Bailout Watch 55: Give 'Em Enough Rope…

Edward Niedermeyer
by Edward Niedermeyer
bailout watch 55 give em enough rope

Non-industry bailout supporters almost always qualify their backing with a number of conditions to be placed on automakers who receive government assistance. As Automotive News [sub] reports “The problem with the plan included in the energy bill: the string attached. Actually, it’s more of a rope. A cable even.” One such rope or cable is the requirement that retooled factories produce vehicles which are 25 percent more efficient than their competitors. Though that may be theoretically possible, AN worries that regulating the loan program could be a nightmare. Unsurprisingly, the Project For A New Generation Of Vehicles (PNGV) is brought up as an example of what happens (or not) when the government gives Detroit money without attaching firm enough conditions. And just like that, there’s another article in Automotive News which reports that automakers are calling on Washington to “change restrictions attached to the money that may impede its benefit for the struggling companies.” An industry lobbyist confides that preliminary conditions were written-up when the energy bill passed last December, but they “were not given much thought at the time.” The big problem? The requirement of 25 percent efficiency improvements, of course. GM CEO Rick Wagoner says that efficiency gains are “typically made in smaller increments.” No kidding, Rick. Detroit got over a billion to develop a new generation of fuel-efficient vehicles starting in 1993 and we still haven’t seen any tangible results, thankyouverymuch. Meanwhile, Nancy Pelosi has not made clear if she is willing to change restrictions on the use of the money or how that would be accomplished. Furthmore, she says that “full funding” of the loan proposal is still up in the air since their are many other programs fighting for access to the federal teat. Stay tuned for future Wagoner press conferences calling on the government to distribute the $25b “in unmarked bills, stuffed in a suitcase and hand delivered to the RenCen.” After all, if Detroit were into the whole “accountability thing” it wouldn’t be asking for a bailout in the first place, would it?

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  • John Horner John Horner on Sep 19, 2008

    The first restriction should be to require cleaning the executive suites of the suits who created these problems in the first place. If the 2.8 hadn't been completely focused on maximizing short term truck profits for the past 15 years and had been INVESTING IN THE LONG TERM HEALTH of their companies then they wouldn't be in this pickle. But long term investing has become anathema to many US businesses and we are all paying a heavy price for it. Intel, Microsoft, Apple and Cisco all get it. They make massive investments across their product lines and into new business areas consistently over time without significant federal handouts. Any of them could radically improve their short term profits by cutting out everything except their currently most profitable product lines ... and they would be stupid to do so.

  • Usbusi Usbusi on Nov 03, 2008

    I'm a Democrat and have been since I started voting in 1980, but there are some issues I cross lines with, and this is one that I agree with the folks commenting here on. I think American executives have for many years been way too focused on short term profit -- worried about losing their high paying jobs and putting into play business plans that last just long enough until their posh retirement pensions, or at least golden parachutes, kick in. You'd think the US automakers would at least learn from the history of their first mistake. Inventing the 4 cylinder engine but not putting it into production due to concern over short term profit if the chassis assembly lines were changed to smaller chassis, and then not being able to react in time to salvage market share from the Japanese and Europeans who were proactive and long term visionary. When history repeated itself recently, this time taking not only a high gas price cost but also a growing population of green consumers worried about the (long term) costs of global warming, hybrid electric market share went to the Japanese. Why should such short-sighted strategy be rewarded by taxpayers? Let's allow the market to reward the visionary executives, and perhaps American executives will change some day as a result.

  • ToolGuy Here is an interesting graphic, if you're into that sort of thing.
  • ToolGuy Nice website you got there (even the glitches have glitches)
  • Namesakeone Actually, per the IIHS ratings, "Acceptable" is second best, not second worst. The ratings are "Good," "Acceptable," "Marginal" and "Poor."
  • Inside Looking Out "And safety was enhanced generally via new reversing lamps and turn signals fitted as standard equipment."Did not get it, turn signals were optional in 1954?
  • Lorenzo As long as Grenadier is just a name, and it doesn't actually grenade like Chrysler UltraDrive transmissions. Still, how big is the market for grossly overpriced vehicles? A name like INEOS doesn't have the snobbobile cachet yet. The bulk of the auto market is people who need a reliable, economical car to get to work, and they're not going to pay these prices.