Friday, December 5, 2008
Detroit-friendly Democrats to buck public opinion
ANALYSIS/OPINION:
The heads of America's Big Three automakers - General Motors Corp., Ford Motor Co. and Chrysler LLC - descended on Washington on Thursday in a convoy of hybrid and flex-fuel vehicles seeking $34 billion in loans to save the floundering U.S. auto industry. They look certain to get the bailout, but U.S. public opinion, even in the Midwest heartland where the industry is based, remains surprisingly lukewarm, even hostile.
The top GM, Ford and Chrysler executives made their case to the Senate Banking, Housing and Urban Affairs Committee on Thursday and face the House Financial Services Committee on Friday.
Earlier in the week, the auto companies submitted their loan paperwork, outlining the changes they would make if they get the $34 billion. They also warned of dire consequences if they don't, such as the loss of millions of U.S. jobs in the industry and its support businesses. To show they were serious, the top executives from the three companies in the delegation cut their multimillion-dollar salaries to $1 a year and promised to dispose of their corporate jets. The United Auto Workers union also offered help in modifying its contract.
The Big Three announced plans for restructuring as U.S. auto sales hit a 25-year low. GM has warned that "there is no Plan B" if it doesn't receive $4 billion in loans this month and about $14 billion in 2009. Ford asked for $9 billion and Chrysler $7 billion. A couple of weeks ago, they said they needed about $25 billion. Apparently, "about" is $13 billion.
Some of the plans, such as executive pay cuts, are superficial, and some, such as the move to higher efficiency vehicles, were in the works anyway. Others, such as GM's suggestion that it may dump Hummer and Saab, are game-changing.
Working against the automakers are polls - if the lame-duck session of the 110th Congress pays attention to polls right after elections have just been held. A CNN/Opinion Research poll released Wednesday indicates that 61 percent of Americans said they don't want to buy out the car companies, especially as foreign-owned companies with plants in the U.S. aren't having the same depth of problems.
On the other hand, working for the automakers is the Democratic congressional leadership. Democrats traditionally support the auto and shipbuilding industries just as Republicans favor aerospace and high technology.
The Republican case against the bailout is exceptionally weak because the Democrat-led 110th Congress was stampeded just a couple of months ago into authorizing a $700 billion bailout of the Wall Street financial sector and then bungled its implementation. Also, President-elect Barack Obama has made clear that he wants the Detroit Big Three to join the cost of hybrids, alternative energy, electric power and more miles per gallon technology.
House Speaker Nancy Pelosi, California Democrat, feels the same way. Mrs. Pelosi, a San Francisco environmentalist, won a crucial political victory when she forced Rep. John D. Dingell, Michigan Democrat, the longest serving member of the House, out of his chairmanship of the powerful Energy and Commerce Committee and replaced him with Rep. Henry A. Waxman, California Democrat. When that happened, the Detroit Big Three and the UAW lost their most powerful patron and protector of the old ways of producing gas-guzzling sport utility vehicles and business as usual.
GM Chief Executive Officer G. Richard Wagoner Jr. and his Big Three colleagues have rejected the bankruptcy option with horror. However, some economists disagree.
Martin Feldstein told CNBC on Nov. 19, "There's this myth out there that if they go into bankruptcy millions of people will lose jobs. That's not what happens when you have Chapter 11 bankruptcy. The business continues, and the government could provide lending to get them over the hump while they are reorganizing. But the key thing is to become more competitive by getting wages in the current unionized auto companies in line with other automakers in the United States."
Mr. Feldstein, it must be said, was an adviser to defeated Republican presidential nominee Sen. John McCain of Arizona, and the Wall Street tsunami also swept away the credibility of traditional Republican free-market arguments in Washington.
The triumphant Democrats have no intention of starting their new era by allowing the most venerable and revered of great American industries to collapse, but the new generation of Democrats isn't going to let Detroit thumb its nose at the world anymore either.
Mr. Obama and Mrs. Pelosi are not trying to end an era of triumphant success by the executives of America's great automakers. They are insisting on an end to generations of failure, shortsighted greed and catastrophic decision-making.
Change - big, lasting, sweeping and irreversible change - has finally come to America's auto industry. Count on it.