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TUESDAY, JULY 12, 2016
Besides the punctuated comic relief of watching CEOs of the big 3 automakers drive to congressional hearings and then hearing Richard Wagoner sum up the realization as, "We learned a lot..."; last week was a demoralizing period for even the most modestly progressive thinker.

The Congressional Democrat's plan to come to the "temporary" aid of automakers, with funds already earmarked for the "energy technology program", is a terrifically cruel example of good money gone bad. The $25 bn was originally intended to help stimulate more energy efficient technology for vehicles, but the idea only seemed to have resonance while oil was trading stratospherically above $100/barrel. With the price of oil resembling Wile E. Coyote coming to the grim realization that he'd just run off the edge of a cliff, it seemed the only "Meep meep" Democratic House Speaker, Nancy Pelosi, wanted to hear was that of a gas guzzling GM Intergalactica (not an actual vehicle). Pelosi, who originally opposed using money from the energy technology program, turned green instead of going green after seeing the latest unemployment numbers this week and decided to back the use of the energy technology fund over financing a different program.

Free market capitalists and environmentalists alike both shudder to think how the use of $25 bn, will prove to be much more than a finger in the dike of the $125 bn that GM, Chrysler, and Ford may actually need to stay afloat or - to use their euphemism - "retool". To add injury to insult, Congress maintained a wrist-slapping 35 MPG (~15 kpl) average fuel-economy requirement by 2020 as part of their laughably stringent set of objectives.

Times of extreme stress often convey a sense of naked transparency, where a person's true colors are often put on display. This can certainly be said for Ron Gettelfinger, UAW president, who also testified before Congress. Mr. Gettelfinger, a pot that rarely calls the kettle black, seemed perfectly fine with CEO compensation so long as his "idled" workers collect 90% - 95% of their full-time pay and benefits for up to two years in a program called the Job Bank. Add to this, the average pay for an American working at GM, Chrysler, or Ford is nearly double that of the same American working at a Japanese car plant based in America. So as the CEOs of the "Big Three" cut their salaries to a $1, Mr. Gettelfinger decided that perhaps his token gesture would be to admit that it was time to cut back the Job Bank.

Doing away with such formalities, Congressional Democrats realized that the UAW membership still accounts for roughly a half-million votes (and potentially 2 to 3 million votes from the workers at Big Three suppliers). Small business innovation be-damned, now was no time to think green, sustainable, or innovation. It was time instead time to maintain the constituency, even if it made little economic sense either. Putting it into perspective, how can GM, a company with a $2 bn market cap ask for a bailout of $18 bn in loans that will only last them roughly half a year?

What was rarely discussed was why the Big Three are not profitable. Congress rarely wants to admit that they imposed a law that required them to manufacture small fuel efficient vehicles (again rather than invest in new more innovative companies). GM, Chrysler, and Ford are all happily profitable in their gas guzzling trucks and SUVs, but claim that they underestimated the demand for fuel efficient vehicles. They also underestimated the need for safety and emission requirements until Congress forced them to comply throughout the 80s and 90s. It is, therefore, hard to believe that now they will suddenly become nimble companies that will deliver advanced fuel efficiency through new technology. More likely than not, they will meet the minimum standards for which they are well-known and continue to lose market share.

The Republican lead opposition to the bailout should come as a relief to both capitalists and environmentalists. With Red States housing the majority of foreign, fuel efficient, and green car plants in the US, there is already an understanding that new innovation must come from small car manufacturers with innovative technologies. The $25 bn energy efficiency stimulus package should remain that and not become a means of bailing out inefficiency.

While the $700 bn TARP (Troubled Assets Relief Program) was a bipartisan tool aimed at providing liquidity to millions of citizens who are seeing their savings and assets wiped out, this short-sighted $25 bn allocation shift has no light at the end of the tunnel and with no realistic chance of even partial repayment. It is difficult to see dozens of American car companies, such as Tesla Motors (the developer of a fully electric sports car) that have been desperate for such a stimulus program to take the next step into medium or even mass production, get denied. These companies have sought innovation and clean power alone without being lead to it with carrot and stick. They are the very companies that should be the poster child for the next generation of manufacturing. They will not get any stimulus, because that money is now allocated to delay the inevitable demise of perhaps the three most arrogant companies in the US since Enron.



The Big Three are like that '76 Ford Truck that you drive today. It's broke, it's beat, it can't haul very much, and it quite literally lacks luster. But hell, you bought that truck with your own money, and have been maintaining it with your own hands - and even though you have enough money to get yourself a new car, one that's better on fuel, has less emissions, and otherwise works, you can't find yourself doing that. You and this truck have been through a lot together - and you're willing to spend a lot more maintaining a broken behemoth, than caving and buying a Japanese import that is like a pair of shoes that - no matter how much you wear them, will never feel right.

If only the rest of the Big Three worked as well as their marketing team...

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