please, third world countries are not propping up the US economy. Second world countries like China are buying our treasuries. First world countries like Japan and Saudia Arabia are buying our treasuries. Third world countries are still trying to put in wells to get clean water, pray that their kids reach adulthood without too much damage from malnutrition, and are continually fighting to keep themselves safe from typhoid, dysentary and malaria. US and a third world country= no comparison, yet!

Sorry for the tone. The overuse of the incorrect US/3rd world comparison is grating on me!

Natalie said...

Snowbird, no apology for the tone needed. I like intelligent, passionate, opinionated people. This is the place for that, yah? I don't necessarily feel this is a right/wrong issue. I just disagree and think the bailout is more likely, more expedient, and better fiscally and logistically.

I think you bring up some interesting points.

First though, I want to clear something up. I never said we were a 3rd world *country*. I said *economy*. The better term is "developing economy", but for the sake of brevity (can you imagine?) and grammar, I used "3rd world". A developED economy would be more self-sustaining (econ, not environ speaking) with emphasis on manufacturing, wholesale/retail and service functions as mechanisms to generate wealth. A developING economy mostly relies on agriculture and natural resource extraction. Those economies tend to export raw materials and import finished goods and have higher unemployment rates. Removing manufacturing trends us in the wrong direction, towards being lesser developed. That's all I meant. Perhaps I was being a bit dramatic. But honestly, that idea scares me.

We're a car culture. That's not set to change anytime soon. And frankly, those living in the 'burbs would probably have a hard time buying groceries or getting to work if driving were banned tomorrow. (Not that we shouldn't be working our way there.) So cars will still be need for time to come. Unemployment numbers are jumping, yet we're still above 90% employment. Car sales are on a serious decline for sure. But I just looked it up. Almost 10 Million cars were sold in the US this past January.

If we don't let the auto industry restructure now (which is supposedly what they need these guaranteed funds for) where will these highly efficient gas-electric or all electric vehicles come from in the future? Japan? China? That won't help our economic outlook any.

Rather than shuttering the manufacturers, we should make them vested in a better system overall - plug-in stations, more efficient hybrids, retooling existing cars, etc. Make producing a "greener" product self-reinforcing. But in the mean time, I still think their old crappy system is needed for us to limp our way onto the next page.

Going Crunchy said...

Yep yep yeppity yep.