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Tilting at Windmills

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November 27, 2008

A DIFFERENT KIND OF AUTO BAILOUT.... [Note: this piece prompted some interesting discussion and emails yesterday, so I'm bumping it up for some additional promotion]

Obviously, policy makers have been mulling over what to do, if anything, about the fate of Ford, GM, and Chrysler. The American auto manufacturers are in deep trouble, and determining what kind of rescue package would be most effective has been on the minds of lawmakers, the Bush administration, and the Obama transition team.

But perhaps the political world has been looking at this the wrong way. Jeffrey Leonard, the CEO of Global Environment Fund, has a provocative idea in an online-only piece for the Washington Monthly -- maybe it's car buyers, not car companies, who should get a bailout.

[L]et's get back to basics: what are we trying to accomplish, anyway? Presumably, Washington's primary goals are to save jobs and to jumpstart the economy. Like it or not, getting people to buy cars is one of the most effective ways to get an economy moving. Cars have what economists call a multiplier effect, perhaps the greatest of any product, because every car that's purchased creates a cascade of further stimuli -- not just to those who make the car, but also to those who repair it, fuel it, outfit it, wash it, and so forth.

That's why Washington has a major incentive to use companies like GM, Ford, or Chrysler to help us through the economic crisis. The way to do it is to offer a 50 percent rebate check to every purchaser of a new, American-made car produced by any auto company that signs up for a voluntary restructuring program with the federal government. The rebate would be paid by the Treasury Department, and then exchanged for preferred stock in the company that produced the car.

In essence, this plan would replicate the principles of our banking bailout, in which cash infusions from Uncle Sam into financial institutions have been linked to equity stakes in those institutions. In this case, millions of Americans could get new cars, aiding the economy with every car-related transaction. Detroit could clear out its sizeable unsold inventory and avoid taking on more debt, and Washington could gain a lever with which to change Detroit's behavior. The government could even consider contributing some or all of the stock to the pension and healthcare plans of autoworkers, to help reduce the pressure of these unfunded liabilities on Detroit's bottom line.

Leonard anticipates a heavy price-tag associated with his ambitious proposal, but the costs would be comparable to the $25 billion bailout that the automakers have already put on the table.

Reading the piece, I had a couple of concerns about rewarding a flawed Detroit business model, and adding millions of cars to the road that aren't exactly efficient, environmentally-friendly vehicles. But Leonard anticipated these concerns, and tackles them head-on.

It's a really interesting idea. Take a look.

Steve Benen 10:10 AM Permalink | Trackbacks | Comments (86)

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Comments

This is a great idea. And modern american cars are not that bad in fuel economy when compared to older cars from the 90s. The cars they would be replacing are probably worse environmentally, so its a net gain there.

We get most of the environmental gains from going from 17 to 23. If this ends up raising the fleet mpg by 1, it is probably worth it from a strictly environmental point of view, much less a stimulus point of view.

Posted by: mickslam on November 26, 2008 at 4:49 PM | PERMALINK

Wow. That is a truly terrible idea. Worst public policy propsal since.... ethanol subsidy? Invading Iraq?

The mind boggles. Verily doth it boggle.

Posted by: EconDoofus on November 26, 2008 at 4:56 PM | PERMALINK

Offering a rebate for American label cars but not foreign ones would probably violate our trade agreements in a big way.

Posted by: Measure for Measure on November 26, 2008 at 5:05 PM | PERMALINK

If I have to bail out the auto industry by subsidizing the deep-discount sale of the fields full of surplus SUVs that the Big Three have choking their inventories, then I want the shrunken heads of a dozen auto-industry executives as decorations for my Christmas tree!

Posted by: Steve W. on November 26, 2008 at 5:11 PM | PERMALINK

And modern american cars are not that bad in fuel economy when compared to older cars from the 90s.

I drive a 1991 Honda Civic (my wife has the nice car). I have tracked gas mileage on multiple trips from Seattle to SF Bay Area - I get 40 mpg on highway, on non-mountainous sections when I don't run the AC.

I can't buy non-hybrid car from Honda, much less the Detroit automakers, that beats that.

Posted by: Wapiti on November 26, 2008 at 5:11 PM | PERMALINK

Clearly against WTO rules.

Posted by: David Weman on November 26, 2008 at 5:16 PM | PERMALINK

Offering a rebate for American label cars but not foreign ones would probably violate our trade agreements in a big way.
Posted by: Measure for Measure on November 26, 2008

===

And giving them 25 billion does not violate any trade agreements?

Posted by: SteinL on November 26, 2008 at 5:17 PM | PERMALINK

I'm much closer to E-Doofus here. Aside from the cost -and I think you can go much much less than 50%, we have the issue of oil dependency. All those SUVs on the lots will consume a great deal of the black gold over their lifetimes (approx 15-20 years), we will almost certainly hit peak oil by then. And sure the cars on the lots will eventually be sold, but sell them off too early, and they will build more of the same makes/models. So we gotta use the money to push for a radical increase in fuel economy, and doing that won't make it easier to unload most of the gas guzzlers on the lots.

Posted by: bigTom on November 26, 2008 at 5:19 PM | PERMALINK

And giving them 25 billion does not violate any trade agreements?

It probably does, which is why the WTO is raising a ruckus about the possibility.

Posted by: Mnemosyne on November 26, 2008 at 5:19 PM | PERMALINK

How about subsidizing the scrapping of the SUVs to make more fuel-efficient vehix, which would then fall under such a program less the difference of the cost of said scrappage? And maybe create some jobs in doing so?

I can't read the piece right now, and I don't know if the possibility it describes is right or tenable, but I like the fact that it's looking at ideas back-asswards. Because therein lie universes of possibility.

Posted by: tina on November 26, 2008 at 5:29 PM | PERMALINK

So we take away customers from companies that haven't run themselves into the ground with worthless stock and sub-standard vehicles. Get Americans even further in debt by tricking them into believing they are getting a car for half price. Hey, let's toss in some Countrywide and AIG stock just to make sure the buyer knows how stupid this deal really is.

Posted by: ScottW on November 26, 2008 at 5:29 PM | PERMALINK

I do not care if it violates the trade agreement. It is a good idea and I proposed it a week ago to the Obama transition web site. The real beauty is that the burden of these bailouts ultimately falls on middle class taxpayers and their children and at least they could get a cheap car out of the deal. I added that the government could buy up a ton of the used cars going off lease or whatever and give them away to folks who can't get to jobs because of inadequate public transportation. Again at least we are getting something for a tax dollars--helping poor people earn a living and ultimately contribute to the economy. If the environmentalists are worried about the SUVs exempt them from the rebate/buyback program although that is likely counterproductive to your cause. The price of gasoline is around a $1.60 a gallon and all those folks who were thinking hybreds, getting scooters, car pooling etc are no longer concerned. Another suggestion is to restore the deduction for consumer interest. reagan took it away as part of his assault on the middle class because it is a distinct middle class deductions--the poor don't get a lot of credit and the rich do not use it. Obama promised a middle class tax cut and the beauty of restoring that deduction is that it targets the middle class and stimulates demand for big ticket items like cars where the middle class buys on credit.

Posted by: terry on November 26, 2008 at 5:37 PM | PERMALINK

What the hell has gotten into everybody? We're going through a recession. It's part of the business cycle. We've weathered them before, we'll weather them again. This is the first time in memory, and I go back a long way, that the country has absolutely panicked, and reacted by throwing tens of billions, hundreds of billions, even trillions, at every possible suspect under the sun.

Stop! Take a deep breath. Relax. The sky is not falling in. It's not doomsday. Just because Paulson panicked doesn't mean we have to.

We're going at this as if we have to consume and consume and consume to get the economy going. This is sick. Just plain sick. We need to reform our economy, consume less, invest more in the future. The last thing we need to do is buy a trillion dollars worth of durable goods that we don't need and don't even want just to keep the factories open.

We need to invest in energy, infrastructure, the future.

As for the frozen credit, they must have forgotten me. I'm still getting all the offers. The second credit card company this week just upped my limit. I've received two emails this afternoon, hawking the advantages of refinancing my mortgage, now that interest rates have dropped to 5.5%. Okay, nobody else can borrow a dime. I accept that. I'm the only one in the country that can borrow money. Some kind of Twilight Zone thing. But sooner or later the banks will start lending again to the rest of the people, especially when they realize that that's how they make money. And we can teach them that by NOT bailing them out. Why should they loan money when the tax payers are going crazy giving them free money?

I can't believe what's happening. It's beyond words, beyond comprehension. Paulson has gone berserk.

Posted by: hark on November 26, 2008 at 5:38 PM | PERMALINK

Two months ago I suggested a Trickle Up philosophy to restart the economy with a $5000 check in every adult's hands with an income less than $150k per year.

This is a great idea. Every automaker, domestic and foreign, is asking for help from their governments. As far as the emissions of the SUV's? I'm confident they'll be much lower than those old clunkers out on the streets today that get traded in on them.

Posted by: Howey on November 26, 2008 at 5:44 PM | PERMALINK

Why the fuck would I want a car from Detroit? Isn't that why they can't sell any?

And, Howey gets the SUV angle right.

Posted by: SocraticGadfly on November 26, 2008 at 6:13 PM | PERMALINK

Free markets and all: Why not simply let the Big 3 bleed to death? Eventually people are going to start buying cars again, smaller more economical cars.

They will be labelled Toyota, Honda, Mazda, Ford (EuroFord; Mondeo, Focus ...) etc. Nevertheless those cars will be produced in the US. Jobs will be recreated - at least to some extent. And everyone will be better off that way.

Really, nobody needs gazillions of USG-subsidized F450s roaming free. Scrap them instead.

Posted by: Ole on November 26, 2008 at 6:14 PM | PERMALINK

Oh, Leonard says any American-made car.

Good, gimme 50 percent off a Honda from Marysville, Ohio. Or, if I am allowed to hold off a year or two, an American-made Prius.

Leonard is full of crap otherwise.

The Big Three have KNOWN Peak Oil is coming down the pike; yet, they bought off John Dingell and other hacks to FIGHT CAFE increases.

Posted by: SocraticGadfly on November 26, 2008 at 6:18 PM | PERMALINK

Steve, seriously, are you FORCED to fluff crapola articles like this by Glastris or other top WM brass? This is the worst dreck since Amy whatsherface finally quit writing her "Dems must be a kinder, gentler Religious Right" shinola.

Posted by: SocraticGadfly on November 26, 2008 at 6:27 PM | PERMALINK

Terry, up above? You're a fuckin' idiot.

Instead, let's up the gas tax a buck a gallon, use part of the money to repair our bridges, and use part of the money to start a program similar to hear in Texas (yes, we do a thing or two right here)...

Give the poor cash assistance to buy something newer to replace that oil burner.

Posted by: SocraticGadfly on November 26, 2008 at 6:29 PM | PERMALINK

Finally, beyond the $1 a gallon gas tax increase, Pharyngula has a FAR better idea for the future of the employees:

Retrain them all to build us a national high-speed rail system.

Posted by: SocraticGadfly on November 26, 2008 at 6:36 PM | PERMALINK

Instead, try this: Federally-funded nationwide free van pools, to be implemented by local transit agencies. The WTO explicitly permits the US mass transit program's "Buy America" requirements. Detroit will get orders for a half million vans over the next two years. It will reduce the demand for imported oil, improve the carbon footprint of urban transportation, and significantly reduce traffic congestion and thereby permit the deferral of highway capacity improvements in favor too-long neglected maintenance and repair needs. Price tag $3 billion/yr.

Posted by: SPBayer on November 26, 2008 at 6:38 PM | PERMALINK

You people have REALLY got to stop hyphenating your adverbs. Yeesh.

Posted by: tina on November 26, 2008 at 6:53 PM | PERMALINK

There are already TOO MANY CARS out there. Import cars are piling up on the docks because people don't want or can't buy them. We already have too many fucking cars, houses, shopping centers, EVERYTHING.

When are we going to get over this "endless growth" mentality?

Posted by: Speed on November 26, 2008 at 7:09 PM | PERMALINK

Leaving aside the various other problems, our trade agreements do not let us do this for American companies, but not for foreign-owned carmakers such as Toyota. And if we ignored that duty to treat them equally, we'd have to pay twice or more, paying Toyota etc. the amount of money it lost due to our improper favoritism. So the price would be two or three times higher, with most of the money going to pay damages to foreign carmakers, not to buy cars. And if you don't like that, please figure out how to get us out of WTO etc.

Posted by: Steve on November 26, 2008 at 7:23 PM | PERMALINK

Why do they have to sell/give away all of these obsolete cars, trucks, SUVs? They were OK with destroying the electric car, the EV-1, so why not these? Of course, you would first strip them of all reusable parts and materials for recycling. Part of the problem in this country is our irrational desire to drive alone to and from work or whatever. Have you ever driven by a school in suburbia with the lines of SUVs carrying the dear little ones to their classes? Let them walk or ride bikes. Take the bus or train. As others have said, let the factories be converted to building renewable energy products and retrain the workers to work in them.

Slightly off topic: is it necessary for everyone to have a job to be considered of value to this society? Is there an alternative for people who may not be "designed" to "work" in a "job"? What of the artists and creative types who don't fit into the mainstream of wage earners? People with certain kinds of conditions, whether mental, emotional or physical which preclude them from holding down a job are treated with contempt by many because they do not want to understand. What is to happen to little Trig Palin when he reaches a certain age and, by our standards, is expected to be self-sufficient? If his parents and family are not able to care for him and pay for his support, who will? The Republicans? I don't mean to pick on the Palins, but they are one of the best know examples of a family that, under different circumstances, would be terribly impacted by having to care for another human being who may never be able to care for himself. What is necessary to address the financial and social problems of this planet is a transformation of consciousness. Obama is the closest thing we have to a transformational leader who has the ear of the global leadership. He is not the sole answer, but he has shifted the narrative to one of community activism from up-by-the-bootstraps mentality of the libertarian individualist who thinks in terms of black and white/right and wrong. We are our brothers' and sisters' keepers and it does take a village/community to raise a child. Until we recognize our interdependence, we will continue to struggle with what we now face.

I am committed to Oneness through Justice and Transformation
peace,
st john

Posted by: st john on November 26, 2008 at 7:25 PM | PERMALINK

i'll apologize in advance for not reading all of the post.

but why the f**k would you give out rebates to cars produced by failing car companies who couldn't figure out where the market was going, and therefore penalize those people who bought cars from companies who figured out what cars they really should be making.

what the f**k?

Posted by: just bill on November 26, 2008 at 7:57 PM | PERMALINK

just bill: gently and clearly stated. What would it look like on a resume if these people were applying for a job at Toyota? We saw all the trees in the forest and imagined all the houses we could build with all the wood. There are so many forests and so many houses to build. Don't worry about replanting. We'll never run out of forests; at least not for the next couple of months. Let the taxpayers look for more forests and we'll help them cut them down, if they will buy them up front.
peace,
st john

Posted by: st john on November 26, 2008 at 8:26 PM | PERMALINK

Wouldn't get one of those duds if they paid me, never mind gave me only 50% off. It's not just an issue of the initial price and/or the matter of environmental damage. There's also the *maintenance* cost, which goes beyond the cost of gas itself. Don't people check the Consumer Report before buying expensive items like cars (or home appliances), to look at things like repair records?

Posted by: exlibra on November 26, 2008 at 9:07 PM | PERMALINK

What happens when the rebates end? We've learned from so many industries that if everyone has an incentive to spend their money today, when the incentive ends there's a huge downturn in money spent. This happened with corporate IT spending in 2000... everyone burnt a ton of money on Y2K in 1999, and the industry suffered greatly in 2000 and 2001 (and then there was the bubble burst and 9/11, which extended the spending crunch, but that's another matter). Why hurt winners like Toyota and Honda to prop up losers like Ford and GM? Are people really going to stop buying cars if there's no domestically-owned alternative? I don't think so. Will those cars be made overseas? Seems to me if demand goes up for Hyundais or those small Mercedes, the likelihood of them being made in North America actually increases; many "import" manufacturers already make vehicles here, generating jobs and stimulating the economy and providing the market with what it demands - value.

You can't have capitalism when it's convenient, then prop up some companies when they're not doing well. The rules of capitalism are simple: the market decides, and rewards those who are deserving. Those who aren't efficient or desired or otherwise "winners" in the market will either change or get bought or go out of business. Period. Any safety net for business not practicing "good business" is actually detrimental to the capitalist system and any society based on it.

Now, the financial meltdown is different. The government failed the industry, not the other way around, by failing to regulate and protect the system from those individuals trying to actively subvert the rules for personal gain. These individuals really should have been breaking the law and going to jail, but neither the legislation nor oversight was there to make that happen. In this case, the government's lack of due diligence caused the problem, and the government (aka "the people") have to help fix it or face massive consequences.

If it weren't for the $700B bailout, would we even be thinking of giving yet ANOTHER $25 BILLION to the auto manufacturers?

Posted by: Robby-D on November 26, 2008 at 9:31 PM | PERMALINK

The hostility toward the American car makers is strange since quality of American made cars has steadily improved and is now equal to Toyota. Some models of American made cars, such as the Chevy Cobalt have excellant mileage (38 mpg highway). I can see where there are international trade implications to giving rebates only to GM, Ford and Chysler model. Still if one were to give rebates I think they ought to be targeted at specific models with high mileage.

Posted by: beb on November 26, 2008 at 9:34 PM | PERMALINK
The most effective would be to impose a substantial gas tax. Another would be to tax weight or horsepower, as many countries do.
Amen to that! With or without the suggested 50% rebate.

In regards to the 50% rebate, the devil would be in the details. If you look on the lots now, you can buy some of those already for 10K+ off the listed price.... So... My question is:

Would the 50% come off the MSRP? or from the lowest listed price? If it is the former, then it will never be a 50% discount, and I'm OK with that. It would still be a good deal to buy one at 1/2 the MSRP.

As long as the companies participating are not allowed to replenish the inventory with similar cars.

Of course it would go against what Obama has been suggesting: Do reasonable shopping. Too many people won't resist the good deal and feel they have to buy one of those. Then after a few months of having to fill up the tank and having sticker shock, they'll regret it. It would create a huge second hand market for those cars and trucks. As if we don't already have a huge second hand market for those guzzlers.

Interesting idea, but not very practical.

As I mentioned at the beginning: Higher taxes on gas will do the trick.

Posted by: bruno on November 26, 2008 at 9:35 PM | PERMALINK

How about this:

Rebate for ANY car (American made or not) that gets over 20 mpg city. That should eliminate the worst of the SUV offenders.

Posted by: ArtEclectic on November 26, 2008 at 9:39 PM | PERMALINK

@ anyone who thinks this is a good idea - incl. Terry

It's not.

First - all other cars on the road would instantly depreciate. That might not go down kindly with the owners of same. (I don't care. Saw this coming last year, sold my two cars and now use a car share company, which is excellent. But owners of actual cars might not like a halving of their auto's value, on top of the depreciation they've already suffered. I'm sure the companies holding their car loans will dislike it too.)

Second - Detroit has focuses hard on building useless luxobarges and stradatanks. Gas guzzlers extraordinaire. And building them badly. Due to financial constraints, they have been cutting corners like mad. There's a reason why they are in trouble - people do not want their cars, they do not want their terrible after-sales service, and they would like Detroit to build something else.

Third - so what to do about all those cars in lots everywhere? It's a tragedy, but a self-imposed one, and a deeply irresponsible one. The person in charge of product development at GM, Bob Lutz, has been singlemindedly pursuing an idiotic platform policy (among other things based on his personal conviction that "global warming is a crock of shit!" - a direct quote.)

There is nothing to save there. Sure, people are craving cars, but not these cars. Luxury, oversized vehicles carry luxury oversized repair bills and operating costs, as well as inflated insurance rates.
That's not what the economically disadvantaged need.

A terrible idea, all around.

Posted by: SteinL on November 26, 2008 at 10:53 PM | PERMALINK

Beb --

The Cobalt is so good as an overall car...

It's being replaced by GM with another mode.

Posted by: SocraticGadfly on November 26, 2008 at 11:08 PM | PERMALINK

SteinL – Also, the formerly Big Three have pursued the greenwash will o the wisp called hydrogen cars, even when they knew it's no more "just around the corner" than nuclear fusion.

In fact, as we type, they're STILL investing research money on hydrogen cars. It's about as much BS as flying on private jets.

Posted by: SocraticGadfly on November 26, 2008 at 11:14 PM | PERMALINK

As mentioned above, the devil is in the details.

First, no "percentage off". Just a fixed dollar number.

Second, only for fuel-efficient "reasonable" vehicles. No SUVs, no sports-cars.

Third, only with the trade-in of an older vehicle, age TBD. This gets the older, more polluting, less fuel-efficient vehicles off the road.

Treat it as a "carbon-reduction incentive". That should tie up the WTO long enough that you can tell them to pound sand.

Posted by: Snarki, child of Loki on November 26, 2008 at 11:32 PM | PERMALINK

@SocraticGadfly

The hydrogen "work" performed by GM served two purposes.

1. Trying to puncture Toyota's Prius balloon. GM actually took out ads deriding the Prius, as it would be outmoded by hydrogen powered vehicles from GM.

2. Hydrogen is popular with the present oil companies and owners of gas station chains because it would require a preservation of the existing infrastructure. You just use it to shift hydrogen instead of hydrocarbons.
This is why they fought against Prius and electrification (and why GM killed the EV1). Distributing power through the national grid immediately obviates the need for the hydrocarbon distribution infrastructure.

We're being had.

Posted by: SteinL on November 27, 2008 at 12:55 AM | PERMALINK

Yeah, This kind of solution is far superior to what Paulson is currently doing.

I've been telling people that the government should have been giving the bailout money to the people who have those sub-prime mortgages, and have them pay the money into the mortgage holders.

That way, they kill two birds with one stone.

Like the car deal presented here, the amount would not be the full amount of the mortgage, but only enough to make the mortgage payments affordable to the borrower - in a re-finance deal. That way the borrower gets an affordable mortgage instead of foreclosure, and the lender clears the bad loan off its books AND gets a customer who continues to pay off the mortgage.

Everybody wins. If We the People are paying for this, anyway, why are we leaving the borrowers out, when the fix could include them AND help the lenders at the same time. Why are they only giving out the money to the lenders?

Posted by: SteveGinIL on November 27, 2008 at 2:24 AM | PERMALINK

Obama needs bold ideas to "shock" the economy into action.

How about a 100% prebate check AND pay my pesky insurance?

Posted by: Luther on November 27, 2008 at 2:24 AM | PERMALINK

Instead of getting people to buy cars, why don't they just give the taxpayers a big check and let them buy what they want?

Sorry, the tax-rebate they sent, I didn't apply. I felt insulted at sending 600 to indivuals and 1200 to couples. That 600 won't cover my rent! I felt like they were treating people like crack addicts - "Here, take this, now get out of here." Yes, it may help some people, but seriously, that's nothing compared to the billions they are giving these banks.

Where's the SEC - Chris Cox has been absent, or should I say direlect in his duties. And for the Board members, CEO, CFO's they should have their bonds revoked as well as removal from duties.

As far as buying anything, yeah right!

Posted by: Annjell on November 27, 2008 at 3:13 AM | PERMALINK

Not fond of underwriting or subsidizing piles of Detroit's downfall. Perhaps cheaper in the long run to write 'em all off as scrap. And isn't there a "moral hazard" in offering a percentage rebate, thus perhaps encouraging bloated pricing?

How about instead a fixed subsidy of, say, $10,000 to everyone who replaces a low-milage automobile with one that makes a minimum of 20 or 25 mpg? In one grand swoop, all the aging pollutermobiles are taken off the roads and replaced with a much greener fleet, Detroit gets an inventon incentive and ramps up production making the economy bloom.

Posted by: Tomm on November 27, 2008 at 4:46 AM | PERMALINK

Sorry, Tomm - I don't want to seem to be making fun at your expense. But from my POV "a minimum of 20 or 25mpg" is quite amusing.

My most recent car (before I joined the car share) routinely got 39mpg, and that was an Alfa Romeo Sportwagon oilburner. Fun to drive and with good performance.

That number shows you how incredibly far behind Detroit fell, building luxobarges and stradatanks.

Posted by: SteinL on November 27, 2008 at 4:58 AM | PERMALINK

I still say there was collusion between big oil and our Big Three auto makers. I want that sorted out before I bail them out. Incidentally, I drive a 1988 Chrysler than gets almost 30 mpg. We should be doing twice as well now. If we sell cars at all, they should be highly efficient or next-generation technology. . .

Posted by: Sparko on November 27, 2008 at 5:20 AM | PERMALINK

Again, a remarkable amount of misinformation and assumptions here. If the idea is bad, that's one thing, but its not a good or bad idea because of anything the Big 3 have done.

Check Consumer Reports - GM and Ford are making "recommended" vehicles. Check the JD Power quality awards - they're making competitive vehicles.

To thnk, as a few have posted, that the finance industry acted nobly but were let down by the government while the auto industry blundered along is ludicrous. Both operated in the environment created. Look at CAFE laws and state dealer franchise laws, for two examples, to understand the current state of things. But overall, keep in mind that the crisis is now, not in the one to two years it would take to pass legistlation to fix some of these issues.

Posted by: foreigner on November 27, 2008 at 6:19 AM | PERMALINK

it's a crappy idea.

If I were an automobile dealer, I would simply re-capture a substantial part of that rebate by being less flexible in negotiations with a car buyer.

If I am selling a $25,000 car and I know that the buyer is getting $12,500 back from Uncle Sam, why wouldn't I try to get some of that rebate for myself? I mean, if the auto retailer captures half of that $12,500 then the car buyer is still coming out way ahead, right?

Posted by: rnato on November 27, 2008 at 10:21 AM | PERMALINK

This plan would not be like the finance-industries bailouts, because the government has not in fact gained significant equity in or control over the bailed-out companies. The government has only preferred stock (no voting rights) and while they have some warrants (right to convert to common stock) these are insignificant in quantity and for the purpose of cashing in on stock appreciation, not control.

Leonard refers to the "principles" of the finance bailout, not the actual bailout, but these "principles" are really window-dressing.

The resistance to direct peace-time government control over any industry has yet to be overcome. Any deal for the automakers may also depend on major setbacks for labor unions. Labor has few supporters in the MSM (or in the blogosphere - has anyone ever seen a link to a labor-union blog?).

Posted by: skeptonomist on November 27, 2008 at 10:43 AM | PERMALINK

Speed nails it, St. John nails it.
Individual transport (automobiles) is going to kill us all.
Look around, what do you see? Cars, driveways, roads, trucks, parking lots, gas stations, etc. If you live in the woods there's only one way to get around. Ever try to find a quiet spot where you can't hear cars? Ever try to walk to the mall?
Our planet can't sustain this, we can't all have lifestyles of the rich and famous. But that's what we're told to do, so we do.
Detroit car companies were just doing what they are created to do: sell the most profitable product.
Look around you, how many SUV's do you see? Nobody forced all those folks to buy a 3 ton truck. People bought them because they're afraid and felt safer, wanted to be one of the crowd, it made them feel good, and didn't want to bothered with the facts. Detroit just sold us what we asked for.
Government is the only force that has the power to look out for the common good. Government is ultimately us. Maybe we'll get that now.
Meanwhile Amtrak is barely getting a billion a year, and that's better than it was. 25 billion spent on a true intercity passenger train service would generate a lot more good than that money sunk into failing car companies. Hell, for a few billion more we might catch up with France!

Posted by: GVC on November 27, 2008 at 11:00 AM | PERMALINK

"Offering a rebate for American label cars but not foreign ones would probably violate our trade agreements in a big way."

You say that like it's a bad thing...

Posted by: chaboard on November 27, 2008 at 11:23 AM | PERMALINK

OK. Here it goes.

Give vouchers to everyone for x dollars to purchase a car. Let's say $10,000

Attach restrictions - car must be rated more than, say, 30 mgp.

Car can be foreign or domestic. Must be new, not used.

Vouchers are tradeable. Those not wanting a car can sell them. ( For maybe $5,000 - whatever the market price would be. Use the money to pay down your credit card, go on vacation, whatever. ). If you want to buy 10 vouchers for a Rolls Royce, that's ok. ( Assuming the Rolls gets more than 30 mpg. )

Posted by: Duncan Kinder on November 27, 2008 at 11:27 AM | PERMALINK


And in 5 years when all of those crappy, shoddy, poorly designed cars start having major systems failures?

Posted by: winner on November 27, 2008 at 11:30 AM | PERMALINK

well, how about this idea? A ten thousand dollar rebate and government-underwritten financing for anyone who buys a new car before December 31, 2009. Here's the catch. On January 1, 2010, the federal gasoline tax will increase by $1.50/gallon and on January 1, 2011 by another fifty cents. The price of gasolie willl double in the next 14 months from taxes alone (dedicated to transit and efficiency measures) and the burden of this will be shares by everyone (for the record, I live in a city, walk to work or bike and haven't owned a car in almost a decade, so this wouldn't directly benefit me). Oh, and the government will pay straight blue book value for any used car, up to $20k. There would be no excuse to not trade in for a more fuel effficient car. A lot of old junkers get traded in and sold for scrap, improving air quality in cities almost overnight.and yes, you could use this plan for any vehicle, motorcycle and scooters count. Anyone who doesn't participate (like those without cars or who don't want cars) gets a $350 rebate to buy a bicycle or a $200 rebate on mass transit fares. I wager the fleet fuel economy goes up 2- 3mpg in a year. Expensive, but everyone gets something, manufacturers get sales, customers get new, theoretically better, cars or other transports. The supply chain is kept humming for a year or two, and we make a serious cut at foreign fuel dependance. And there's a lot of cash flying through the economy. Better than giving $500b more to Wall Street, right?

Posted by: northzax on November 27, 2008 at 11:40 AM | PERMALINK

Stick a fork in this turkey - he's done. Scary to think a dude with such second rate ideas can be in charge of money to invest in "environmentally aware" enterprises.

The world produces too many cars. William Greidner prophecied this in the late 90's. The obvious fruition of his foresight is a bunch of cars sitting on lots unsold.

Now we have a typical fluffy headed environmentalist telling us that the solution to Detroit's problem is for the bovernment (as in bovine) ante up half the cost of one of those gas guzzlers. Next question - and one he doesn't answer: what happens to all the used cars released into the market by this stupid plan? Oh, you say, "We'll just ship them to Mexico where the peons can use them."

So now we have replaced twenty percent (by way of argument) of the car stock with new gas inefficient vehicles and shipped the crap to Mexico. Now we have just reset the "rebuy" clock for a wad of people who otherwise might have been interested in a new, genuinely fuel efficient hybrid or electric five years hence. They will still be driving the dreck they bought at half price.

It's unfortunate but "red in tooth and claw" does have a meaning. No one likes to watch people go begging but I can live with the idea of GM, Ford and Chrysler dying. I believe they're walking dead now so why put them on life support when the outcome is so clear?

We don't need more cars. We probably don't need more roads. Patch up the bridges. Build some light rail.

But don't throw money down the Detroit rathole in any way shape or form - let them die.

Posted by: LJR on November 27, 2008 at 11:54 AM | PERMALINK

A few months ago consumers were buying the American car and future oil prices approached $150/barrel, unsustainable. If government gets involved in subsidizing car purchases then we get back to a $150/barrel oil future.

There is no way we can subsidize Detroit and keep oil futures low.

I read the article, and the author rationale for subsidizing an unsustainable operating point is not justified by the possibility that we can fix the car industry later.

Posted by: MattYoung on November 27, 2008 at 12:00 PM | PERMALINK

This is a better idea because it's a demand side intervention. It addresses automakers' central problem: people aren't buying cars because their wealth just evaporated, their credit just dried up and they aren't sure whether they'll have a job next year.

The automakers want a supply side bailout because they are the suppliers. Naturally, they want their name on the check. But it would be foolish to give it to them. A supply side bailout might make sense if there were a shortage, but there isn't one. There's a 3 million car surplus. It makes absolutely no sense to subsidize production of more.

Posted by: Aatos on November 27, 2008 at 12:08 PM | PERMALINK

Since there aren't enough ponies to go around, how about a free bicycle? American-made. Clear up the congestion prob in both anatomical and metro arteries at the same time. Take that, OPEC.

Posted by: cavjam on November 27, 2008 at 12:13 PM | PERMALINK

What a staggeringly stupid idea.

In the first place it would violate the WTO agreements and allow other countries to impose massive tarifs on US imports that would hit the rest of US industry. I don't think you will find many companies that are too happy paying punitive tariffs for a trade violation that only benefited the incompetent auto-makers.

The other reason it is a terrible idea is that a $25 billion dollar loan is not necessarily lost money. A $25 billion give away is. Chrysler eventually paid back the price of the first bailout, and returned a profit.

Posted by: PHB on November 27, 2008 at 12:21 PM | PERMALINK

That's the answer, surely - start an Obsolete Vehicles Retirement Program, under which you get your whacking tax break if you buy a new car that at least doubles the old one's MPG and you can prove the other was scrapped.

Posted by: Alex on November 27, 2008 at 12:23 PM | PERMALINK

Presumably, Washington's primary goals are to save jobs and to jumpstart the economy.

Depends which "Washington" you mean. The goal of the Democrats is to save union jobs and jumpstart the economies of Michigan and Ohio to get re-elected in 2010. If the cost is to slow economic growth in the red states and non-unionized industries, that is a small cost to pay.

America manufactures, and Americans buy, millions of fuel-efficient automobiles every year. The way to a green economy is to promote the growth of the companies that already produce fuel-efficient cars, and Americans already do that by buying fuel-efficient cars. Government intervention to save GM and Chrysler (Ford is slightly better) would be counter-productive.

Posted by: marketeer on November 27, 2008 at 12:27 PM | PERMALINK

Foreigner - WRONG.
The Big Three created the environment in which they operate. How fucking hard is that to understand.

As for quality, they may have some recommended vehicles. T0p to bottom fleet quality? Still behind the Japanese Big Three.

Stein -
You nailed it on hydrogen. Nothing but greenwash.

Alex -
As I posted earlier, Texas already has a state program to help buy oilburning boats off the streets.

Posted by: SocraticGadfly on November 27, 2008 at 12:39 PM | PERMALINK

Leonard anticipates a heavy price-tag associated with his ambitious proposal, but the costs would be comparable to the $25 billion bailout that the automakers have already put on the table.

If the government has to spend that money in order to look like it's doing something useful, wouldn't it be better for the economy, both in the short run and long run, to invest in new domestic fuel and energy supplies? Even a "fuel efficient" Cadillac Escalade will need fuel from somewhere, so I'd say invest in domestic fuel supplies first, and only later invest in "fuel efficient" SUVs.

Or, use the $25B to finance the conversion of every vehicle to run on "flexible fuels", such as E85 (which is just one example.) For most recent cars with computer-controlled fuel-injection and ignition timing, that is not a very expensive conversion (not expensive compared to some of the alternatives in the discussion thread above.)

Posted by: marketeer on November 27, 2008 at 12:40 PM | PERMALINK

Let me add, per one other poster's comment about "environmentalists" - Gang Green groups like NRDC, EDF and Sierra probably would support this. Real environmentalists? No way.

Posted by: SocraticGadfly on November 27, 2008 at 12:47 PM | PERMALINK

"modern american cars are not that bad in fuel economy when compared to older cars from the 90s. The cars they would be replacing are probably worse environmentally, so its a net gain there."-mickslam

Bullshit. I drove a 92 Toyota Camry that consistently got 33-34 mpg on the highway. My wife's 02 Ford Focus (a much smaller car) gets 29-30 mpg hwy on a GOOD day. Both vehicles had auto transmissions and both were driven by me during dozens and dozens of highway trips.

Further, The 92' Camry had 190,000 miles it and it never had any problems mechanically, except a water pump failure @ 170,000 miles. The 02' Focus which now has 83,000 miles is a mechanical nightmare. I've had to replace the ignition cylinder, thermostat housing, sway bar links, idler pulley and belt tensioner, etc. Not to mention the rain catcher that diverted water INTO the passenger cabin.

Unfortunately, American automakers (not to be confused with American autoworkers, who also make Toyota's, Honda's, Hyundai's etc) can't compete with the better managed companies from overseas.

I say give the money to foreign companies to build more automotive plants here in the U.S. It would give jobs to U.S. workers AND improve quality and efficiency of the cars we drive.

Posted by: Palinoscopy on November 27, 2008 at 1:10 PM | PERMALINK

The unions are not the problem, so, for those who insist on constant union bashing, stop it. If one looks at the Constitution the right to hear ones grievance is built in the document. Look it, Companies are licensed to do business by the government. We the people are the government. So, everyone has this tight connection. Let it go, unions are basics to the constitution.

Now, here in the communications industry when millions of conversions are about to take place to have high definition television it seems very reasonable to get your coupon from the government for a box to enjoy the conversion. The similarities are just staring at all of us. Well, how is this? There is a future type technology punch built in to the whole conversion. This should also be built in the auto industry.

Face it these same old auto guys do not have what it takes to make a conversion, or better put they not only don’t know how to convert to a better car for the consumer, they don’t care! Ladies and gentlemen of America these autos CEO’s are in position at the wrong time. They are going to “CUT AND RUN” with the money.

What to do? Obama has the opportunity to not only retool the industry but to retool or better put help the American labor forces rethink. So what am I saying? Simple, a bail out package has what the auto biggies regret. A legion of America’s finest educational institutions from the Manhattan project type, the Fermi Lab types, to Caltech types are woven into the bailout, Period.

Huge education research and development directives are set to create a massive in flux of industrial science and calling to arms all educational institutions, especially entry level and advanced university and college research centers as a sort of science renaissance centers devoted to devolvement and manufacturing of the futures new engines and products. Turn the college and university system of America to viable learning centers for everyone with internship, apprentices, entry level and advanced position for all areas of science and technology.

Yes, in a sense the educational system needs regulation, by the people for the people and of the people. Right now it seems to be loaded with “The few and the Rich”. Who donate for who’s cause? Not mine or yours!

Posted by: Megalomania on November 27, 2008 at 1:27 PM | PERMALINK

When the rest of the world was moving toward more fuel efficient, smaller cars, American car companies were indulging in the stupid, macho American bluster and building BIG SUV's that got crap gas mileage, as if that's a measure of how macho you are. MY CAR IS BIG! I'M A MAN! I even remember seeing Toby Keith, the epitome of the Bush era, doing a commercial for Ford where he drove a big truck that proudly guzzled gas.

The MARKET actually was saying "buy smaller, more intelligent cars". The CEO's ignored the market. They must be socialists.

Posted by: JaneaneTheAcerbicGoblin on November 27, 2008 at 1:53 PM | PERMALINK

This idea is a start, but could use some refinement. How about the rebate match whatever number the auto maker is willing to cough up? If GM is willing to knock 5k off a slow seller the government kicks in another 5k. I want the makers to have some skin in the game.

And all this is tied up with some smart strings, like executive compensation at a minimum with a big kicker out 5 years if things work out well.

Plus we need a rational energy policy that stabilizes the price of gas at a level that encourages better systemic behavior, and raises a few bucks to fix our infrastructure problems.

Posted by: Nat on November 27, 2008 at 2:32 PM | PERMALINK

I don't think we should give money away to any person or corporation. We should invest in car companies and use our voting ability to make them produce economical and renewable-energy-using cars.

Posted by: Paul Siegel on November 27, 2008 at 2:58 PM | PERMALINK

This country is going insane. Why is the prospect of going from +3% growth to -2% growth akin to the Armageddon?

Run for your lives! GDP/capita is falling from 35k to 33.5k! Oh my god!

People who were poor before will still be poor. Rich people will stay rich.

We had artificially-stimulated demand previously, with below market interest rates and super-easy access to cash, and car builders and home builders all ramped up production to cash in. Now we've got too much inventory.

Employment, wages, the stock market, profits were all higher than they woulda been (without such ridiculous liquidity), now they will all be lower.

Who cares.

Let the car companies fail. Let the sub-prime mortgages default, let the banks fail. (The houses will still be there in 5 years, and for 1/4 the cost). Prices will fall massively for homes and cars.

Who here has been laid off before? It's happened to me 3 or 4 times. Why is our country being hysterical? The election year is passed.

Posted by: flubber on November 27, 2008 at 3:41 PM | PERMALINK

Screw WTO, Screw IMF and blame the House and Senate for doing nothing. The CFOs have been permitted by our ellected officials to 'steady as she goes', so lay the blame where it belongs and vote'em all out! Then have the new members criminalize white collar scams.

Posted by: burdizzo on November 27, 2008 at 3:49 PM | PERMALINK

The signal to Detroit would be: Taxpayers Pay For Inefficient, Wasteful Vehicles. As others have said here, let the market take care of the gas guzzlers (they will be sold).

Structure a bailout only on conditions that will benefit Americans: 1) Fuel Efficiency and 2) Less Pollution.

Posted by: crispinpierce on November 27, 2008 at 5:41 PM | PERMALINK

Dumb, dumb, dumb idea. This is exactly the sort of thing the big 3 (esp. GM) has been doing for years. Namely, build too big an inventory & then sell off that inventory at a loss while they again ramp up to build too many cars to sell at still further discounts, etc.

I'm not automatically against a bailout only because to let the US car industry go belly up would also mean disaster for the states where they, & many of their suppliers, employ most of their people. A bailout would be much cheaper than letting them go under & dealing with the consequences of that. But I sure want to see one with some real teeth in it, & done in a way where we stand a chance of breaking even financially. This whole rebate idea is the same as pouring the money down a big hole & setting fire to it.

Posted by: bob in fla on November 27, 2008 at 5:56 PM | PERMALINK

It's not an entirely bad idea. I have been considering a new car for a couple months, but this shaky economy has left me on the sidelines. I am waiting for a local dealer to have a fire sale or something like a bailout rebate.

Posted by: tuna on November 27, 2008 at 6:03 PM | PERMALINK

SteinL makes a good point. I bought a new car three months ago (living in LA). This gets done, the car is instantly going to be worth less than what I owe on it. That's theft, pure and simple. It's like a ~10k flat tax on everyone who bought a car recently - a completely random selection of people.

Posted by: christian h. on November 27, 2008 at 6:44 PM | PERMALINK

So, the people who can't afford to buy new cars will subsidize the people who can?

Sounds pretty dumb to me.

Posted by: serial catowner on November 27, 2008 at 8:04 PM | PERMALINK

Firstly, the Treasury/Fed bailouts thus far almost exclusively have been buying up impaired discounted credit instruments at above market prices. In theory they will be able to sell them for something later. Don't hold your breath on that. They have overwhelmingly purchased short term instruments which are going to go into technical default and if they are eventually settled at all will be settled at a deep discount. One tell is that they are fighting tooth and nail not to identify those secruities. If nobody knows what they are then the pretense can continue that they are good.

Point being that agencies and agents of the US Government is buying stuff. The auto companies need someone to buy their stuff. So since they make cars if Uncle Sam buys their cars directly or indirectly he is doing the same thing. Buying something.

What they buy and how and who gets them will of course be a deal for those who get it and be unfair to everyone else. Come to think about it so are the bailout facilities. Only corporations get those. Why can't mortgage holders get Uncle Sam to buy their crappy mortgages. Well round and round we go. It would be unfair to the millions of citizens who don't get the deal.

The crucial thing here is that corporations don't have to worry about this fairness thing. People might bitch or moan that AIG or C get the money, and that will be that. There is no individual to point a finger at, Nobody who will have to defend their good deal or be shamed by it. Corporations don't really give a shit. They play by a different set of rules. Which come to think about it is what got us into this mess. Corporations act as sociopaths. They will get the trillions in bailouts. People won't. People won't because there is no way to make it fair. Corporations will because fairness isn't an issue.

In the next cycle corporations will be worse yet. Nothing can stop them.

Posted by: rapier on November 27, 2008 at 9:16 PM | PERMALINK

Until Bush killed them, the government offered tax breaks for purchasing hybrid cars.
Bring the tax break back, but instead of a thousand bucks or whatever it used to be, make it $5,000, or $6,000 -- something substantial -- and make it available to purchasers of all foreign-brand hybrids that are manufactured entirely or substantially in the U.S. That would encourage U.S. automakers to ramp up hybrid design and manufacture even more rapidly, reward Honda and Toyota for their designs and encourage them to add U.S. plants.
The government could actually work with the automakers to put the tax break up front, in the form of an immediate rebate check, at the buyer's choice.

Posted by: secularhuman on November 27, 2008 at 9:31 PM | PERMALINK

"I drive a 1991 Honda Civic (my wife has the nice car). I have tracked gas mileage on multiple trips from Seattle to SF Bay Area - I get 40 mpg on highway, on non-mountainous sections when I don't run the AC.

I can't buy non-hybrid car from Honda, much less the Detroit automakers, that beats that.


Posted by: Wapiti on November 26, 2008 at 5:11 PM | PERMALINK

I can beat that. My '97 Tercel (130K miles original cost $12K) can get 50 mpg without the a/c and driving at 55 mph (about 40 mpg otherwise). But nothing at the car dealerships these days, whether hybrid or conventional, can do better. What's up with that? 11 years and zero progress on efficiency. I used to respect the Japanese makers a little, but they are getting just as fat and stupid as their American rivals.

Posted by: jussumbody on November 27, 2008 at 9:41 PM | PERMALINK

``What's up with that? 11 years and zero progress on efficiency.''

let's see, I know there's something about that time span that could explain this but I just can't quite put my finger on it... 1997... 2008... maybe it's that when you bought the car there was a moderate Democrat with an environmental conscience in the White House and the last eight years a president from an oil state was getting rubber stamps from a Republican-controlled Congress?

Posted by: secularhuman on November 27, 2008 at 9:54 PM | PERMALINK

A bailout would be much cheaper than letting them go under & dealing with the consequences of that.

How do we know that? The cost of the bailout (lost investment elsewhere) might exceed the cost of the bankruptcies.

Posted by: marketeer on November 27, 2008 at 10:06 PM | PERMALINK

Well, now when trillions are yesterday's billions, a bailout might be cheaper - but GM alone needs about 400 billion, they haven't been quite fortright on that one, but that's analysts' calls.

BTW - just so we know what we're talking about. There are a lot of cars out there:

Who owns who?
http://www.hifisentralen.no/forum/index.php?action=dlattach;topic=29059.0;attach=58545;image

Posted by: SteinL on November 28, 2008 at 12:42 AM | PERMALINK

Socgadfly - You can show how the Big 3 caused the credit crisis? Anything else is crap. Check the actual record - a year ago these guys were geniuses because they had just concluded a labor contract that would, by 2010, solve their labor and health care problems. The credit crisis is the reason that's not still the likely outcome.

Many would like to blame the automakers for SUV's, etc, but explain this: at the peak of the market, Ford was selling more than 900K F series pickups, GM a similar number of Chevy and GMC, and both companies comparable numbers of SUV's. Toyota launched the newest Tundra and built their plant in San Antonio, with the Sequoia SUV at Princeton, IN. Nissan came out with the Titan pickup, and even Honda with the Ridgeline. All companies, including the Big 3, were responding to consumer demand. They weren't going door to door to force people to buy these things.

As for the cost, I've never seen the $400 Billion estimate, so I'm curious for details. Otherwise, consider that GM alone could cause the end of the PBGC if it went under - I'm pretty sure that's less than the cost of the loan under discussion. Oh, yeah, and its a LOAN.

Posted by: foreigner on November 28, 2008 at 1:42 AM | PERMALINK

Irresponsible greedy self centered hog heads do not like to be muzzled. A national not for profit health care ins. plan like an expanded required for all Medicare/Medicaid plan relieves the huge financial burden from the auto makers. Bail out would be used to retool and reconstruct factories lines for all electric cars.(gas scooters get 100m/gal and until gas cars got that they are a dead end) Most Americans cannot afford a new car even with a 50% rebate especially since ins. rates are based on credit ratings and not driving records. You don't save a drowning industry by trying to get everyone to climb aboard the sinking vessels.

Lack of vision and short sightedness will only waste time and energy. I don't care if some of the factories are taken over by the people's government to build electric speed trains we must focus on renewable energy no matter what the cost.

Building corporations so big to affect the nation's economy in such a way that failure would be disastrous for the nation should carry penalties failure due to incompetence and personal greed. "Who Killed the Electric Car"...those who could not figure a way to make billions from its utilization. There are those among us who would rather see the failure of a nation's economy than lose one red cent of their own money. The entire bail out operation is nothing more than protecting the holdings of the very wealthy who managed to profiteer greatly to the point of economic collapse for the rest of us.

Confiscate and freeze their holdings and bonuses then see how little is required to save their companies. The big three auto makers involve too many jobs and affect too many areas of the economy for the US tax payer to allow for their failure but they certainly aren't concerned for our welfare, only for their own gain. 542 to 1. That's the difference between the average CEO salary and the worker for their companies.

Time to overcome personal unregulated greed for the good of the many. What has been missing is a vision for the future of our nation beyond what is profitable for the wealthy. Not only for the survival of our nation's economy but for the human race as a whole. Our entire future depends on how much we are willing to change our ideology about the continued functioning of the big three auto makers and what is necessitated by our environmental conditions...renewable energy and global warming.

Posted by: bjobotts on November 28, 2008 at 2:33 AM | PERMALINK

"The Financial Services regulatory and oversight board"

"The Auto Industry regulatory and oversight board."

These are commissioned and appointed by the US Congress with complete prosecutorial and subpoena powers to promote accountability.

Hey, it's a start.

Posted by: joey on November 28, 2008 at 2:45 AM | PERMALINK

Jussomebody, yes, there is a degree of truth in that. Look at the Toyota Tundra or Nissan Titan.

That said, the Japanese makers can crank out more of the economical cars, and turn production around more quickly. And, they do have those cars, which the Big Three don't.

I mean, what is Chrysler? It's Jeeps, the Ram truck and the 300. What else do they make? The PT Cruiser is a Neon with a hunchback.

===

BobinFla - The same is true in Germany. German car makers used cheap credit in the first half of this decade the same way as Americans. Now, VW/BMW/Opel/Daimler are looking at whacking 100K employees.

===

Foreigner, bullshit on your shout back to me. I never claimed the Big Three caused the credit crisis, nor did I claim that their problems are primarily due to this. Tis true that it's affected Euro carmakers to a fair degree and somewhat, even Japan's. But, many ppl have noted the current AMerican market just doesn't have room for 17 mil new cars a year. Somebody has to go and the Big Three are at the bottom of the quality shitpile.

As for "loan," you have to have some expectation it will be paid back, or it would sand down a rathole.

Look, I can cut each UAW assembly line worker a check for $100K cheaper than this bailout. It's that simple.

===

Joey - And, you expect Congress to actually enforce that?

Posted by: SocraticGadfly on November 28, 2008 at 12:47 PM | PERMALINK

In a market economy, one has to see things from the marketers point-of-view. What's in it for GM to produce fuel-efficient cars? Obviously, the answer is "not enough" or they would have done it already. Jane Hamsher points out the obvious today -- "A market for green cars can only be guaranteed by government action." That is, by tax incentives and disincentives.

(It would also help a lot if somebody could design an ATTRACTIVE fuel-efficient car, which has yet to happen. One shouldn't have to look like a green martyr to drive a green car.)

The Constant Weader at www.RealityChex.com

Posted by: Constant Weader on November 28, 2008 at 2:53 PM | PERMALINK

Socgadfly - your other comments aside, do the math on your $100K. There are something on the order of 250,000 UAW members at the Big 3 - there's your $25 billion. In addition are millions of retirees and widows, who presumably you wouldn't want to throw on the streets, so billions more. Then there's the white color staff - engineers, designers, etc - 10's of thousands at each company. Do you want to include them as well? How is this cheaper than a loan?

Posted by: foreigner on November 28, 2008 at 6:33 PM | PERMALINK

This proposal helps a few people buy trucks who (1) will have not thought it through or (2) try to abuse the system and resell them. Honestly I think most people don't need these trucks.

As an engineer for Ford for 8 year's and working on the hybrid Escape and then Ford's newest Fusion/Edge/Taurus lineup, I know at least one American company that can put together good teams to make good products and also learned to be more flexible with new leadership.

The auto companies should be given a loan, and they SHOULD BE HELD ACCOUNTABLE for future individual contributions such as annual product introductions, overhead cost improvements, and development of their own new technology and new domestic manufacturing partnerships. As for a loan bill, I think part or most of the loans could be waived based on an individual company's performance. Competitive pressure is still necessary for the industry, and more restructuring and downsizing of the industry will need to happen since there's never going to be the same old global "big three".

Posted by: Kab on November 28, 2008 at 9:53 PM | PERMALINK




 

 

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