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Nationalize This!

The New York Times details the perils of the auto industry bailout being crafted by Congressional Democrats and President-elect Obama. Clearly the devil is in the details, and that's exactly where the "n" word comes in...

...[W]hat Mr. Obama went on to describe was a long-term bailout that would be conditioned on federal oversight. It could mean that the government would mandate, or at least heavily influence, what kind of cars companies make, what mileage and environmental standards they must meet and what large investments they are permitted to make - to recreate an industry that Mr. Obama said "actually works, that actually functions."

It all sounds perilously close to a word that no one in Mr. Obama's camp wants to be caught uttering: nationalization.

Not since Harry Truman seized America's steel mills in 1952 rather than allow a strike to imperil the conduct of the Korean War has Washington toyed with nationalization, or its functional equivalent, on this kind of scale. Mr. Obama may be thinking what Mr. Truman told his staff: "The president has the power to keep the country from going to hell." (The Supreme Court thought differently and forced Mr. Truman to relinquish control.)

The fact that there is so little protest in the air now - certainly less than Mr. Truman heard - reflects the desperation of the moment.

This is a perfectly absurd way to fix the auto industry, by subsidizing their current and future losses in the hopes that things will turn around. Many have compared this bailout to a super-sized version of the 1979 bailout of Chrysler. The details of that saga show that it wasn't the success it was cast as by big government supporters. Somebody is going to eat Detroit's losses, the only questions who will determine the winners and losers. If you trust Congress to make those determinations (as opposed to a bankruptcy court) seek psychiatric attention immediately...

People aren't going to stop buying the cars they already aren't buying just because Chrysler and GM go into bankruptcy. When they're confident enough in their own financial situation to buy a car they will - assuming that banks, credit unions, and automakers will provide financing. "Fixing" Chrysler and GM via federal fiat will do nothing to the demand side of the equation. Automakers fortunes will turn around when they offer the right product at a price consumers are willing to pay. Of course the problem is that right now consumers are, wisely, holding off on big ticket purchases and some are having a hard time financing such purchases.

Instead of offering $15 billion to GM, Ford, and Chrysler, the government could provide 3 million $5,000 dollar off coupons valid for the purchase of any new car. Alternatively, for even less money, they could offer a car payment insurance policy (that would take over payments for unemployed workers) for all new 5 year auto loans that would make the prospect of buying a new car in an unsettled job market far less of a concern for buyers. Either of those might actually get some buyers back in the market and help turn the economy around.

If the Big Three can't manage to compete on those terms they don't really deserve to survive...


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Comments (12)

"Instead of offering $15 bi... (Below threshold)

"Instead of offering $15 billion to GM, Ford, and Chrysler, the government could provide 3 million $5,000 dollar off coupons valid for the purchase of any new car."

Love it.

Likewise, if the Federal Government had simply written each resident of New Orleans a check for $150,000, the city would probably have been completely restored in less than 18 months.

Unfortunately though, your idea would probably mean that the Big Three would just end up losing another $1500 per car, multiplied by the number of people who used the coupons.

Kevin, this has nothing to ... (Below threshold)

Kevin, this has nothing to do with "saving" Detroit - so much as it is a blatant vote save amongst the Dems to one of their single largest constituencies (UAW).

It's a naked power grab to protect their base from fleeing like rats off a sinking ship, and it sickens me that we all have to pay for it.

Many have compared... (Below threshold)
Many have compared this bailout to a super-sized version of the 1979 bailout of Chrysler. The details of that saga show that it wasn't the success it was cast as by big government supporters.
This bailout is shaping up to be a micromanaging nightmare compared to the Chrysler bailout.

And the Chrysler bailout was successful. Instead of thinking 1983 like that article which was far too soon after. Think the Viper timeframe and the years shortly after. They became profitable enough that Daimler bought them to gut them. Hence they are back in trouble again. Daimler sure and heck didn't buy them to do them a favor.

This is not a bailout, this... (Below threshold)

This is not a bailout, this is a way for meddling adults to force the US auto industry to make Green cars.

This is the archaic Luddite's at work, they are not saving jobs they are forcing industry to adopt draconian laws which through some magical force will heal the Earth and all living things.

This is the efforts of insane people since magic is an illusion and is not a rational, scientific approach to anything.

I waver on bailing out Detr... (Below threshold)
James H:

I waver on bailing out Detroit. Sometimes, I think it's a good idea. But mostly, I worry that it's an awful precedent and an unconscionable example of government meddling in the private market.

I would be far, far more comfortable with a managed bankruptcy. That is, I would like to see the most troubled of the automakers go into chapter 11, but with the feds providing whatever assurances are needed to keep reorganization from turning into liquidation.

Or if the feds were to "bail out" the automakers, I would prefer to see the federal government do so as a customer with a large order for new automobiles.

As I see it, the Big Three have three problems at heart.

First, they bet far too much on the large SUV market to keep them afloat when long-term oil-price trends should have alerted them to the need to keep their product lines more diversified. The emphasis on larger cars hurt them.

Second, even though the Big Three improved their car quality in the last decade or so, their quality was poor, especially compared to Japanese automakers', for a good chunk of the 80s and 90s.

Third, the union contracts hurt. I don't just blame the unions for these contracts. After all, a union's job is to represent its workers as best it can. But those contracts have created untenable obligations for the automakers. Agreeing to those contracts in the first place implies a certain lack of fortitude on the automaker execs' parts ...

This is where a group of fu... (Below threshold)

This is where a group of fugitives from academia will become permanent government employees, and will get together at a DC cocktail party to 'plan' what kind of car Detroit should be making. It will combine the worst features of a Chrysler 'K' car, and a Yugo. Nobody will want to buy it, and there will be no differences between the big 3(?) except for cosmetic features.

It'll get 60 miles to the gallon, but you won't be able to haul your groceries, or carry any more than two people at one time. Of course, you'll be paying $10.00 per gallon ($1.50 plus $8.50 carbon and other 'green' taxes.

Cars designed by government committee. The same people who gave us inefficency and waste in the financial sector and other government 'services', will now decide how to build a car. A group of lawyers and other non-producers who couldn't put together a Lego set, will now tell Detroit automakers how to build a car.

The only way to make Detroi... (Below threshold)

The only way to make Detroit competitive is to subsidize the $25.00 per hour difference in wage costs compared to the Japanese workers. If the Japanese can produce cars with a $40 per hour labor cost, there's no way you can compete with a $75.00 labor cost. Either labor costs have to be lowered or the government has to make up the difference. Unfortunately, the UAW is so far up the Democratic party's butt that the obvious solution will never see the light of day.

Then you need to produce a superior car, which is not the case currently. The answer is not to make SUV's illegal and force people to buy poorly made, unpleasant little shitboxes that they don't want. By the time Congress is done with it, Detroit will be forced to produced wind-powered cars, and you'll be forced to buy them.

Another item which strikes ... (Below threshold)

Another item which strikes odd about the bailout, over the last three decades or so Americans have been beaten over the head by Democrat politicians about the 'evils of fossil-fuel machines' yet today Americans are being beaten over the head by the very same Democrat polticians that we need to bailout the US Auto industry.

Conflicted positions offer by the intellectual Democrat ie 'Fossil fuels are evil BUT bailout fossil fuel industry'.

That said, I seriously doubt Californians will appreciate their over-priced golf carts aka Smart Cars running out of electricity while driving on the LA Freeway particualarly as George Clooney's over-sized fossel-fuel Limo or Nancy Pelosi entourage of SUVs are speeding past the fried Smart car sitting in the middle of the freeway.

The proposed cure in the li... (Below threshold)

The proposed cure in the linked proposal is worse then the disease.

Anybody here ever driven a ... (Below threshold)

Anybody here ever driven a Volga?

Had a friend who kept getti... (Below threshold)

Had a friend who kept getting Ford pickups - his dad had a Ford, so he had to have one also - and each one would last about two years. He'd take it in to the dealer because something catastrophic had happened - engine problems, transmission failures or whatever - and a salesman would talk him into getting a new one. It was a Ford, and he was loyal to the brand.

He didn't abuse them, unless normal city driving counted as abuse. They were just shoddy pieces of work. He finally got fed up and went to a Toyota dealer and got a pickup there - he's bought Toyotas since. They last - Fords don't. It was as simple as that.

The Big Three won't be able to compete until they put out cars that people WANT that won't fall apart in three years or less of normal use. I don't see that happening, unfortunately. They know the American buyer will buy the crap they put out - so why make any real effort to improve the quality? Just change the sheet metal and slap on some chrome, and some fool will buy it.

And now, with a government bail out virtually guaranteed, why bother to make better cars? Yeah, you can pay lip service to the idea - but do you really think anything going to change that much?

The bailout won't work. I h... (Below threshold)

The bailout won't work. I have a better idea: a stimulus program wherein the government gives every American enough money to buy any GM, Ford, or Chrysler car of his or her own choosing. This will revive the American car industry.






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