By on November 12, 2008


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As commentators from all across the spectrum ditch their pom-poms and start to face facts, The Detroit Free Press is keeping it surreal by dedicating its nearly all of its ink budget to the cause of federal investments in the American auto industry. In fact, there’s so much bailout boosterism, it’s hard to know where to begin. How about the decision to run this CBS scare piece, complete with misleading, self-serving commentary by MI Governor Jennifer Granholm? When asked to justify a bailout of failed businesses, Granholm claims “one in ten Americans is employed in this industry.” Yes Ms Granholm, but “this industry” includes plenty of healthy firms who aren’t asking anyone for a bailout. Oh, but the “national economy,” “manufacturing sector,” and “energy future” (?) depend on a bailout, threatens pleads Granholm. You decide where her political career rates on that list of bailout-dependent priorities. Oh, but there’s so much more…

Further along, Freep columnist Rochelle Riley wonders aloud “Can The Auto Industry Borrow AIG’s Lobbyist?” while exhorting Granholm to step it up. “If the American auto industry fails — and many people amazingly still don’t believe it’s possible — IT WOULD BE AN UNNATURAL DISASTER OF DEVASTATING AND INSURMOUNTABLE NATIONAL PROPORTIONS. (Yes, I’m screaming that part.)” writes Riley, drawing on the “caps lock” rhetorical technique long favored by forum trolls. “And the governor can’t seem to convince people of the urgency.” So, Granholm should conjure up even more misleading tropes (Volt=pure electric,  No Detroit= No EVs, etc) to create more of a sense of urgency? Ultimately, Riley refines her argument to its headline-fulfilling conclusion. “It isn’t fair. And Michigan needs to borrow AIG’s lobbyist, the one who convinced the administration to write near blank checks to the insurance company.” MY HEAD ASPLODE! (Yes, I’m screaming that part.)

Speaking of Freep hearting its local Dems and their shared passion for rewarding (local) failure, be sure to check out their special “We Heart John Dingell” section. There you’ll find their editorial board’s fawning endorsement of Rep. John Dingell as chairman of the House Energy and Commerce Committee. You see, Dingell “fights tirelessly for the interests of the beleaguered auto industry,” and his challenger, Rep. Henry Waxman (D-CA), is “literally a Beverly Hills Democrat.” Oh yeah, and they hand-picked five letters from readers for the website, four of which just happen to bleed Dingell love all over the page. Coincidence? Echo chambers rarely are.

Finally, a piece by former Olds-euthanasia litigator Leonid Feller offers a new (and by Freep standards, moderate) approach to a bailout. In this test balloon, the government would essentially perform brand mercy killings for any Detroit firm that wants it. Pointing out that the $2.3b spent to eliminate Oldsmobile is only one-third of the $6.9b GM burnt through last quarter, Feller sells the idea as a bargain. Still, add up all the brands GM would need euthanized (Saab, Saturn, Buick, Pontiac) and you’re back to about $10b. Still, after reading the rest of the Freep’s bailout coverage, I expected him to recommend hiring Jack Abramov to convince Obama to start selling arms to Iran, and using the profits to build Volts. The suggestion that brand cuts be “string attached” to any government aid seems downright reasonable. Y’know, relatively.

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23 Comments on “Bailout Watch 175: Freep Loves Them Some Bailout...”


  • avatar
    Usta Bee

    “energy future” ?.

    Oh I get it, I see what they mean now. Since Detroit bet the house on gas hogging SUV and pickup truck profits they should be asking for bailout money from Exxon. A perfect case of corporate vertical integration (or dis-integration as far as the cars go). Maybe they could team up with a scrap metal business too and have a cradle-to-grave-to-cradle business. Buy steel from China, make American cars out of it, fill ‘em up with Exxon gas and oil, scrap the cars when they’re worn out, send the scrap metal over to China, repeat process.

  • avatar
    rkeep820

    It’s Obama time finally! Bush and Co. sure have taken care of Texas and the South nicely. Now it’s time to give Detroit oh, $150B to start I’d say.

    Heck, maybe I’ll even get my job back. But not too fast, I’m enjoying this 95% full pay layoff way too much the past 6 months. Last 20 lbs, started a workout program, and ordered a Challenge R/T on my employee discount! Don’t turn us around too fast okay? How about about 1.5 more years of this gravy train just before our contract is up then I’ll go back to work, finish out my 4 years and retire at 55 with a full pension and medical. Gotta stay in shape and laugh alot to drag out this pension for at least 40 years.

    Thanks all – hey help us out man – Detroit is in peril! Give us our money Dems!

  • avatar
    tulsa_97sr5

    Why do I suspect that this 1 in 10 jobs stat I keep hearing includes the butcher at my grocery store, since they sell motor oil and washer fluid there. That makes it auto related right?

  • avatar
    gslippy

    Only a fraction of our energy consumption – something like 11% – goes into automobiles. The rest is used for power generation, for industry, and by other public uses. In addition, Middle East oil only comprises about 10% of our oil consumption; our greatest oil imports come from Canada. So selling ridiculous $50k hybrid SUVs that get 20 mpg instead of 14 mpg isn’t going to bring energy independence to America, nor wean us off Middle East Oil.

    She made no mention of fixing the multitude of problems with the US auto industry – 1. Quality, either real or perceived, 2. Poor marketing, 3. Union extortion of the manufacturers, 4. Boards of directors that reward executives with no linkage to performance, 5. Poor service and bloated dealer networks, 6. Awful sales techniques, 7. Bloated pension programs, 8. etc.

    No, $25B can’t make a dent in what they need. GM, burning cash at the rate of $2B/month, has no plan for how to stop doing that and subsequently pay the money back. NO PLAN!

    And just because “this government” passed a terrible $700B bailout of Wall Street doesn’t make it a good idea. Using her logic, since $25B is such a “small fraction” of that amount, I’d like to ask for an even smaller fraction to pay off my house debt (just $80k), so I can more easily pay my son to cut the grass, as well as others who are employed by my expenditures. :)

    I say let market forces clear it all up; it would be much cheaper to do so, and the results would be better. Too bad Group Victimhood is the MO of the Dems, rather than Personal Responsibility and Corporate Responsibility.

  • avatar
    micpl30

    Gslippy, how are you so sure GM has no plan? You have a seat on the board?

  • avatar
    carveman

    A few minutes ago on TV John Bonior was mentioned as a possible appointment for “Car Czar” to lead the efforts to save the auto industry. John served admirably in the house as the representative from the UAW. If this is the kind of ideas we will get from Obama he will be political toast by spring.

  • avatar
    Bozoer Rebbe

    Bonier’s a leftist toady. He was rejected by the voters but still wants to suckle off the taxpayers’ teats. I’d rather have tax dollars going to GM than to Bonier.

  • avatar
    gslippy

    micpl30:

    If GM had a plan, they’d be talking it up so that the American people and Congress could support it. We love to help a guy when he’s down, provided he doesn’t keep jumping off bridges.

    If GM had a plan, their cash burning wouldn’t have accelerated from $1B/month a year ago to $2B/month now.

    If GM had a plan, and their lifespan is a matter of months without severe action, they’d be taking that severe action today. How about a 3 month shutdown since inventories are over 150 days? How about killing R&D on products that can’t sell, and redirecting it into ones that can? How about a token effort to reduce the bloated salaries and bonuses of top management, just to say “we’re with you”? How about saying to the union “get lost, but we’ll rehire workers at appropriate wages if they still want a job”?

    Looks to me like GM’s plan is to just hold out the tin cup.

    If they indeed have a plan, let’s hear it from them… quickly. I would like to love them for what they can be, rather than blast them for what they are, but it’s tough to do when business-as-usual seems to be the plan.

  • avatar
    blkstne

    @micpl30

    Gslippy, how are you so sure GM has no plan? You have a seat on the board?

    If the board had a plan(a clue)they would not have lead GM(Ford,Chrysler)into the toilet.

    Let GM(Ford, Chrysler) have a loan(strings attached)after they file chapter 11.

    The airlines seem to make chapter 11 work.

  • avatar
    Robbie

    Gslippy: exactly my thoughts, very well worded…

  • avatar

    I’ll repeat this here, from the deLorenzo thread:

    A few points.

    1. The Baltic Dry Index has fallen 98% over two months. That’s the indicator showing what it costs to hire a bulk ship per day, to ship stuff around the world.
    This fall means that no one is shipping much these days. The average cost of chartering a ship has gone from over USD220.000/day, to USD5.611/day.

    What this means is that the world has stopped buying, because there’s no money to borrow to keep buying.

    2. Which takes us to GM. If their stuff was worth buying, it’s still tough to get money to buy their stuff. (There’s a reason why GMAC is tanking.)
    As GM is presently run by a wrecking crew, and this crew clearly intends to keep wrecking GM, there’s really little point in giving them any more money. The place is thoroughly wrecked as it is.
    At any rate, even if they could keep building their crappy, oversized and under-engineered cars, there won’t be money around to buy them with, at rates that people are comfortable with. (The sharp drop in the oil price is due to the fact that the world economy has run into a wall, not because a lot of oil has been found …)

    3. The large world economies are headed for a major recession next year, and while we’re in the doldrums we might as well rethink the automotive equation from the bottom up. We’re fond of using the Titanic-analogy when speaking of GM – the Titanic was actually a great ship, but it was run badly because of a desire to beat a record. The true analogy for GM would be of the Tall Ships companies that were competing with steam ships for trade, they probably also sought a bailout at the time.

  • avatar
    rkeep820

    Hmmm- let me see. So if shipping cars globally costs so much, you’d think this would give the US automakers an ADVANTAGE since those Germans and Japanese who build out of the country have to ship HERE.

    Nice try.

  • avatar
    Bozoer Rebbe

    So bailing out the domestics would be rewarding the bad mistakes of their management and the UAW. That’s an understandable position. Critics of any bailout say that without a change in management and corporate culture there’s no chance that the companies will change and avoid the mistakes they’ve made over the past 30 years, and worse, that there’s no guarantee for the taxpayers that they won’t be hit up for another $50 billion next year or the year after that.

    So what about all those folks who build or buy homes on flood plains? They can’t get flood insurance from private carriers so the Feds provide insurance via FEMA’s National Flood Insurance Program. Remember the great Mississippi River and Missouri River floods of 1993? Taxpayers bailed homeowners out, paid for their losses and the homes were rebuilt, only to be flooded again this past spring.

    What about people who have chosen to live in the path of hurricanes on the Atlantic and Gulf coasts? Not only have taxpayers paid for disaster relief in Florida just about every year, we’re now paying to rebuild New Orleans, which is below sea level.

    California is no different with its wildfires, mudslides and earthquakes.

    Taxpayers aren’t just rewarding bad mistakes, the taxpayers are paying for people to repeat the same mistakes over and over.

  • avatar
    dwford

    I don’t see the solution to GM’s problems being to just give them money. The whole company needs a complete overhaul. Chrysler? Cerberus has money and should be forced to cough up $1 for any government $1 they receive. By the way, didn’t Cerberus get Chrysler from Mercedes for free?? Ford has a plan, has money through next year, and deserves a loan if they run a little short.

    As for the auto industry in general, does any bailout hater think that the transplants provide enough business to the US suppliers to keep them all going? What if Toyota’s US suppliers go belly up? What about the coachbuilders, chassis cab upfitters, RV makers, etc.etc.etc. You don’t need to include the local butcher to see the millions of jobs at stake..

  • avatar

    rkeep820 :
    November 13th, 2008 at 12:16 am

    Hmmm- let me see. So if shipping cars globally costs so much, you’d think this would give the US automakers an ADVANTAGE since those Germans and Japanese who build out of the country have to ship HERE.

    Nice try.

    Think. This has nothing to do with shipping cars – but with the fact that nothing is getting shipped, there’s been a 98% contraction in the cost of hiring a ship. Consider it a snapshot of the contraction of the economy, it’s just not caught up with us fully. (As if what’s happening isn’t devastating enough.)

    People have stopped buying – from huge construction projects down to batteries for a small child’s plastic toy. That’s why DHL are letting people go, FedEx is contracting its activities, shipping companies are in the red, container companies are bleeding, hauling companies are going bankrupt.

    And against the doldrums this will create, we might want to spend some time reflecting upon what kinds of cars, automotion and mobility we’ll want in the future. In the short term, we will not be needing 8million plus vehicles from GM, for instance – while GM needs to SELL as many, at their present “profit” margins, to pretend they’re in the black.

    When there was easy credit, the economy was kept going on a “you’ll get yours” basis — now it’s “cash up front, please.” The companies who were certain they would be selling their goods at an ample profit BORROWED the money needed to hire those cargo ships (or space on them) for their shipments, they borrowed to cover everything, from manufacture to promotion and buying shelf-space. But now that has dried up completely. (GM used to do something similar, not only borrowing to build cars, but also using money it had borrowed to lend to customers to let them buy their cars, all because money was considered easily available.)

  • avatar
    cmcmail

    In a capitalist system, citizen’s (consumers) vote for the companies they want survive with their hard earned after tax money. Of late that support has gone to the “Big 3″ Toyota, Honda, Nissan. The “Big 3″ build the cars the sell here, right here. They employ you and your neighbors. Taking your tax money and giving it to the “Other 3″ makes no sense. If one or all of the “Other 3″ goes under, the “Big 3″ and other competitors will pick up the slack. The real question is, are the workers from the UAW going to be part of the solution? After working in “Union” plants can they ever be employable in a “Real” work situation, reasonable pay and benefits for work done. This contrast deeply with the “Job Bank” mentality that exist at the very core of the UAW. Labor union’s should provide labor, not methods to isolate workers from management. Management is another tragic story, Rick W and Bob L still have their jobs,…Enough said.

  • avatar
    HarveyBirdman

    Stein is absolutely right on target, including the precipitous drop in shipping, which is just starting to show up as a record 4.4% plunge in the U.S. trade deficit for October. Part of that was the biggest drop in auto imports in 5 years. It’s definitely going to get worse before it gets better, folks.

  • avatar
    I Callahan

    Bonier’s a leftist toady. He was rejected by the voters but still wants to suckle off the taxpayers’ teats. I’d rather have tax dollars going to GM than to Bonier.

    Although I agree with you that Bonior’s a toady, he wasn’t rejected by the voters. He was gerrymandered out when Republicans ran the state and Michigan lost one congressman. Bonior’s the one who got edged out. Candice Miller now has most of Bonior’s district, plus 90% of the thumb, making it solid Republican.

    TV (Harry)

  • avatar
    I Callahan

    If GM had a plan, they’d be talking it up so that the American people and Congress could support it. We love to help a guy when he’s down, provided he doesn’t keep jumping off bridges.

    The had a plan, and it was starting to work. Then $4 gas hit, and Democrats decided to raise CAFE standards again. Basically, the government caused most of this mess to begin with – GM has 2 different fleets of cars: one for the U.S., and one for everywhere else in the world. Incidentally, they make money everywhere else in the world. The US fleet is bound by onerous rules. Read Holman Jenkins in the WSJ:

    Under the nonsensical “two fleet” rule that now applies, manufacturers meet the standards separately with their “domestically” and “nondomestically” produced fleets. What does this have to do with making sure U.S. consumers get good mileage? Nothing. It’s a naked handout to the UAW at the expense of the companies and their customers. How dumb is the two-fleet rule? Nissan, in a petition for its removal, points out foreign brands may actually minimize the domestic content in their U.S. cars so they can continue to count as “nondomestic.”

    All this aside – I come from a family of auto workers and have lived here all my life. I work for a hospital, and my wife works for an animal shelter. If the big 3 dry up, then we lose our jobs. What did we do to deserve this other than live where we grew up?

    I would imagine the sentiment would be different if we were talking about some other industry, say, the movie industry drying up. Los Angelenos would be singing the same tune. I guess it depends on whose ox is being gored.

    TV (Harry)

  • avatar
    geeber

    I Callahan: The had a plan, and it was starting to work.

    The plan wasn’t nearly comprehensive enough. GM was losing money even before the current run-up in gas prices. And a key component of the plan was rushing the new full-size pickups and SUVs to market, but those vehicles required big incentives to move them even before gas hit $3 a gallon, let alone $4 a gallon.

    I Callahan: Then $4 gas hit, and Democrats decided to raise CAFE standards again.

    The new CAFE standards don’t take effect for years. They are not responsible for GM’s current dire situation.

    I Callahan: Basically, the government caused most of this mess to begin with – GM has 2 different fleets of cars: one for the U.S., and one for everywhere else in the world.

    I’m against CAFE altogether, but let’s be realistic – CAFE standards haven’t driven GM to the brink of bankruptcy.

  • avatar
    I Callahan

    The new CAFE standards don’t take effect for years. They are not responsible for GM’s current dire situation. CAFE standards haven’t driven GM to the brink of bankruptcy.

    Then what is? And please don’t bring out the tired old shibboleth about making trucks and large cars and not being ready when things changed – that’s a hunk of B.S. from the word go.

    The lose money on small cars due to the high cost per hour for labor. They can’t compete due to the UAW contracts. However, that was recently changed and they now have a 2-tier workforce. This was a long time in coming, and if they can get a helping hand, in the long run they’ll be able to compete with the Japanese three, once more employees retire or are bought out.

    TV (Harry)

  • avatar
    geeber

    I Callahan: Then what is? And please don’t bring out the tired old shibboleth about making trucks and large cars and not being ready when things changed – that’s a hunk of B.S. from the word go.

    Poor management, plain and simple.

    I would never criticize GM for making big trucks. There is a market for the Silverado and Tahoe.

    The problem is that GM has consistently put more effort into its larger vehicles and only grudgingly builds small vehicles.

    That approach leaves GM high-and-dry if the market shifts to smaller vehicles (which it was doing even before this year). Which is what happened…

    Toyota just introduced an all-new, bigger, Tundra and a redone Sequoia just as the market for those vehicles tanked. Because it has also continuously improved the Corolla and Camry over the years, Toyota still has something to sell people if they don’t want a big truck.

    GM has one decent car to compete in that market – the Malibu. And one car can’t support the entire company. GM ignored a major chunk of the market, and is now paying the price. That’s bad management, plain and simple.

  • avatar
    billdacat

    Some facts:

    Why did GM focus on trucks and suv’s? Maybe it’s the 25% tariff on imported trucks and suv’s?

    Maybe it’s the 1.50 gas while gas in japan has been more than 4$ for about a decade

    Maybe because people wanted those trucks and SUV’s with $1.50 gas because it is more comfortable and safe to drive one. Yes.. it is.. I have both a car and midsize SUV and we always take the utility vehicle on trips because it is safer and more comfortable. There is no comparison.

    Why did Toyota have a hybrid before gas hit 4$ a gallon?.. same reason… 4$ gas in Japan.. why did GM not have an electric or hybrid… 1.50 gas.. You can’t expect these companies to build products for 4$ gas when gas was $1.50. No one buys them and they lose money.

    Maybe if they could sell more than 20,000 cars in Japan, maybe they would have had some hybrids.

    How about we open that japanese market for u.s. products instead of being the world’s “free” market stooges?

    Another thing.. how can you call a market ..free.. when goods are subsidized? Need an example? how about the fact that we subsidize our farmers… and then ship our produce to Mexico under the guise of free markets.. we absolutely wiped their farmers out.. well.. this is what’s happening to our auto industry. Foreigners subsidize their auto industries and then ship their goods here.

    japan spent hundreds of billions of dollars driving down their Yen over the last several years to make their cars cheaper here than they should be

    Unions? You think that is the problem? Then explain to me why all of the Japanese automakers in Japan and Korea and Europe are ALL unionized.. all of them. This cOuntry’s citizens have beEn led down the road to destruction and too many people believe that “FREE” markets are the answer to everything. So take a look around you and witness what the idea of free markets has done to this country. 10 trillion in debt for starters.. that is what happens when you wipe out your tax base of manufacturers! Oh and we also have more than 5 trillion in debt related to trade.. I guess this is what happens when you ship millions of cars to this country and export only your debt!

    Our roads and bridges are falling apart, our kids are about half illiterate… and the Republicans socialized the banks but somehow have a hard time with helping the auto industry which provides about 150 Billion a year in tax revenue and directly and indirectly provides employment to millions of people.

    Tell you what.. go ahead and let them go BK… and then you had better prepare yourself because it will mark the beginning of the Great Depression part 2… which should be subtitled “idiots never learn”

    The “Free” market Depression

    By the way.. there is no such thing as “FREE” markets because every country has different taxes and regulations that makes them unequal. Many countries, such as japan, use these tactics to control their markets in favor of their domestic producers. If you want to understand japan’s export philosophy, study mercantilism.


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