Detroit Wants $14 Billion More
Anyone who thought the last dose of auto bailout money was the last we’d be asked for was kidding himself, and anyone who thinks this $14 billion request will be the last is also kidding himself. The trouble, though, isn’t really the price tag. It’s the conflicting goals of the enterprise. Amidst an enormous recession, there’s a fairly compelling case for spending money on this scale as what amounts to a jobs policy. Standing by and letting the level of unemployment shoot up further would not be helpful to the larger macroeconomic situation. But to really do this right would amount to the management and owners of the companies just admitting defeat, and saying they want the government to keep their assembly lines running as welfare cases. They don’t want to do that for a whole variety of reasons. Instead they want to say that this is part of a plan to save their companies and the “domestic” auto industry. But that means cutbacks:
In return, the two companies also promised to make further drastic cuts to all parts of their operations, in the hope that they can eventually strike a balance between their bloated cost structures and a dismal market for new car sales.
G.M., for example, said it would cut 47,000 more of its 244,000 workers worldwide; close five more plants in North America, leaving it with 33; and cut its lineup of brands in half, to just four: Chevrolet, Cadillac, GMC and Buick.
There’s a business case for big layoffs. GM is hardly the only firm undertaking them. But if spending tens of billions of dollars on a jobs program makes some sense, spending that kind of money to help keep the management and marketing infrastructure of the firms in place as they layoff and furlough their workforce doesn’t. But you sort of need to choose what you’re doing here—are taxpayers creating makework jobs to prevent the rust belt from becoming the new dust bowl, or are we trying to provide assistance to our “national champion” firms and help them compete? If it’s the jobs we care about, we’d probably be better off spending the money giving different jobs to auto workers—spend $14 billion+ on Detroit to Chicago high-speed rail or something (ditches, anything)—which would have the same beneficial employment effect, avoid bailing out shareholders and managers, and help reduce auto industry overcapacity thereby lending a helping hand to Ford and to U.S. production of “Japanese” cars. Otherwise, if every country around the world insists on sinking more and more money not into its nation’s car companies instead of into its people who work for car companies then we’ll have a situation where the whole industry just keeps shrinking and sinking slowly.
45 Responses to “Detroit Wants $14 Billion More”
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February 18th, 2009 at 11:08 am
I don’t know how you can write this post without the word “union” in it.
If you cared about maximizing employment, wouldn’t the best policy be to rip up the union contracts, have GM and Chrysler pay as many employees a market wage as they can profitably keep, and spend the government’s money finding jobs for those who are laid off?
The only reason we are sinking money into car companies is because we insist on subsidizing the UAW’s demands.
February 18th, 2009 at 11:09 am
It seems a mistake to think in terms only of layoffs vs no layoffs. It could make sense to spend 14 billion to prevent 244,000 layoffs rather than just 47,000, while the costs of maintaining even those 47,000 could be prohibitive.
I don’t know any of the economic details, so I don’t know what the actual choices would be. But there do not seem to be an a priori reason why saving those 197,000 jobs could not make sense while the additional 47,000 would be too costly or make no long term sense.
February 18th, 2009 at 11:11 am
While I broadly agrew with Matthew, the current economic situation is so bad that our choice is not between good policy and bad but rather between bad and catastrophic. A crash is inevitable; so we should steer for a soft crash from which we can walk away rather than a hard crash that would cripple us for life. Japan of the 1990’s is not something we should feer, but rather something we should hope for.
The auto executives and shareholders are not going to prosper very much for very long because – let me speak plainly – the dreaded “class warfare” is coming their way; so they will be taxed accordingly – if not this way, then that.
February 18th, 2009 at 11:14 am
I agree. Create jobs doing the work America needs done. That does not include making more cars; we already have enough of those.
February 18th, 2009 at 11:22 am
The big reason GM’s having problems is their retiree burden. It might make sense for the bailout to include taking over retiree health care.
February 18th, 2009 at 11:26 am
” If it’s the jobs we care about, we’d probably be better off spending the money giving different jobs to auto workers—spend $14 billion+ on Detroit to Chicago high-speed rail or something (ditches, anything) … and help reduce auto industry overcapacity … Otherwise, if every country around the world insists on sinking more and more money not into its nation’s car companies”
Of course. What we really need is to cripple the American auto industry and get all of our autos from foreign companies both during the downturn, and after the downturn is over.
What a lying wanker Matthew is about the domestic auto industry.
After all, you don’t need domestic export industries to exist if you get all your money from your trust-fund…
February 18th, 2009 at 11:26 am
Will any of the European American (white) autoplant workers get any of the money?
Obama / Reich already said they don’t want much of the construction money going to whites.
———-
Why was Judd Gregg prohibited from being Obama’s Sec. of Commerce?
Black and Hispanic lobbies: “no white people should be in charge of 2010 census.”
Obama’s Economic Stimulus plan for Construction: “No money should go to white males”
See YouTube video: “Explosive Video Reich” “No White Male Construction Workers”
——–Digital Tech——–
OBAMA’S DECLARATION OF WAR AGAINST EUROPEAN AMERICANS
Obama at one time or another has supported:
(A) Reparations. Redistributing money from European Americans (whites) to blacks, mestizos, and Asians.
(B) Criminalizing white parents who refuse to let their children practice miscegenation.
(C) Using “hate crime” laws to silence any criticism from European Americans.
(D) Using Third World immigration to overwhelm European American majorities.
(E) Maintaining anti-white affirmative action programs
(F) Creating a mandatory “America Serves” community-service program to indoctrinate and deracinate young European Americans
——
From sociobiology email list: “Children of mixed, white-black, marriages identify 99% of the time as black and detest European Americans (whites). Why? They almost always look black (eye color, hair texture, nose shape, lips, skin color, etc.). Obama wrote: “I found a solace in nursing a pervasive sense of grievance and animosity against my mother’s white race.””
,
———————————-
Meaning of White Trash
Re: etymology of white trash, word history of phrase “white trash,” dictionary white trash, thesaurus white trash, meaning of white trash
Greenberg: The phrase “white trash” originally meant a white person who procreated with a non-white person, but it recently has taken on a wider meaning.
The poet T.S. Eliot also considered “white trash” to be a white person who fornicated with a non-white.
——————————–
FAMOUS QUOTES
“We remain a hunted people. Now you think you have a destiny to fulfill in the land that historically has been ours for forty thousand years. And we’re a new Mestizo nation.”
“Our devil has pale skin and blue eyes…”
“We have got to eliminate the gringo, and what I mean by that is if the worst comes to the worst, we have got to kill him.”
– Professor Jose Angel Gutierrez, founder of La Raza
“Around the year 2040, whites will become a minority in the United States and, believe me, it will be ‘payback time’.”
- Pro-Immigration Activist, Jorge Sanchez
“And the one idea is, how we are going to exterminate white people because that in my estimation is the only conclusion I have come to. We have to exterminate white people off the face of the planet to solve this problem.”
- African Studies professor, Dr. Kamau Kambon
“Blond hair and blue eyes are a biological defect.”
“The white race is a disease, and the only cure is a bullet. The rule of whites is history. Soon they will be our serfs. It’s now the Age of the Brown Man.”
- Hindu nationalist, Ramesh Sharma
“I found a solace in nursing a pervasive sense of grievance and animosity against my mother’s white race.”
- Barack Hussein Obama
“Al-Qaida is not merely for the benefit of Muslims. That’s why I want blacks in America, people of color, American Indians, Hispanics, and all the weak and oppressed in North and South America, in Africa and Asia, and all over the world.”
- Al-Zawahri
“The goal of abolishing the white race is on its face so desirable that some may find it hard to believe that it could incur any opposition other than from committed white supremacists. Make no mistake about it we intend to keep bashing the dead white males, and the live ones, and the females too, until the social construct known as ‘the white race’ is destroyed–not ‘deconstructed’ but destroyed.”
- Jewish studies professor, Dr Noel Ignatiev
———-
February 18th, 2009 at 11:28 am
Japan of the 1990’s is not something we should feer, but rather something we should hope for.
No hope. Japan survived, if you want to call it that, via exports. Not available to us. See Krugman’s blog today.
No hope, since we have a Reagan in the WH rather than a FDR.
the dreaded “class warfare” is coming their way
I don’t know. There are probabilities worse than violent revolution.
February 18th, 2009 at 11:31 am
GM and Ford (Chrysler is finished IMHO) carry too much debt on their balance sheets to be viable, and unless creditors agree to write down most of it these companies have no future. But they won’t do that as long as D.C. keeps supplying bailout $$$$.
February 18th, 2009 at 11:33 am
Private equity firms borrow money from the public to leverage-up companies, gut them to pay off the debt and then sell off what remains at a profit. The result – less productive capacity in the US and huge rewards for those responsible.
Auto execs may have made big mistakes but the companies at least provide real jobs and are needed to maintain an industrial base in this country.
February 18th, 2009 at 11:45 am
Amy:
That’s a nice set of unsourced, bullshit quotes you’ve got there.
February 18th, 2009 at 11:47 am
Hey Petey,
Just out of curiosity, what is your class background?
February 18th, 2009 at 11:50 am
If you cared about maximizing employment, wouldn’t the best policy be to rip up the union contracts, have GM and Chrysler pay as many employees a market wage as they can profitably keep, and spend the government’s money finding jobs for those who are laid off?
It’s the tone of this post that scares me the most. UAW demands? What demands, that their workers are paid a living wage? That GM follow a contract they agreed to? Auto assembly is not a very good job. It doesn’t pay well. It just pays better than Walmart. Now, there is an argument that during a depression, allowing wages to slide and keep employment up helps avoid a deflationary spiral. But keep in mind that the real problem worldwide right now is a lack of demand. Not supply. Demand. Squeezing workers harder and harder year after year as a national policy is the supply side way. But when you don’t have any way for workers to buy goods than by over leveraging themselves on asset bubbles, you are asking for disaster. Maybe it’s time for the UAW to take a hit, but the long term future of our economy depends on our ability to find a model that pays a larger percentage of our income to middle class workers.
February 18th, 2009 at 11:53 am
are taxpayers creating makework jobs to prevent the rust belt from becoming the new dust bowl, or are we trying to provide assistance to our “national champion” firms and help them compete?
Yes. ‘You have to choose!’ Why? ‘Those firms suck, the Japanese are fabulous!’ Because they get de facto government existence. ‘Now what?’
Start horsetrading. Catapillar, Bobcat and IH are all in trouble too. So we pick up GM and Chrysler (just like we should do with the banks), and use those assets to trade off with the Europeans and the Japanese. I want the Toyota’s large truck division (they ain’t usin’ it), and their electrical vehicle patents, and say North America Nissan midget truck division, plus (maybe) their north American arms. I want rights to previous designs. I’ll bail them out. Meanwhile I want Bobcat and Catapillar and IH (which was bought by the Dutch, so the Dutch can the europeans bits). We give up GM Belgium plus Opel plus Volvo and whatnot.
Then we take the mess and make three or four (much smaller) IC engine companies (cars, trucks, rolling stock, construction equipment). The target goal is to able to have an actual manufacturing industry capable of producing all those goddamn electic cars we need. That’s what the right hand is doing. (And that’s what you dedicate the overcapacity to making instead of gas cars.)
The left hand needs to rebuild Michigan and Ohio. Since it’s dumb to make houses out of trees, that gives us an opening to build a domestic manufactured housing industry, one that makes modular parts for building regular houses, but out of metal and foamed glass. (No, not trailers.) All those factories in Michigan may not be useful for making cars, but they should be fine for making other stuff.
spend $14 billion+ on Detroit to Chicago high-speed rail or something (ditches, anything)—which would have the same beneficial employment effect, avoid bailing out shareholders and managers, and help reduce auto industry overcapacity thereby lending a helping hand to Ford and to U.S. production of “Japanese” cars.
The short-term goal is to avoid mass unemployment. But if we’re going to do that, and justify all that Keynesian stuff, we also have to have a long-term goal of running this country for a profit. Instead of running it like an aging firm where upper management (that’s the DC people, in case that’s not clear) has busy looting the firm for cash. I mean, we could take the entire country into bankruptcy and dissolution, but that seems like it will have upleasant results.
I would also point out, that the US, starting pretty much from scratch (and with some help from European refugees) created the atom bomb in three years. If you (and I and we) can’t do the equivalent for manufacturing, it’s because you ain’t tryin’ hard enough.
max
['Follow it through: if the Depression was ended by WWII, and we don't want to have a big war, what does that imply?']
February 18th, 2009 at 11:54 am
Matthew,
I appreciate your comment that a works program create productive work. The cliche make-work job of moving rocks from one pile to another does nothing to improve our national economy. Too many people out there do not consider the output of jobs when proposing to make jobs–it’s as if the sheer existence of a job opportunity is enough.
February 18th, 2009 at 12:23 pm
Filed Under:
Matt doesn’t like icky cars and the proles that make them.
February 18th, 2009 at 12:35 pm
To “Right”: Better to pay money to people who are working and then who will turn around and spent it rather than paying it to banks who will sit on the funds to cover their bad bets. To put it another way: Unionism-the concept that people are not disposable parts.
On the other hand, while I think we need a form of Chrysler and GM around, if only so that the investment in their hardware can be repaired, I no longer believe that it’s justifiable policy to help them avoid Chapter 11. Particularly if we’re going to pretty much wind up with firms that look like they’ve gone through Chapter 11, only with the idiots who couldn’t manage their own firms still being in charge.
February 18th, 2009 at 12:38 pm
Neither. Those are the two contradictory, equally bogus rationales that GM executives are giving for their requested handouts. But the money won’t accomplish either “goal.”
It’s often misleading to divide some Federal expenditure by some lowball estimate of the number of jobs created and say it cost $250,000 per job, or whatever. But in this case, it really would be better and cheaper to just fortify the safety net, let GM lay off as many people as it has to, and spend the $14 billion on unemployment compensation.
February 18th, 2009 at 4:38 pm
I think DTM has it pretty much right. Matt was among the first to correctly laud “automatic stabilizers” like state government employees or beneficiaries. Likewise, the auto industry is out of borrowing options during an insane time in the financial sector (which isn’t their fault) and there just isn’t a quick way to replace what Detroit means to the manufacturing sector.
Look, nothing we’re doing right now feels very nice. There’s going to be a lot of people that screwed up and don’t deserve the help they will get. But you know what? In the same way that we shouldn’t cut off our nose to spite our face in the name of cutting anything pork-ish in our national stimulus, we also shouldn’t go apeshit when the evil, gasoline-guzzlin’ men in Michigan get more than they deserve. Just hold your nose for a little while, please.
February 18th, 2009 at 4:59 pm
DTM, your comments on this blog have been a useful counterweight to Matt’s on auto industry issues, but in this case it seems to me you’re just taking for granted that the short-term benefit of more jobs per dollar exceeds the long-term costs of, among other things keeping global car supply overinflated.
February 18th, 2009 at 5:28 pm
help reduce auto industry overcapacity
Why won’t Matt read?
I’ve seen this piece linked 2 or 3 places today. People who know what the hell they’re talking about are saying that, even if people own 10% fewer cars per household next year, auto sales are almost certain to go up 40% in 2010, due to the rather obvious fact that cars don’t last forever, and need to be replaced at some point (and the average age is already the highest ever recorded).
But no, clearly we have permanent overcapacity that will never, ever change, because future conditions will be identical to current conditions.
Gas is still $4/gal., isn’t it?
February 18th, 2009 at 6:03 pm
There is auto industry overcapacity, at least amongst the domestic automakers. They need to cut down to 2-3 brands, not 4 (Buick should go bye-bye, I’m not convinced you need GMC and Chevy). They need to cut the number of dealerships in the U.S. by about 2/3 of the present total.
February 18th, 2009 at 7:25 pm
I agree with this post. The government should spend money on things that would actually benefit real people. America (and the world) doesn’t need a propped-up, rotting GM. Yes, the government should spend money to put laid-off autoworkers to work on modernizing the nation’s energy grid, or on building new roads (less traffic means less gasoline burned while engines idle). If there are things the government can spend money on that would ALSO happen to be honestly beneficial, yes! Shoveling taxpayer dollars to GM is a luxury we can’t affford. May as well pour the money into Iraq. Bush thought he had enough money to fix Iraq. I hope Obama doesn’t think he has enough money to fix GM.
February 18th, 2009 at 8:04 pm
If they promise to introduce five models of production plug-in hybrids each, at different sizes including sub-compact and SUV, and promise to not fight card check and accept the executive salary caps, then why not? But I would prefer new management.
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