A Federal Bailout by Any Other Name…

A hypnotherapist once told me that he began every session by asking his subject to close the door, hand him a pen, move closer, etc. He said that the sooner his subjects learned to follow small commands, the sooner (and more likely) they’d follow the big ones. When I read that Michigan Representative Mike Rogers wants the federal government to guarantee $20b worth of loans to help domestic automakers develop alternative fuels, hybrids and other “energy saving technologies,” I knew it was the same deal. Rogers is training Uncle Sam to bail out the Big Two Point Five.

Of course, Rogers was quick to distance his legislative efforts to clean up the planet and reduce our dependence on foreign oil from the “b” word. “This isn't the dreaded bailout word," the Wolverine State pol assured the characteristically credulous Detroit News. "This isn't a free pass for them to avoid painful decisions or restructuring. This is a chance for the automakers to compete on a fair playing field with access to the credit markets." Rogers said his bill will "level the cost of investment capital in the United States between domestic and Japanese auto manufacturers." Huh?

Was Rogers saying that the so-called domestics’ downgraded credit ratings– a result of their inability to put their houses in order– make it difficult for them to invest in “green” technology and, thus, place them at a competitive disadvantage vis-à-vis the Japanese (ignoring the Koreans and Germans)? Yes. In case you missed the point, “This [bill] is about supporting real jobs for real Americans through innovation" and “Ford's survival is in America's interest.” And yet, Rogers said the federal loan guarantees would also be available to non-domestics– as long as the research was conducted in the United States (preferably Michigan).

Setting aside the issue of which automakers would be eligible to save hundreds of millions in interest payments thanks to Rogers’ ability to manipulate the federal government on their behalf, the republican rep wanted his conservative constituents to know his bill is a hand up, not a handout. "This bill is fiscally responsible because it requires the loans be paid back," Rogers insisted. "I don't think this bill will cost taxpayers one cent." Note: “think.” Not even a seasoned politician can completely gloss over the fact that if one of the beneficiaries of his/our federal largesse goes belly-up, it’ll be sayonara to billions of bucks.

Which is why The Big Two Point Five gave Rogers’ proposal a lukewarm reception; they don’t want workers, suppliers, dealers, customers and banks to think they’re teetering on the edge of abyss. On the other hand… "It's an intriguing idea that merits consideration,” PR flack Greg Martin opined. “But right now our turnaround and our success rests on the advanced technology that we are putting in our cars and trucks today." (Pushrods rock!) "We find it encouraging that there is support from Congress to accelerate green technology," Ford spokesman Mike Moran said. DCX, whose existence owes much to federal loan guarantees, let its silence speak for itself.

Despite wrapping his $20b loan guarantee program in politically correct environmentalism and flag waving patriotism, Rogers’ bill doesn’t stand much of a chance. Not with an administration that can’t seem to reschedule a meeting between President Bush and the heads of America’s domestic automakers. Besides, staking our tax money on The Big Two Point Five’s ability to develop energy saving technologies? How’re those domestic hybrids selling anyway? Roger’s efforts are simply a bit more political grandstanding in the pre-election silly season; the obverse of California AG’s lawsuit against selected automakers for destroying the state’s ozone layer.

And yet Roger’s doomed bill presages the fun to come. Can/should/will Uncle Sam ride to Ford and GM’s financial rescue as it did for Chrysler? The bailout “debate” is on its way, pitting Ford and/or GM’s political muscle against capitalist theory. Most observers don’t rate the Big Two’s chances of sucking on the federal tit immediately before– or after– bankruptcy papers are filed. The imports' manufacturing beachhead on US soil and the domestics’ relatively small market share make their failure less of an issue than it was back when Chrysler was “too big to fail.”

Even so, the domestics’ end game will occur entirely in the political realm, where common sense plays second fiddle to emotions, and performances are orchestrated by people whose ability to maintain power depends on their ability to maintain appearances. In any case, if we begin drip feeding The Big Two Point Five now, it’ll make it that much easier to continue to do so in the future, which will make it that much more difficult for these companies to implement the fundamental changes they must make for their resurrection and long-term survival.