NYT editorial: Saving Detroit From Itself

[DeepModem Mom]

Saving Detroit From Itself
Published: November 15, 2008

We have seen a lot of posturing, but we haven’t heard a lot of sense in the debate over whether the government should spend even more to bail out Detroit’s foundering automakers.

Senator Richard Shelby, a Republican of Alabama, is wrong when he says that the troubles of the Big Three are “not a national problem.” The Detroit companies support nearly 250,000 workers and more than a million retirees and dependents, as well as millions of workers at part makers and dealerships. A messy bankruptcy filing by any of the big car companies, in the midst of this recession, would likely cost the government and the economy more than trying to keep them afloat.

At the same time, Congressional Democrats and President-elect Barack Obama, who are pushing for many billions worth of emergency aid for the nation’s least-competent carmakers, must ensure that tough conditions are attached to any rescue package. If not, the money will surely be wasted.

This goes beyond firing top management, forbidding the payment of dividends to stockholders and putting limits on executive pay — all necessary steps. The government should insist on a complete restructuring of any company it pours billions of public funds into.

All three car companies have been hamstrung by the legacy costs of providing pensions and health care to hundreds of thousands of retirees. But Detroit’s problems are mostly of its own making.

The automakers hitched their fate to gas-guzzling trucks, and they obstinately refused to acknowledge that oil is a finite resource and that burning it limitlessly is harming the planet. They lobbied strenuously against tighter fuel-efficiency standards. That wrongheadedness did them in as gas prices spiked and consumers flocked to energy-efficient cars made by Toyota and Honda.

It makes no sense at all to give these companies billions just so they can struggle on for a few more months down this disastrous path....

***

The companies also are struggling under a mountain of debt. And any restructuring would mean that creditors would have to swallow a loss or accept equity — as under a regular bankruptcy filing. Restructuring would likely require more plant closures and layoffs.

Rescued car companies would almost certainly have to re-open labor agreements on pay and benefits. These steps would be painful for many workers. But they also are necessary....

http://www.nytimes.com/2008/11/15/opinion/15sat1.html

[Demeter]

1. Before Worrying About Spending "Even More"

How about letting go of the first dollar, hmmm?

The Fed Govt. has ignored the plight of the Motor City and the Rust Belt for decades, and not spent one thin dime over the usual nation-wide programs like SSI, unemployment, Medicaid and food stamps, all of which have large state components in funding.

A plague on both their house and senate!

[madrchsod]

2. no one forced the american public to buy suv`s and trucks

when the big three were selling these gasoline was two dollars a gallon and no one cared. when gas hit 4 everyone started wailing about these trucks and suv`s were the downfall of america. now gas is 2 or less a gallon and the big three have developed and are selling hybrid/multi fuel trucks and suv`s.

it costs millions to design fuel systems for gasoline and diesel engines and the lead time for production is at least a year or more. so it seems that the big three started to develop new systems several years ago. if one takes the time to do a little research on what the big three has now and is developing the future does`t look bleak for the american auto industry.

[bertman]

3. I bought one of those pickups and an SUV, but I sure as hell would have been a lot happier

to have had an option for buying them with more fuel-efficient engines. Alas, that was not to be because our auto makers had decided that fuel efficiency was not a priority. As a matter of fact, as the NYT article accurately states, they actively fought higher fuel efficiency standards.

I find your argument about development of systems to be ludicrous. They have had 35 years to have some of the best engineers in the world develop fuel efficient and/or alternative energy engines that could have been the new standard for the world. The oil embargo of '73 was the shot across the bow of the Detroit auto makers, yet they kept steaming straight ahead because they were in cahoots with Big Oil and thought they could somehow prevail over the Japanese without investing in the future. Now they are reaping what they have sowed.

This is a failure of leadership on a monumental scale. These folks need to be held accountable. Any "help" from the government should be tied to loans and loans only--with the government getting its payments first.

We need to save these companies, but their executives need an ass-whipping before being tarred and feathered. They thought they could come begging hat in hand and have their benefactors in Congress GIVE THEM billions of taxpayer dollars to undo their mess. Wrong.

This article hits the nail on the head.