Bailout Watch 32: Farago Votes Nay

Robert Farago
by Robert Farago
bailout watch 32 farago votes nay

Detroit refuses to contemplate the only possible savior for their broken businesses: bankruptcy. Unless Chrysler, Ford and GM use Chapter 11 protections to kill products, spike brands, close factories, “renegotiate” labor agreements, terminate dealers and generally reinvent themselves, they will continue to die by a thousands cuts. The automakers’ pride– and their belief that “no one buys cars from a bankrupt automaker”– prevents this radical move. So, instead, they’re pursuing a federal bailout. Only they don’t call it that. And therein lays the seeds of their final destruction.

Motown’s federal bailout is set to arrive as $50b worth of low-interest federal loans. The money is a [now-inflated] part of a $25b provision in last year’s Energy Bill, disguised as an attempt to “help” Detroit retool 20-year-old factories for a fuel-efficient future. TTAC and other commentators immediately identified it as a bailout. Simply put, the 20-year caveat restricts the loans to Detroit.

Thanks to the very public Bear Stearns bailout debacle, and the even more prominent Fannie Mae and Freddie Mac “rescue,” and The Big 2.8’s increasingly obvious financial distress, the convenient falsehood of Detroit’s “green” federal assistance has lost currency. Hence Bill Ford, Alan Mulally, Mark Fields, Rick Wagoner, Bob Lutz, Jim Press and the rest of the Motown elite are busy denying that the money is a bailout. As Queen Gertrude remarked about her evil doppelganger in Hamlet’s play-within-a-play, “The lady doth protest too much, methinks.”

There are a couple of simple reasons why Detroit won’t come clean about their need for a taxpayer-sponsored financial infusion. First and foremost, personal power.

As Edward Niedermeyer observed in his Aporkalypse Now editorial, we’ve been here before. The last automaker “bailout” was bestowed up Chrysler. It was, in fact, a federal loan guarantee program (this time it’s actual loans). Uncle Sam demanded an executive shakeup and enough management-related strings to turn the Pentastar Pinocchio back into a marionette. If any of the current players admitted to the feds that the $50b was a bailout, they’d lose their autonomy (i.e. power) and, most probably, their jobs.

If you wanted to be more charitable about Detroit’s craven denial of their position at the head of shit creek sans paddle, you could say that Ford, GM and Chrysler don’t want to destroy their [remaining] customer loyalty. (Never mind potential conquest sales, we’re moving beyond that now.) They recognize that the word “bailout” and “bankruptcy” are virtually interchangeable in the public mind. And for good reason. It’s the truth.

While Motown’s moguls deem this prevarication necessary to shield the buying public from the heretofore under-the-radar realization that one, two or all three Detroit automakers are in real danger of going bye-bye (say sayonara to your vehicle’s resale value), the lie puts The Powers that Be in a ludicrous position. Even as they hustle over to Capitol Hill to secure their piece of the multi-billion dollar public pie they must pretend that everything’s hunky dory.

“Ford CEO says effort to regain profits going well” today’s Detroit News headline blares. Yes, OK, if everything’s going so well, why does Ford and friends need $50b of our money to fund their recovery? Bill Ford trotted-out the new party line: it’s all about the SPEED of bringing green machines into the supposedly free market. If the money is denied, “It would just make everything more difficult, and we may have to go slower, and that’s clearly not what society wants.”

Sure, I blame society. But it’s hardly likely that society will blame society. Despite the fact that bailout bucks are free-flowing at the moment, despite the fact that Michigan is a key state in the upcoming presidential election, despite Detroit’s cunning plan to avoid speaking the word “Voldemort” in public, The Big 2.8 are not going to have as an easy time of this as they think.

The “bailout by any other name would still be so green” ruse may fool willfully ignorant Big 2.8 dependents– execs, union workers, suppliers, dealers, etc.– but the “change Washington” election rhetoric circulating through the rest of the country indicates a growing Pink Floyd mentality: “keep your hands off of my stash.” During these times of pseudo-austerity, telling the people’s representative that $50b in federal funds is “nice, but not REALLY needed” is not going to be a particularly convincing strategy.

This whole boondoggle is just another in a long line of half-assed, boneheaded decisions that reflects Detroit’s ongoing inability to fully face their actual, honest-to-God brand, product and profitability problems and develop a viable strategy– now involving Chapter 11– to overcome them.

There is but one word that truly suits this $50b federal loan guarantee/bailout program: enable. Even with some pertinent strings, the money will simply enable Detroit to continue its addiction to stupidity, sloth, greed and arrogance. And that’s why I believe Detroit should not receive the funds.

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  • Landcrusher Landcrusher on Sep 14, 2008

    G2H, Sorry, You missed your chance by throwing out a lot of politically loaded stuff. I am not buying. As far as I am concerned, it doesn't matter if they half the fine, stop enforcing, or anything else. If the law is on the books, it is still there. If I still have to send in a form, nothing changed. If compliance is voluntary, all you changed was the chance that you might get caught. For those who don't want to go foul of the law, there is still WAY too much regulation in this country. For those who cheat, there is never enough.

  • Geeber Geeber on Sep 15, 2008

    I can't quite buy a reversal of a snowmobile ban in national parks or reconsideration of a manatee protection plan as examples of deregulation.

  • Rng65694730 All auto makers seem to be having problems ! Still supply chain issues !
  • MrIcky I'd go 2500 before I went 1500 with a 6.2. I watched an engineer interview on the 2.7l. I appreciate that their focus on the 2.7 was to make it perform like a diesel and all of their choices including being a relatively large i4 instead of an i6 were all based around it feeling diesel like in it's torque delivery. It's all marketing at the end of the day, but I appreciated hearing the rationale. Personally I wouldnt want to tow much more than 7-8k lbs with a light truck anyway so it seems to fit the 1500 application.
  • MaintenanceCosts If I didn't have to listen to it, I'd take the 2.7 over the 5.3 based both on low-end torque and reliability record (although it's still early). But the 5.3 does sound a lot nicer.
  • Arthur Dailey The Torino Bird which was relatively short lived (3 years), 'feasted' on the prestige originally associated with the T-Bird name. The Cordoba originally did the same as it had a Chrysler nameplate. The Torino 'Bird had modified 'opera' style middle windows, a large hood with a big chrome grill and hood ornament, pop-up headlights, and a 'plush' interior. It was for the time considered a 'good looking' car and could be ordered with a 400 cid engine (the first 2 years) and even a T-bar roof. You can see one just behind De Niro and Liotta in Goodfellas when they are standing in the diner's parking lot and have learned that Pesci has been 'whacked'.Although a basically a renaming/redesign of the (Gran Torino) Elite, the Elite was for a time available with Ford's 460 cid engine.I had both an Elite and a 'Torino Bird'. Although their wheelbases were the same, the 'Bird always seemed 'bigger' both inside and out. The Elite seemed 'faster' but it had the 460 opposed to the 400 in the 'Bird. But those are just subjective judgements/memories on my part. However the 'box Bird' which followed it was a dud. It sold Ok the first year based on the T-Bird name, (probably mostly leases) but it quickly lost any appeal/prestige. Back then, the management/executives of the Toronto Maple Leafs used to get leased T-Birds every year. After the first year of the 'box Bird' they changed to different vehicles.
  • Parkave231 Random question that -- in the interest of full disclosure -- I am too lazy to look up on my own.Back in the day, cars in my mostly-GM family had a hard lock on the steering wheel, such that unless the key was turned to the ACC position, the steering wheel was physically locked in place.I don't recall whether my 2002 Deville locked the wheel in place, but I want to say it didn't, even though it still had a physical key.And now, of course, most everything is push-button, and my current Cadillac doesn't physically lock the wheel.So was the movement away from a literal physical lock of the steering wheel back in the 80s driven solely by the transition to push-button start, or was there some other safety regulation that got rid of them, or just something else that a car manufacturer could omit for cost savings by running something else through software (I'm guessing this since the H/K issue is a thing).