Last month I wrote what I thought would be the last post on bailing out the Detroit Three automakers. I should have known better, especially after last week's election. Once you prime the government trough, it's very hard to turn it off. There's already talk about another "stimulus package" and even, yes, yet another bailout for the Detroit Three. Geesh… I wonder where all that money is going to come from. Oh that's right… the fewer and fewer of us that actually pay taxes.
Obama said Friday he would push Congress
to accelerate the delivery of 25 billion dollars in loan guarantees
aimed at helping automakers develop more fuel efficient vehicles ahead
of upcoming regulation. The Big Three asked for another 25
billion in loan guarantees for more general expenses during a meeting
with top lawmakers in Washington Thursday.
Even NAM, that industry association that has spent most of the past two years criticizing everything even the slightest bit left-leaning, now weighs in on Obama's side.
"Automakers need immediate funding to
stay on track during this difficult time," said National Association of
Manufacturers president John Engler. "We're talking about
close to a million jobs in America — we're talking about a lasting
impact on our industrial production in the United States. We simply
cannot afford to let the auto industry fail."
Presumably Engler means "Detroit automakers" as although they're technically eligible, the foreign companies have turned down the handouts. Maybe it's time to take another look at NAM… it's been a while. Will subsidizing pathetic management really save those jobs long term? Probably not. The miscalculations of the Detroit Three have been pretty phenomenal.
back to the last big oil shock, of 1979, which helped the Japanese gain
a foothold for small, fuel-efficient products. As gas lines
faded from memory, the Asian automakers continued to gain ground by
focusing on quality, something GM, Ford and Chrysler have only recently
come to grips with — and with varying degrees of success.
Further compounding the situation, Detroit has been consciously slow to
embrace changes in the American automotive marketplace, especially the
shift from big trucks to small, fuel-efficient passenger cars. And even where it has, lamented Consumer Reports' auto analyst David
Champion, it has needed "more models that were exciting for people to
Our friends in the hollowed ivory towers of Wharton recently provided similar comments.
so, decade and a half, they made a lot of strategic mistakes. You know,
basically, years ago, they had a very favorable industry structure.
Industry forces were positive. They had power over suppliers. They had
power over buyers. Buyers didn't know much about buying cars. They had
size, they had market share. It was an oligopoly — three firms. All of
a sudden, the world changes. Competition comes in. The customer gets
much more knowledgeable, because of the Internet. Suppliers become more
powerful. The UAW had a history with GM of bad relationships. And
that's not carrying over positively right now. And so when you put all
of that in perspective, and given what John Paul also said — that in
fact, you can see some strategic errors, and just inability to manage
their company well.
So why not give them more bucks? A billion here a billion there… apparently it doesn't matter much these days.
Let me get this straight: we have to bribe historically pathetic management to save a bunch of jobs that are supposedly protected by unions, while without any prodding Toyota is spending $35 million a month to save U.S. factory jobs when they don't even have unions breathing down their backs? Yes I know Toyota has an incredible cash position. Isn't that a function of leadership? Which form of leadership do you want to ensure survives long term? Who should really get the bribe?
And wait a minute… doesn't this latest auto bailout sound a lot like supply side economics? From the same Democrats that complained about Reaganomics? Trickle it down, baby! Dump it on top and hope it helps the common folk. I would have thought the Dems would at least focus on pushing on the balloon from the demand side. Funny how politics works.