A few days ago, Jonathan Golob made the case that the US should bail out General Motors—arguing, essentially, that the loss of GM would reverberate throughout the US economy. Moreover, Jonathan wrote, GM pays well and has come up with technological innovations—like the Chevy Volt—that rival those of Japanese automakers. “If we allow GM and the auto industry to fail, it’s unclear what, if anything, would replace the key role it played in our economy. I cannot fathom how to renew an industrial middle class without the auto companies—and the vast manufacturing networks supported by them,” Jonathan wrote.
A couple of folks far more familiar with auto industry than I am have argued compellingly that any bailout should come with tough conditions. GM, after all, can’t blame its failure entirely on outside forces. To the contrary, it has persistently refused to change, innovate, and adapt. The auto giant spent millions fighting against higher fuel-economy standards (including right here in Washington State), gleefully amped up production of low-mileage SUVs the second gas prices rebounded, and wasted the opportunity provided by the Clinton-era Partnership for New Generation Vehicles to create new generation of clean vehicles. This is a company, as KC Golden of Climate Solutions noted in yesterday’s PI, whose CEO once callled global warming “a total crock of shit.”
Because GM has refused to change on its own, Golden argues, the only way to save it is to force it to change.
The market wants efficient cars; the engineers can produce them; the law requires them. But GM’s lawyers and executives fight on for their right to commit commercial suicide and planetary ecocide, even as they descend on Congress, cup in hand.
Bullitt Foundation President Denis Hayes nailed it: “In World War II … Detroit was ordered to stop making cars and start making tanks. Today, Detroit needs to be ordered to stop making civilian tanks and start making cars.”
Hayes proposes that manufacturers be required to deliver cars that average 50 miles per gallon by 2020, and 100 mpg by 2030. That should be a minimum condition of any bailout. Little tweaks won’t do it. We need — and to survive, the company needs — an automotive revolution.
We can’t revitalize the economy by resuscitating a gasping Hummosaurus. We have to build a new, more durable economy by investing in the infrastructure and industries that can sustain prosperity and save the planet.
At Grist, Joseph Romm argues that GM’s management brought the company’s failure on themselves, and worries that if the government does the company a multi-billion-dollar taxpayer handout, they’ll just spend the money the way they always have: lobbying against higher fuel economy standards and limits on greenhouse gas emissions.
The overarching question, he writes,
is not whether many more jobs are going to be lost in the term. They are. The question is will we end up with a well-managed domestic auto industry that can prevent far larger job loss in the medium term and thrive in the long term? Will we end up with an industry that understands its only hope for the future is being part of the solution to peak oil and global warming — and that means changing its core drivetrain.
I don’t have problems with these bailouts except I want there to be caps on executive compensation. These suits should not be rewarded for running the banking and auto industries into the ground.
The Honda FCX Clarity Hydrogen powered fuel cell car is being leased on a test basis in Los Angeles.
It does everything we need to move beyond Carbon and into the Hydrogen economy.
We’d be better off putting all GM workers on the dole and give them credits to buy Clarity cars.
Actually Erica, Bob Lutz said it was a crock of shit, he’s the Vice Chairmin not CEO, that would be Richard Wagoner, http://www.gm.com/corporate/investor_inf…
Detroit, with the UAW, may be reeling, but the manufacturers in the Sunbelt are surviving.
Another issue is how bad the UAW has damaged the US companies, http://www.dailynexus.com/article.php?a=…. If you look at most foreign owned manufacturers, Honda and Toyota among them, they don’t have that kind of UAW organization and have the same kinds of benefits and pay, with the exception of what I believe to be unreasonable guarantees that almost no other industry, especially mine in commercial software industry, have.
Another issue is how bad the UAW has damaged the US companies, http://www.dailynexus.com/article.php?a=…. If you look at most foreign owned manufacturers, Honda and Toyota among them, they don’t have that kind of UAW organization and have the same kinds of benefits and pay, with the exception of what I believe to be unreasonable guarantees that almost no other industry, especially mine in commercial software industry, have.
fuck GM. they deserve to fail for ignoring consumer demand (and common fucking sense) for cleaner, more fuel-efficient vehicles. michigan is my home state and i would hate to see it suffer even more than it has already, but fuck… GM deserves whatever misery they get. they made this mess, let them sort it out.
Mexico builds high-speed rail, Beijing builds a sexy new subway grid, and we bail out failures who make ugly cars.
Unfortunately, I have to agree with the troubles the UAW has caused. Yes, the CEOs have made serious bonehead moves. They should be salary capped as well in the event of a bailout. However, the unions need to look at their benefit packages as well. If this move by the government is to take place, then the workers need to take a hit as well. Sad, but true.
I’m not that familiar with GM finances but it wasn’t long ago that GM owned a chunk of Seattle downtown and they still are a major player in mortgages (they own 49% of GMAC).
If you own 49% of a big mortgage outfit today you are in financial pain no matter how good the
cars are.
GM has been called an investment/retirement/insurance firm that makes cars on the side and that’s not entirely wrong.
There are a lot of innovative, smart people at GM and I hope they get their chance now that the not-so-innovative have had their go.
“Ecocide?”
Erica, it is “Washington state” not “Washington State” unless you are writing for an old gray lady. Please make a note of it.
The unions are one third of the problem. The biggest downfall of them is they limit the ability to adjust rapidly. refer back the post golob made where I posted.
The GM problems start at the top and work their way down. compensation is a red herring. Capping executive compensation wont make companies more financially healthy and wont improve the future outlook of these companies. any attempt to do so is based on emotional distress, not rational thought.
Oh, stop with the union thing.
It’s really just a fake side issue to try to avoid talking about health care in America.
Want to solve GM’s problems? Instead of bailing them out with cash they’ll just spend on current and former CEOs and execs and on dividends, PREPAY for all the NEW CARS and TRUCKS – high-mpg ones or plug-in hybrids – that we need for the US government including military.
Then you create jobs, force them to retool, give them volume so the price to manufacture drops, and the money goes back into the economy.
Damned Socialist Republicans and their Socialist Bailout lies …
The average worker for GM makes about $75. an hour in total compensation. For that kind of money, you would think the GM worker would make the best cars in the world. But they don’t – they make some of the worst cars in the world. Why should I, a middle class worker earning a fraction of what the GM workers make, give them one dime of my tax money? They can go f*** themselves.
Here’s what they should do: let GM go bankrupt. Then, the government can assume the pensions, health care, and unemployment liabilities toward GM’s employees and retirees in full (remember: Michigan is broke). In exchange, the entire board and CEO and CFO resign, and the shareholders loose all their money, and the government gets an equity stake instead. Then, in bankruptcy, the company can be released from its oppressive union contracts and try to innovative or compete to save itself. If it fails, it fails–but the retirement, health, and unemployment benefits are still covered.
The predictions of 2-3 million unemployed are exaggerated, incidentally: those predictions come from GM itself or its lackeys.
Yeah, GM is trying to extort 25 billion from by using the 2-3 million unemployed figure.
Bailo, you’re a fucking idiot. Where do you think hydrogen comes from? Currently, and for the foreseeable future, hydrogen, like corn-based ethanol or biodiesel, is a net negative on hydrocarbon fuel use.
The problem with this “50 MPG” condition is that, if it is not applied to the other car companies, GM will die just as fast as they would without a bailout. Everyone will just buy 30 MPG Toyotas, like they already do, only more so. A 50 MPG car is a niche product, even in the places that have them now.
The long-term problem with GM is not the unions. That’s causing cash-flow problems that are making it difficult to finance corporate change, but it didn’t cause the problems that got them into this bind. That problem is purely corporate: GM designs shitty cars, period. And not just shitty, but shittily aligned with the market. This is not unique to GM; there is essentially NOTHING that a Ford or Chrysler offers either that Hyundai doesn’t do better and cheaper. American cars are suffering from an intellectual failure, which has led to a failure of branding. It’s almost impossible to imagine what could possibly make an American car cool again. Cadillac did it, but that’s the wrong direction: huge gas guzzlers. The trucks did it to some extent, but that’s also the wrong direction.
CrazyCatGuy:
GM does some things about cars very very well…
and some not so well and some, well, badly.
With the possible exception of the 4 cylinder aluminum block Vega they have never made the worst cars in the world. (remaining Vega owners: joke).
GM transmissions were (are?) used by Rolls-Royce.
GM engines, for the most part, will take quite a bit of abuse (reference: Mythbusters).
Production line work was (don’t know if it still
is) soul-sapping in a way that makes being a convenience store clerk seem inspiring.
GM is a long long way from the worst in the world although I sometimes thought a few 70’s models were trying mighty hard for that title.
Socialize the auto industry! A compact hybrid in every garage!
@20 – only if they’re plug-in hybrids – cause we need a stable power grid for the added wind and solar power.
@19 – OK, not the worst cars in the world, but the worst cars on the American market.
My experiences driving GM’s are usually rentals, and there have been many. All of them drive like shit, handle like shit, and look like shit. From the response of the automatic transmission (yes, I just accelerated; no, I didn’t want to downshift to 2nd at 65mph), to the spongy suspension (yes, I want to change lanes; no, I don’t want to roll over), to that god-awful interior (why does the dashboard look like a giant marshmallow, and why is the windshield 6 feet in front of me?). Even the stereo sucks (I am listening to music in a car and not a giant bathtub, right?)
One time I rented a car and got a Chevy Malibu. It had a sun roof, which would be great, except it was over the back seat. Who the fuck puts a sunroof over the BACK seat? GM, that’s who.
Remember, this is the same company that marketed the Chevy Nova in Mexico without realizing that “No va” means “No go” in Spanish.
It’s a dysfunctional company from top to bottom. If they were a horse, they’d be taken out and shot.
Mahtli69, that “no va” story is an urban legend. Mexicans are no more likely to confuse “Nova” with “no va” than you are to confuse “therapist” with “the rapist”.
A bailout of the auto industry seems a little too “Orren Boyle”-esque for me…
@23 – OK fine, but I was raped by my therapist, so thanks for dredging that up.
Can you imagine what crap cars Honda and Toyota would make if Japanese auto workers had a union?
We need to get old school. Break up GM and sell it off to it’s competitors who are willing to innovate and create cars that meet market demands. Hand the bailout to those same companies as low interest loans with incentives to create and develop more green automobiles and employ more American workers. With GM out of the picture Honda, Toyota, Hyundai will produce more cars to fill the hole, and since most of their cars are built her in the United States that means more jobs for local workers. As nice as the Volt may be it is still a fossil fuel based hybrid when we need a generational leap in automobile technology.
@27, this is of course what I thought of too.
@27 – That would make a better product, but won’t happen (at least, not via a government bailout).
Obama campaigned heavily on energy independence, protecting US jobs, and “American ingenuity”. Using the taxpayers’ dime to outsource the next generation automobile to a foreign company, even if they are employing Americans, wouldn’t go over well.
I wonder how giving money to failed businesses, families who purchased houses they couldn’t afford, and banks whose execs didn’t even pretend to give a damn about the economy speaks to our long term economic success?
You don’t give a dog a bone for destroying your favorite pillow do you?
Give a man a fish you have fed him for today. Teach a man to fish and you have fed him for a lifetime.
Well, great, we have given fish to the banks and automakers with failed business plans (and no reward for the ones that didn’t fail I might add). I can’t wait until next month when GM needs their next fish installment.
Let’s see if we can find some more failed businesses to give handouts to, that way there will be no reason in any business to bother trying to be profitable – just fail and wait for handouts.
A modest and well controlled bailout to save current jobs is fine. But, as a private sector worker without subsidized retiree health care, I’ll be dammed if a DIME of MY TAXES goes toward providing subsidized retiree health care for autoworkers .
Politicians, ARE YOU LISTENING !
Whoever wrote this is an idiot. Once I got to the part where you stated that GM thought global warming was a crock of shit, I could read no further. You are an idiot. GM sucks and so do you (because they cannot adjust their business because of UAW). Global warming is a crock of shit and it only proves that you have no clue what you are talking about. You must work in the public sector, as that is where a majority of the clueless morons exist. Remember – MORONS DO NOT DESERVE A FREE COUNTRY!
I say screw you, I work hard in a factory for $20, shitty pension , I can’t afford RSP’S. Why should I loose my house because my taxes are going up. Just to help the people who have had it good for years. I say fuck them, let someone else have a turn. They can suffer now, I need to keep my money. If I was making 100,000 a year I would be mortgage free and have money in the bank
Maybe U.S. automotive industry blame themselves for all of this neither the ‘world financial crisis’ issue. Detroit should be making better and fuel efficient cars – volvo parts – that people wanted to buy.