Why Washington Wants to Save Wall St. and Sink Detroit
Mark Gimein has a good piece on The Big Money trying to limn the ideological framework that has aligned against Detroit. He makes the excellent point that the banks are more responsible for their woes but get less abuse because law makers have no real idea what the bankers ought to be doing going forward. Instead, everyone has an ideological hobby horse to ride with Detroit whether you’re anti-union or pro-eco.
One difference between Citi and GM and Ford is that when it comes to Citi, we all know what they did wrong yesterday, but hardly anyone in politics assumes that they know exactly how to run their business tomorrow. With the automakers, everybody does.
The irony is that while the automakers have long been the sick men of the American economy, they are much, much less responsible for their most recent cascade of troubles than Citi and other banks are for theirs. It’s hard to hold them responsible for oil prices shooting up to $140 a barrel—and now that they’ve fallen back down to $50, the idea that, “well, of course gas will cost a fortune because we’re running out of oil” no longer seems so compelling. Consider that since last year, GM’s sales have plummeted 41 percent, and Ford’s 31 percent. But guess what? Toyota is down 34 percent, too—and it’s got nothing to do with making gas guzzlers or ignoring hybrids.
Source:
Micromanaging Detroit
Why Banks Get Bailouts and automakers get stern lectures
MARK GIMEIN
The Big Money, December 5, 2008
December 7th, 2008 at 10:08 am
All auto manufacturers, U.S. or foreign, have to deal with the economy slump that has hit them. But the U.S. manufacturers were already in bad shape when it hit, because of bad decisions to focus on gas guzzlers. The foreign manufacturers had already built a strategy that recognized energy was always going to be a problem, no matter the ups and downs it might take over the years. I guess I missed seeing the foreign manufacturers at the committee table asking for a handout; they don’t have to. They can weather the economic problems and the price of oil/gas because they are better positioned. The oil & gas prices will rise again. “well, of course gas will cost a fortune because we’re running out of oil” no longer seems so compelling.” If that is what this country believes in and bases their strategies on, we will be right back in the soup when the rise reappears. The Bush “energy policy”, has made sure we are always at the mercy of oil/gas prices and Middle East suppliers.
December 7th, 2008 at 10:26 am
I know everyone else sees the irony here as I do…For the last few decades Detroit has played it “safe” keeping much manufacturing here in the USA and offshoring to Mexico and other low cost labor sites when they could…is that what Japan and Korea have done? Decidely not…they moved plants to the highest cost labor site in the world, the US, and have beaten the big 3 at their own game here in the USA..
How many factories does Detroit have in the second largest economy in the world? The Japanese decided they would do whatever it took, even if we were headed down the protectionist road, and moved factories here…
Sort of like playground football…we’ll play with your ball and your rules and still beat you….
AND they have.
December 7th, 2008 at 11:32 am
The quotes above don’t make a very compelling case. Frankly it sounds a bit simplistic and a bit somebody (don’t know who) serving.
There’s a much easier ideological case to make: they don’t care about detroit because the people that own washington are the investment bankers. Oh, wait, in fact in many cases, they are the same people.
Another easy case to make is that the big business establishment has come to believe that they are what matters in the world, not workers — hence the framing of the above quotes. Indeed the Republican party has never made much of a secret of the fact that they regard ‘helping workers’ as a sin. What’s funny is the (likely) republican voting management at the car companies (and through out the economy) who thought that ‘not helping workers’ translated to helping them. Tee Hee, actually the real Republican platform has always been a con game of luring in fools in support of the interests of an extravagantly small minority– the real insiders.
December 7th, 2008 at 11:40 am
Our Wal*Mart Supersized with more than a 50% sales tax reinvestment to construct the plot.
It not my job to investigate why the foreign manufactures are winning this game. Maybe its advertising. Maybe its legacy costs. Maybe its a wealthy paper pusher class buying thier kickback books.
I’m one of those that is feeling the American game play is not Christian based but Ballfield based. That is a VERY dangerous thought coming.
I’m starting to come around to that thought pattern of buy buy buy on credit, use the system to the maxout then file for bankruptcy to jump a couple steps forward … hanging onto what is allowed. It seems to be the game play that is sanctioned … because in actuallity it forces Jubilee.
How can a small startup compete with embedded superpowers. Compete? Hell – starting up is a boost to the superpowers. It is beginning to seem the only logical play is signup at a superpower.
Round and round.
Because in actuallity it forces Jubilee.
Why not a new system in the 21st Century. We’re not pig and sheep herders anymore.
December 7th, 2008 at 11:43 am
In general i f one is going to look at why washington does something, looking at nebulous notions like competence, or ‘ideology’ guarantess a continued inability to understand why the government does what it does. There are three reasons why people in washington do what they do: self-interest, self-interest, and self-interest.
If one’s claim to analyzing washington doesn’t involve likely voting results, or payments from lobbyists one hasn’t dealt with any self-interest issues. Very, very few in congress vote based on any notion of ideology. Actually another one of the most hilarious things about the recent Republican rise is their sudden invocation of the term ‘ideology’. Their only ideology is winning power — economic first, political second — but somehow they never quite mention that ideology. All their other ‘ideological’ positions are con-games for rubes designed to further their real goals.
December 7th, 2008 at 12:02 pm
I woke up watching Cspan yesterday following a replay of the House of Rep AutoBailout hearing – and it went into the call in show from Ds Rs and Is. A laidoff construction worker called in and told a story of 2 houses across the street with 12 and 10 boarders in them. They are working on some project in SCarolina.
I wanted to add an additional factoid (tough to get thru – gave up trying long ago – needs a liveblog / maybe there is)…
from the Systems point of view (in short terms) the neighborhood has 2 more houses rented out, but a long standing contributor to the community is being strained. I’ll bet they are transported via company van. They probably are shipping 2/3rd paycheck to Mexico. No children in the schools (a plus ie not driving up class size). The list goes on – both pos and neg depending on point of view.
I have also seen this on some construction projects being built. Abroad workers staying in motel rooms. Another kickback for cross related mega corporations directly or thru stock markets.
I’m afraid of this game the kids are learning to play.
December 7th, 2008 at 12:09 pm
Is it my job – I think not – but are not the Hummers being used in Iraq built by GM? Were we not told to buy them (along with other SUVs) for a tax credit?
This country (world) is so disfunctional via this game of catch ya cash.
December 7th, 2008 at 1:37 pm
All the auto companies, both oreign and domestic make large ga s guzzling SUVs because that is where the money is. Nobody makes money on cars.
The foreign auto companies do not have to go to the US for money because their own governments will take care of them. The Japanese government has been manipulating its currency for years. Try to ship cars into Japan or Korea or China. Free trade? What a joke. It’s more like structured destruction of US jobs.
December 7th, 2008 at 1:51 pm
Congress loves to pick on CEOs, especially when they come-a-begging. But when the Treasury Secretary asks citing a potential collapse of the ENTIRE economy, it is harder to play politics, although the Republicans did try a little, with rather serious consequences in the equity market.
The not-so-big-anymore 3 will be bailed out, I believe. Although eventually allowing one (Chrysler?) to be sacrificed is still a definite possibility in my mind.
December 7th, 2008 at 1:55 pm
The car manufacturers were forced to go before Congress to plead their case. None of the banks have been forced to run that gauntlet of public disclosure, though it’s inarguable that they’re far more responsible–and far more expensive to save–than Detroit. Citibank wouldn’t have gotten a nickel had they sat in front of the cameras crying for money…or at least they wouldn’t have gotten anything before their shareholders and bond holders were wiped out.
It’s unsettling to read and hear the reflexive hostility that many Americans have towards workers who are doing well. It’s strange when you think about it. If we only had more workers who were ‘overpaid’, and bankers who are ‘underpaid’, I suspect we would be looking at an entirely different landscape right now.
December 7th, 2008 at 2:17 pm
Personally, if I were employed in a Toyota factory in Mississippi I would be calling my Senators and Reps urging them to vote for the auto bailouts. Because if the big three disappear, and Toyota doesn’t have the UAW luking in the background, the wages and benefits of every auto plant in the US will drop.
December 7th, 2008 at 2:51 pm
I said this on a different thread but I’ll say it again. The SUV thing is a red herring. The big 3 are down because they made poor quality cars. The Japanese made more reliable cars that sold for higher prices.
The big 3 either didn’t have what it took to make good cars or they didn’t recognize how important quality and reliability were to buyers. I think a combination of both. It’s really a lack of leadership and vision. I think if Apple made cars it would have looked quite different.
It’s not clear though why the banks have come first, here are two guesses:
1. Higher perceived impact of letting them fail.
2. More connected to the politicians.
Japanese companies are building cars in the US to get around US trade barriers so it’s not exactly like it was free trade in the first place. You can’t put barriers up and then cry foul when the other side figures out a way around them…
Bottom line is I think the big 3 have to be bailed out but a price needs to be extracted for that. If they can’t change course after government help they should be left to fall.
December 8th, 2008 at 9:25 am
There are smart guys on both sides of the aisle that believe that Wall Street received a loan that will be paid back, while the Big 3 have no hope of paying back any loan. That’s what is causing the foot dragging in regard to the Big 3 while WS has been showered with fresh capital.