Start Making Sense
There’s been so much talk about Detroit–some of it smart, some of it less than smart–that you would think there was nothing more to say on the matter. After all, we seem to be drifting toward a general agreement that bankruptcy is better than a bailout for Detroit. Though some of the reflexive piling on misses the point that the auto makers have done a lot of restructuring already; and made the cars we demanded.
With that in mind, Steve Pearlstein’s Washington Post story on Obama and Detroit is a salve to our increasingly deflation-jangled nerves. Pearlstein starts with a claim that Obama has already settled on a post partisan plan that neatly splits the baby. (He thinks we’ll hear it just after Thanksgiving and it’ll swap free trade with Colombia as part of the deal.)
Then he rattles off his vision of a government-backed, pre-packaged bankruptcy. Any can do that. Where Pearlstein shines is paying attention to the demand side of the equation:
Congress could also authorize the General Services Administration to negotiate an advance order, with a big down payment, for millions of new fuel-efficient cars and trucks to be delivered over the next decade as the government’s fleet needs replacing. Such an order could not only prod the companies in the direction of more fuel-efficient cars, but also help to finance the research and development necessary to achieve breakthroughs in battery and other technologies. Another $25 billion in loans has been authorized to retool factories to produce the new vehicles.
And to restore the flow of liquidity to the auto finance market, the Treasury could be ordered to use some of the next tranche of money under the $700 billion bailout program to buy packages of auto loans, with an emphasis on loans made after Dec. 1, 2008.
Such a multipronged rescue might require the outlay of a bit more than $25 billion, but it would significantly increase the likelihood that taxpayer money would be repaid. The government could get a nice discount on a new fleet of fuel-efficient cars and trucks. Most importantly, a vital industry would be required to complete a restructuring that was too long delayed.
With the way things are going, Washington will be continue to be the center of capitalism for some time to come. So we should all start bookmarking Pearlstein as a first read of the day.
A Voice of Reason Puts Automakers on the Road to Rescue
STEVEN PEARLSTEIN
November 18, 2008, The Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/18/AR2008111803510.html
November 19th, 2008 at 9:30 pm
The last half hour saw a debate on CNBC with Jane Wells out in Cali at the auto show. Heated.
How come GM isn’t showing any green cars and Ford has 6 models? How in bed (you scratch my back I scratch yours) has it been between Detroit and Oil?
Is all this posturing just a show to delete promises to workers on health and pensions?
I’m wondering what TIF agreements the south offered the foreign auto manufactures to build factories, and provide jobs? Is this mortgage mess a play to return the money?
Heres a line, after Detroit falls, there’ll be a scrappers heaven to ship the steel to China. Then the lawyers can write some TIF agreements for a fresh start.
What is the standard of living wage we need to set in this country? Are the taxpayers going to provide college for the kids – or mom and dad with good paying jobs?
I wonder when the line “whats good for GM is good for America” came out … what was the standard of living paycheck vs. the standard of living bills for the month?
November 19th, 2008 at 10:25 pm
Ford unlike GM has over the last 5+ years been putting a lot of effort into europe, and has come out with some great cars recently like the Focus(not the version in the USA, I suspect that even Ford don’t know why there are 2 versions) and Mondeo. Having people that have been focused on selling cars in a environment where fuel prices are high and your competitors are the likes of BMW and Merc can only be a good thing.
November 20th, 2008 at 12:51 am
Pearlstein and I are on the same page on this (I thought I was alone with this idea). Start out with targeting the most fuel efficient vehicles they produce today, then escalate the mileage required gradually every year. This also can be used as a global warming offset, so some of the funding could come from other parts of the budget. This is a win-win solution.
That said, I would still force out Nardelli and Wagonner and look at selling each company to someone with competent management, and not necessarily from the auto or manufacturing sector. Hmmm, a Microsoft Taurus or a WalMart Town and Country. Somebody needs to get these guys on track, because even if they have the right cars they have no clue how to price or market them.
November 20th, 2008 at 3:07 am
Watching Charlie Rose right now. Shelby and Franks debating the auto rescue.
Sen Shelby is making a great case for restructuring the health and pension benefits of the bankrupt Corporation of the United States of America’s government employees.