News Intelligence Analysis
[Yurica Report editor's note: see our article by Katherine Yurica, "Save GM and Save the World!"
October 31, 2008
Editorial
More Money for Detroit
Here is a measure of just how grim the economic outlook is: It
seems to make sense to pump billions more taxpayer dollars into
Detroit’s automakers even though down the road they could
quite possibly go bust anyway.
The specific request by General Motors and Cerberus Capital Management, the private equity firm that controls Chrysler, is preposterous: billions to help pay for a merger of dubious value. Neither automaker has been able to produce cars that consumers want to buy. Both are losing money hand over fist. Gluing them together would not change this dynamic. Still, there are two plausible arguments to support a general government bailout of Detroit’s lumbering car companies.
First, it is not unreasonable to believe that they might survive as self-sustaining companies if government money can get them over the credit crunch and deep recession that is expected in 2009.
In 2010, they are expected to offload responsibility for their retirees’ health care onto a new fund. It would cost them some $40 billion but would get the problem off their books and stop the hemorrhaging of money. They have negotiated new contracts with the auto workers’ union that eliminate retiree health care and allow for lower wages for new hires. They are slashing the production of gas-guzzlers. Some analysts believe they finally have a promising lineup of fuel-efficient cars.
The second argument may be the more powerful: even if Detroit’s car companies do not manage to survive in the longer term, it may still be worthwhile to keep them from going bankrupt next year. The economy and the job market will have their hands full dealing with the fallout from the near-collapse of the financial system.
Detroit’s three automakers employ hundreds of thousands of workers and support several million jobs in related industries like auto-part manufacturing and car sales. Major job losses in the auto sector would not only cause enormous economic and social distress around the country but would be extremely costly to the government. In particular, the government’s pension guarantee corporation would have to pick up some of the tab for hundreds of thousands of retirees.
The auto workers suggest that the companies could use another $25 billion in low-cost loans to pay into the retiree health care fund (they already got $25 billion in subsidized loans to retool their plants to make fuel-efficient cars). Detroit might need more just to make up for the markets’ collapse that has cut its access to credit.
But if the government is going to hand out billions to Detroit’s Sorry Three, there need to be serious conditions. For starters, Cerberus has to open up Chrysler’s books and the rest of its finances to government inspection to make sure taxpayer money isn’t just funneled elsewhere in the opaque private equity firm. Ford and General Motors don’t pay dividends these days. We don’t know if Chrysler does. They should all be barred from paying dividends until they repay any taxpayer money they get.
The money should also come with limits on executive pay and golden parachutes. The top executives of the car companies should be required to step down; taxpayer money should not be used to underwrite proven managerial incompetence.
We realize that helping Detroit involves big risks. After bailing out the financial system, it will encourage other companies to seek sustenance at Washington’s trough. Washington will have to learn to say no. But at this juncture, Detroit is too big to allow it to fail. And who knows? It may learn to survive.
Copyright 2008 The New York Times Company
Send a letter
to the editor
about
this article
Visit
our New Directory:
Automotive News
And Read:
"General
Motors, Driven to the Brink,"
by Bill Vlasic and Nick Bunkley
October 26, 2008, New York Times
Save
GM and Save the World!
October 29, 2008
By Katherine Yurica
There are three ways Americans
and the new
administration can help to save the automotive
industry from total collapse. In fact, it will make
America the "hero" of the world! (To paraphrase
a line from the Heroes television series:
"Save
the General and save the world!")
More
Money for Detroit
A New York Times Editorial
October 31, 2008
Obama Asks Bush to Provide
Help for Automakers
By JACKIE CALMES
November 11, 2008
Panic
in Detroit
This is not your father's Oldsmobile
we're rescuing.
Jonathan Cohn, Friday,
November 14, 2008
Saving
Detroit From Itself
Nov. 15, 2008, N.Y. Times
Before it approves any bailout
package, Congress must
insist that any company receiving government money
must commit to a specific plan to improve energy efficiency.
by Jane Hamsher
11/17/2008
"Let Detroit Go Bankrupt,"
says Andrew Sullivan.
With spittle-flecked rage, Charles Krauthammer
writes, "hourly cost of a Big Three worker: $73;
of an American worker for Toyota: $48."
G.M.’s
Latest Hope
Is a Plug-In Car
November 22, 2008
By MICHELINE MAYNARD
Executives at General Motors,
the largest and
apparently the most imperiled of the three American
car companies, are using the Volt as the centerpiece
of their case to a skeptical Congress that their
business plan for a turnaround is strong, and that a
federal bailout would be a good investment in G.M.’s future.
Directory of the Articles and Essays
of Katherine Yurica
Strategies, Communication and Propanda Techniques
Directory on the Rise of Christian Dominionism
This article is copyrighted material, the use of which has not been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
Back
to The Yurica Report Home Page
Copyright
© 2008 Yurica Report. All rights reserved.