Monday, November 24, 2008

Those Pesky Bailouts!

Last week the Big 3 did a rather poor job of presenting their case to Congress. But for the most part Congress looked pretty silly. Especially telling was the leadership in this "whipping" from members of Congress that have a vested interest in the failure of the Big 3, Southern states that have given sweetheart deals to Toyota, Nissan, and others to build plants in their states -- states that discourage unionization. Oregon's lumber industry suffered the same fate 20 years ago. It wasn't the Spotted Owl, it was labor costs.

Mitch Albom, columnist for the Detroit Free Press and author of Tuesday's with Morrie, offered a biting rebuttal to the opponents of help for Detroit. Entitled "If I had the floor at the auto rescue talks." He notes that while Congress and apparently Barack Obama want a plan for "viability" from Detroit, no one's asking the same from AIG and the other banks. Indeed, this morning we wake up to learn that the Government will inject 20 billion into Citibank and guarantee 300 billion in toxic loans. No plan was asked for, as I understand it. No requirement that they change management. But for the Big 3, one of the last bastion's of US owned manufacturers and the heartbeat of Michigan, just tongue lashing.

We're told that they need to have new products and such, but apparently Congress is stuck in the 1980s and even 1990s. The Ford Fusion is coming out as a hybrid that will get 6 miles per gallon more than the Camry hybrid. Are you ready to drive it? The Ford Focus is a pretty nice little car. I drive one and like it. The new ones coming out in 2010 or 2011 are supposed to be really nice. Instead of driving a Prius or a Camry why not a Fusion or an Escape?

Oh, and word is, Ford is in pretty good shape, relatively speaking. They're not intending to tap this "bailout," but since they all share suppliers, if one goes down Ford could be hurt. So, let's be a bit more circumspect. Lets look at the issues and instead of handing the auto industry over to Japan, let's see if we can't do something about what we have here!

Okay, I'm living in Michigan. But I'm not too far from living in California. I understand that the needs of one's region will be in the forefront of one's mind. I remember the fall of the Timber industry in Oregon. It's taken a long time to rebuild the economy. Michigan is working on diversifying as well. But it takes time. So, where's the help?

4 comments:

Michael Westmoreland-White said...

I agreed with Congress in telling the Big 3 to come back with a better plan for the future. The bailout should have strings. But then I was pissed off when Bush and Paulsen gave CitiGroup a no-strings bailout just as they have the rest of the financial sector. There is a bias in favor of saving white collar jobs vs. saving blue collar jobs.

Anonymous said...

The first problem is.. do we need THREE auto manufacturers? Nope. The average amount of cars sold was 18 million, now its 11-12 million.

Think of Toyota.. it has a small, medium, and large car, plus a couple of SUVs. GM has Cadillac, GMC, Pontiac, Chevy, Hummer... and they all have their subset brands.. there is NO WAY the demand is there for these cars. Ford is doing ok b/c its offerings are more limited and its cars are better, as you mentioned.

You can be mad about the bailouts to financials.. but you have to do it. If AIG failed, the ramifications are breath taking. The amount of debt they insured and what would happen if there were defaults would ripple throughout the world. Put another way.. imagine if every transaction involved cash b/c no one could lend. If you woke up and the bank said.. sorry, your credit cards are canceled, your home equity line is closed... most people would be bankrupt. Its literally where we are in the cycle.

Living in the south, I HATE HATE HATE unions. They served their purpose 100 years ago, but today they destroy industries. Are there even successful industries that utilize unions? Should we really be surprised that foreign companies do well without them?

Ps.. Environmentalists came out after the blow up in Oregon and admitted.. the spotted owl wasn't really in danger, but we wanted to emphasize how bad logging is!!

-Chuck

Anonymous said...

Sorry.. one last comment. Please don't let the $25B price tag fool you. This just buys time and does not solve the problem. Some analysts say it will take $200B!! You realize if there are 2M people effected, we could just send them a check for $100K and it would be the exact same. I bet most would take the money!
-Chuck

Pastor Bob Cornwall said...

Chuck,

Remember that Toyota has the Lexus division, which is its luxury division. It also has Scion -- it's youthful division. GM has already dropped Oldsmobile and maybe will drop another. Just a month ago GM was looking at taking over Chrysler, but it would have done no one any good. More likely we'll see a partnership with something like Nissan -- They can't seem to make good trucks and would benefit from Chrysler's trucks and minivans. And Jeep apparently remains a good product.

On Oregon -- the environmentalists weren't the ultimate issue. Most of the mills processed old growth timber -- that was nearly gone. The south has a shorter growing cycle and cheaper wages. Unions can be a problem, but they also have their place. Somewhere there is a balance!