Editorial: Between the Lines: David Cole and the Bridge To Nowhere

Robert Farago
by Robert Farago
editorial between the lines david cole and the bridge to nowhere

David Cole is the man whose industry and union-funded Center for Automotive Research carried-out a study of the economic implications of Detroit’s meltdown. The result has become the de facto standard for “this is the serious shit that will happen if we don’t bailout Motown’s mismanagers with federal tax money” argument. So much so that the mainstream media uses the figures without attribution. TTAC has exposed Cole’s blantant self-interest in this matter. Our Best and Brightest have examined CAR’s study and exposed its deep methodological flaws. While there is no doubt that a GM, Ford and/or Chrysler bankruptcy filing would create an economic catastrophe for tens of thousands of workers and hundreds of communities, exaggerating the impact for political gain is deeply immoral. And just plain wrong. Giving Cole an uncontested platform to promulgate his propaganda is, if anything, worse. And yet that’s exactly what The Detroit News has done…

The DetN is so happy to let Cole mislead the general public that the headline AND strapline say the same damn thing: “Letting automaker fail costs more than price of loan automaker” is immediately followed by “fail costs more than price of loan.” You know, just in case you can’t be bothered to read Cole’s dietribe [sic]. Which begins by blaming the same government his people seek to suckle.

“The popular complaint is that the domestic auto industry got itself into this mess, and it should suffer the consequences. But the reality is the Detroit Three wouldn’t have cash flow problems if the federal government hadn’t caused the financial crisis, in part, by ensuring that Americans who couldn’t afford a home suddenly could buy one. The resulting subprime mortgage crisis helped lead to the credit crunch, which has caused a dramatic decline in auto sales.”

The meme is clear: the financial crisis is the cause of Detroit’s disaster. The fact that all the other automakers doing business in the United States who aren’t HQ’ed in Motown are in no danger of going belly-up is, apparently, irrelevant. The inconvenient truth that GM’s former captive finance unit GMAC is up to its eyeballs in the subprime mess doesn’t get a look in. Or the American automakers’ obvious willingness to lend money to car buyers whose credit scores mirror a minor league baseball player’s batting average. But wait! There’s more! More federal complicity in Detroit’s dilemma!

“The federal government also contributed to the auto industry’s problems with its lack of a realistic energy policy. The price of this hit home this summer, when the price of gasoline spiked to $4 a gallon and caused a massive shift in the types of vehicles consumers would buy. Now that the price of gas is below $2 in some areas of the country, there will be far less demand in the short run for the fuel-efficient vehicles that the government wants the automakers to sell in greater quantities.”

How fucked-up can one argument be? Seriously, I’m sitting here at the keyboard, schnauzer at my side, lost in the maze of Cole’s rhetorical obfuscation. Are the feds to blame for not having an energy policy that kept gas prices low? Or for having one that did, then didn’t, then did? Did the federal Corporate Average Fuel Economy regs force automakers to make the fuel-efficient cars that would have saved their ass if they’d hadn’t gorged on SUV and pickup truck profits (assuming they could make competitive small cars if they really wanted to) a good idea then, but wrong now? Or wrong then AND now?

Cole’s willingness to blame CAFE for Motown’s misery shows where his sympathies lie– if such evidence were needed. It also shows that Motown’s propagandist-in-chief is no strategist. Criticizing the Dems’ legislative darling child will not win Detroit any friends in Washington. No siree Bob.

“If GM, Ford and Chrysler had to shut their doors, according to our center’s calculations, the economy would lose nearly 3 million jobs in the first year. That is because the auto industry has the highest jobs spinoff of any manufacturing enterprise. For example, for every auto assembly factory job, there are another eight to 10 jobs outside of the plant.”

This rhetorical technique is called reductio ad absurdum. You make a claim, show how it leads to an absurd or ridiculous outcome, and then conclude that the original claim must have been wrong– as it led to an absurd or ridiculous result. If Detroit’s automakers file for Chapter 11, there is no way on God’s green earth that they will simply shutter their doors and be done with it; they will continue making and selling vehicles. It may be a fraction of previous production, but it will not be zero. To suggest so is the dictionary definition of disingenuous. Of course, Cole’s got that one covered.

“Critics have said it would be better to let the automakers file for bankruptcy and get their financial houses in order. The problem with this approach is that industry experts know that consumers won’t buy expensive products from a bankrupt company. That still leads to serious decline in sales and to 2 million lost jobs very quickly.”

Don’t you hate it when an industry expert quotes unnamed industry experts to prove that he, an industry expert, is right? Perhaps Mr. Cole should conduct a study on consumer attitudes towards buying from a bankrupt GM, Ford and or (yeah right) Chrysler, focusing on price. Because at some price, ANYTHING will sell. And he might want to ask “If the your car warranty was backed by the federal government…” Nope. Checks cashed. Blinkers on. Two million jobs? Where’s the data? And define “very quickly.” Fuzzy logic uber alles.

“In addition, the very low level of current sales and surprisingly low inventory of vehicles are creating a pent-up demand for new vehicles once the credit crunch subsides and the economy improves. The market promises to shift from the buyers’ market of the past decade to a sellers’ market where fewer financial incentives or discounts will be needed to sell a vehicle with the industry’s reduced manufacturing capacity.”

Baseless conjecture. Dataless drivel. Crap. In fact, you could say that the domestic automakers’ build ’em fast, pile ’em high, sell ’em cheap strategy over the last ten years created an automotive “bubble.” That burst. TTAC may not be a credible source of industry expertise in Mr. Cole’s eyes, but we called the sales meltdown (sub 12m units). And plenty of us hereabout don’t see a recovery until the tail end of 2010. And even then, vicious competition from the transplants guarantees that America will ALWAYS be a buyer’s market.

“…the government needs to give the Detroit Three a bridge to this brighter future. A bridge loan now would be far less expensive than letting one or more of the domestic automakers fail.”

Or not. In fact, funding the automakers without letting them pass through Chapter 11 would be a bridge to nowhere. And a complete waste of money. Our money.

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  • Gus Gus on Nov 13, 2008

    Excellent, excellent article, Robert. Cole is an arrogant buffoon, whose self-interest would be far less painful if he weren't trying to obfuscate the true facts about the coming demise of Detroit. He has appeared several times on national media over the past couple of weeks, most notably on The Newshour with Jim Lehrer and CNN, debating Professor Morici of the University of Maryland. In both occasions which I viewed not only was Cole the arrogant, misinformed tool of the industry as you describe, but totally condescending to the Professor (and, frankly, anyone who dared take a position divergent from his or other industry flunkies, no matter how well thought out). Typical response when you can't defend your position on the merits. And while I am far from an industry expert, I am somewhat familiar with economic policy and government intervention; when I e-mailed Cole directly, his flip condescencion as I dared disagree with him on the merits was palpable.

  • Joeaverage Joeaverage on Nov 17, 2008

    I don't get it. Ford and GM (Chrysler not so much) already have frugal vehicles in production. They just have to bring them here and federalize them. Okay I recognize that a Belgium produced car is not going to be a money maker but they could send the European blueprints over and start building them here with American sourced parts. Or they could build them in Mexico like so many other "American" cars. The difference is that Detroit is going to have to promote these vehicles a little. Offer huge warranties on them (10/100K) and so on. Offer them at all of the GM dealers and not rebadging clones but as GM products under whatever names. Sorry but there are people who just won't go to a Saturn dealer. They too well remember the plastic cars from the mid-90s. Put these cars (even badged as Saturns) on Pontiac lots and Buick lots and so forth. Make it clear to all of the dealerships that they need to give the car customers just as much attention and service as the potential $30K SUV customer. No rolling of the eyes and wrinkling of the noses. See people carriers, sell hatchbacks, sell sporty cars like the OpelGT mid-engined roadster thing, sell big Opels, sell little ones. GM HAS frugal cars (more furgal than what they sell now). They just need to make an effort to sell them even if they aren't high margin SUVs and trucks. I still don't support government bailouts. It will like so many of you have stated just delay the inevitable. Batten down the hatches fellow citizens because we're screwed - either by failing businesses built around rapid consumption or because the gov't is spending so much newly printed money that the dollar will be devalued. Can inflation be far behind? Come spring I'm planting a garden.

  • Tassos VW's EV program losses have already been horrific, and with (guess, Caveman!) the Berlin-Brandenburg Gigafactory growing with leaps and bounds, the future was already quite grim for VW and the VW Group.THis shutdown will not be so temporary.The German Government may have to reach in its deep pockets, no matter how much it hates to spend $, and bail it out."too big to fail"?
  • Billccm I had a 1980 TC3 Horizon and that car was as reliable as the sun. Underappreciated for sure.
  • Inside Looking Out I did not notice, did they mention climate change? How they are going to fight climate change, racism and gender discrimination. I mean collective Big 3.
  • Lou_BC I'm not too picky about gloves. If I'm concerned about heavy oil or grease contamination, I'll donn nitrile gloves. Heavier work and I'll use "old school" leather gloves, fake leather, synthetic or whatever is available.
  • Dusterdude Getting the popcorn ready . May be a good plan for strikers to make sure they own good winter jackets for future pickets .