Help the Big Three

I am so astonished at the vitriol being directed towards Detroit in terms of this bailout of the auto industry. For the record, I was really upset with the bailout of the financial industry because it reminded me of how we got involved in Iraq which was, “Pass this bill now or the world is going to end!” I mean the financial bill had to be passed in what, a week? Didn’t it seem like this emergency came out of nowhere? Even emergencies should require due diligence and too many in Congress were not willing to put the brakes on and say, “If we are going to give you $700 billion dollars, you can wait a minute.” Do you remember trying to ask your parents really fast so they don’t catch all the details? That was the financial bailout.

I think Congress should help the auto industry for the following reasons;

We are talking about a $25 billion dollar loan (there is precedent a la Chrysler, Lee Iacocca) which is a fraction of the $140 billion tax cut that Paulson tucked in the bailout bill.

Some people say we should let the Big Three die. We are not just talking about 3 million jobs being lost, we are talking about ripple effects that run deep in our communities. Take healthcare for example. I have a friend who works at a hospital here in Michigan that is announcing major layoffs. Why? Because as the auto industry announces more and more layoffs, these laid off workers lose their health care which then forces people to sign up for Medicare and Medicaid. And because Medicare and Medicaid reimburse at lower rates than do say Blue Cross/Blue Shield. So for real, a world without the Big Three is not going to be contained to Detroit and trust me, it will impact you in a very real way.

Framing

I find it interesting that most coverage of the auto industry is framed in terms of saving or not saving “Detroit.” Detroit is not being saved, the auto industry is asking for a loan. Although Detroit is known for the auto industry, this framing has negative consequences. For starters, the economic bailout of Wall Street was never framed in terms of saving New York. Instead, the framing was that Wall St. is the engine behind your paycheck and small businesses all across America. One doesn’t have to think long to conjure up negative images about the city of Detroit and we end up pitting city against other cities. Again, this is about America, not Detroit. My city has one of the highest unemployment rates in the country. No economic bailout is going to put Detroiters to work again but failure to do so will guarantee millions of people not directly working for the industry will see an economic downturn that will be peanuts compared to what we are seeing with the economic mess.

We are all in this together. Congress, do the right thing

Stay up fam,

Brandon Q.

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2 responses to “Help the Big Three”

  1. Monroe Anderson says :

    The Big 3 must be helped by the Feds…but not without strings attached. We bailed out Chrysler only to have it sold to the Germans. There should be some 50 or 75 year sunset law that prevents our auto industry from being bought out by a foreign company.

    There should also be some green fuel requirement. As the price of gas drops, there will be the temptation to return to the production of the gas-guzzling big SUVs.

    And, while we’re at it, there should be a salary cap for CEOs. Why some guys gets paid $28 million for failure defies logic. For those of us in less lofty positions, when we fail, we get fired and are forced to stand in the unemployment lines.

  2. jasahl says :

    A couple thoughts:

    1) there are going to be jobs lost whether the feds bail them out or not. currently, the big three are losing a minimum of $500 per vehicle sold – $25 billion won’t fix that.
    2) if any (or all) of the big three go Chapter 11, they won’t disappear, and there will still be work to be had. Yes it would be difficult, but it would allow them to get out from under their existing credit obligations (currently the net worth for the B3 together is more than $200 billion in the hole). Getting relief from their current debt and contracts would set them up to succeed. Loaning them a mere fraction of their crushing debt isn’t going to help at all.
    3) Monroe: Chrysler was bought by Mercedes because it was going under. As much as it would be nice for them to have staid in US hands, the Germans saved quite a few jobs – Chrysler would have folded up shop years ago if it weren’t for that deal.
    4) There already IS a green fuel requirement – CAFE. And in the past few years, the standards have been tightened even more. It was these standards that cause the B3 to have to sell tons of tiny vehicles at a loss (since nobody wanted small cars) in order to meet fleet regulations. The only vehicles they could profit on at all were the big gas guzzlers. That’s why the gas prices this past summer killed them. They couldn’t move the only cars they made any money on.
    5) Salary caps are a bad idea. While I certainly don’t think the existing CEO’s should expect any “golden parachutes” for the crappy job they did, capping salaries would discourage the best and brightest from even considering the job. A $100 million CEO would be well worth it if he were capable of turning one of these guys into an industry player once again.

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