[Marxism] Detroit revs up its bailout begging

[Greg McDonald <sabocat59@xxxxxxx>]

Detroit revs up its bailout begging
On bended knee, and with promises to retool their operations, the Big  
Three ask Congress for billions to save the auto industry. They might  
get it this time.

By Mike Madden

Dec. 05, 2008 |

For the most part, the drive from Detroit to Washington is pretty  
boring (though there used to be a pinball machine at one rest stop on  
the Ohio Turnpike that gave unlimited multiballs in every game, which  
could keep even the weariest travelers busy long enough that they  
wanted to get back in the car). But apparently nine hours in a Chevy  
Malibu is the price you have to pay these days if you want Congress  
to hand you $18 billion. (If you only want $13 billion, you can do  
the trip in a Ford Escape, and if you can make do with just $7  
billion, you don't even have to say what you're driving, as long as  
it's a hybrid.) After all, the government is trying to be responsible  
with taxpayers' money now; lawmakers won't just write a check to  
every big shot with a company plane who swings through town -- this  
ain't October anymore.

So the heads of the Big Three automakers were back in town Thursday,  
having learned a crucial lesson from last month's failed effort to  
secure billions and billions of dollars in federal aid -- to wit,  
they needed some vague idea what they plan to do with the cash once  
they get their hands on it. And also, ix-nay on the orporate-cay ets- 
jay. Chastened by just about everyone who watched their first  
attempt, the CEOs promised to cut their multimillion-dollar salaries  
to $1 a year, start flying commercial and -- less symbolically --  
overhaul their product lines, ditching the gas-guzzling SUVs they've  
been making for years in favor of smaller cars that people actually  
want to buy. (General Motors told Congress it's thinking of parting  
with the Hummer line and will do the same with Saab and Saturn; Ford  
CEO Alan Mulally boasted that his company sold Aston Martin, Jaguar  
and Land Rover and may spin off Volvo, too.) Their strategy thus  
revised, the car companies felt comfortable enough to up their asking  
price significantly, from $25 billion the first time to $34 billion  
-- and possibly more -- this week.

The hearing, in the Senate Banking Committee, was a strange display  
from the Big Three -- a combination of a shameless grovel for money  
and a not so veiled threat that a second Great Depression would hit  
if they didn't get it. The firms can't survive without cash, they  
told the panel. "We are here because of the financial crisis that  
started in 2007 and accelerated at the end of the second quarter of  
2008," Chrysler CEO Bob Nardelli said. The slump meant Chrysler lost  
$16 billion as customers opted not to buy new cars. "With such a huge  
hit to our sales and revenue base, Chrysler requires the loan to  
continue the restructuring and fund our product renaissance."

Actually, the CEOs were less alarmist than some of the other  
witnesses. Moodys.com chief economist Mark Zandi told the panel that  
the costs of not bailing out the car companies -- and letting them go  
bankrupt -- would be far, far more than $34 billion. "It's not even  
in the same universe," he said. United Auto Workers president Ron  
Gettelfinger said there wasn't much time to dither: "I believe that  
we could lose General Motors at the end of this month." And if  
Detroit goes under, the witnesses agreed, the rest of the country  
won't be in such good shape itself -- suppliers could also fail,  
whole local economies could fall apart, the government could find  
itself handling warranty claims on all the Jeep Cherokees out there.

The problem is that Congress -- having already dumped $700 billion  
onto Wall Street a few months ago, only to see most of it used to buy  
shares in banks rather than to vacuum up the toxic assets that  
sparked the financial crisis -- isn't necessarily inclined to move  
quickly on yet another big corporate bailout. "I don't trust the car  
companies' leadership," said Sen. Chuck Schumer, a New York Democrat.  
"I worry that, if they're left on their own, they'll be back a short  
time later asking for more, and we won't be better off. To hand money  
over with vague, unenforceable promises without an enforcement plan  
for viability isn't good enough."

Republicans were even more skeptical. The conservative base hates the  
idea of bailing out failing companies -- though it's hard not to  
wonder if part of the opposition has to do with the fact that these  
particular failing companies have pretty good contracts with union  
workers. People in Tennessee "have a tough time thinking about us  
loaning money to companies that are paying way, way above industry  
standards to workers," said Sen. Bob Corker. Of course, the UAW  
already announced that it would let automakers suspend payments into  
a healthcare fund for retirees, killed a program that paid laid-off  
workers most of their salary, and agreed to let management reopen  
negotiations on a contract signed just last year. Still, with  
Congress already girding for a fight over "card check" legislation  
that would let workers organize without a secret vote, expect to see  
Republicans try to lay down some markers about labor during the  
bailout debate.

Unions aside, it was pretty easy to see what the popular move for GOP  
lawmakers will be. "The strength of the American economic system is  
that it allows us to take risks, to create, to innovate, to grow, to  
succeed and sometimes to fail," said Sen. Richard Shelby, a  
Republican from Alabama (which happens to be the home of Honda,  
Hyundai and Mercedes plants, making Shelby a little less worried  
about the Big Three's viability). "Every time government endeavors to  
alter any of these dynamics, it undermines and distorts the forces at  
work in all of them." On the other hand, Utah Republican Bob Bennett  
was doing his best to become a corporate matchmaker, which doesn't  
exactly fit orthodox free-market philosophy -- at one point, he  
threatened to make Chrysler and G.M. merge as a condition for getting  
federal loans.

Democrats sounded a little more open to spreading some wealth around  
to the car companies, though it's not clear whether the money would  
come out of the earlier $700 billion bailout, out of existing funds  
to help Detroit shift to making greener cars, or out of a new  
program. While the Big Three came in for plenty of chiding Thursday,  
the main target of committee chairman Chris Dodd's wrath was actually  
Treasury Secretary Hank Paulson, and the bungled way the Bush  
administration has handled the bailout funds Congress handed over  
just a couple of months ago.

"It seems to me that the requests being made by the automobile  
industry, while large by any measure, are modest in comparison to  
what this committee has lately witnessed in the financial sector,"  
Dodd said. "If we're going to insist on reforms by the auto industry  
as a condition of receiving federal funding, we ought to do the same  
for the financial companies."

By the end of the nearly six-hour hearing, you could already see the  
outlines of a deal emerging, just based on the questions and remarks  
from the committee members -- the auto companies would get at least  
some of the money they want, with a lot of federal monitoring to make  
sure they're not wasting it (or shipping it overseas to expand their  
foreign operations), and sometime next year, everyone would reconvene  
to assess the situation again. Nearly half of the Republicans on the  
banking committee are lame ducks, which might mean they feel free to  
vote for a bailout if they think it's actually good policy,  
regardless of what the GOP grass roots says. Likewise, Democrats show  
little inclination to make the nation's economy any worse before  
Barack Obama takes office next month. The transition team has tried  
hard to stay out of the bailout fight, publicly at least, but Obama  
indicated that if the Big Three can come up with decent plans for how  
they'll use the money to stay solvent, he'd be for it.

Even if Congress works fast, though, and manages to hammer those  
broad concepts into legislation, it's hard to say whether it would be  
quick enough to make a difference before Detroit goes under. All  
those years of pitching customers 0 percent financing to buy enormous  
vehicles they didn't need is finally catching up with the American  
auto industry. What Washington has to weigh, and fast, is whether  
they've really learned their lesson this time.

-- By Mike Madden 

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