The Business Cycle Dating Committee of the National Bureau of Economic Research announced recently that the current recession started in December 2007. Horrible auto sales figures dragged November retail sales down for a record fifth consecutive month. This is seen as confirmation that the current recession is catching up with the buying public, who can't or won't make major purchases.
This fact clearly escapes the Senate Republicans, who are accused by AutoWeek of "looking for something — anything — to kill this deal." Senator Bob Corker claimed "union resistance to wage cuts" killed the bill, but United Auto Workers President Ron Gettelfinger argued on WJR-AM's The Paul W. Smith Show that the Senate Republicans weren't just anti-union, but were also "anti-Big Three." Gettelfinger pointed out that if UAW members were "working for nothing" it would not save GM from bankruptcy. Gettelfinger also added that the proposed legislation had been agreed to by the White House, which remains in Republican hands for now. This indicates even more how little respect there is for George W. Bush, especially within his own party.
Michigan Democratic Governor Jennifer Granholm accused Senate Republicans of ignoring the livelihood of three million American workers, choosing instead to "drive the American manufacturing industry — and perhaps the American economy — into the ground." Big Three CEOs have testified that the auto industry accounts for one in ten jobs in the US. GM, Chrysler, and Ford employ around 250,000 people directly, with their shared supply chain accounting for the remainder.
The outspoken Republican Oakland County Executive L. Brooks Patterson appeared with Gov. Granholm in the Detroit suburb of Southfield and defined GOP lawmakers in Washington as "ruthless" and declared that "the arsenal of democracy is under attack by the arsenal of hypocrisy."
Odd words coming from a Republican, but we'll take it as it comes.
With so much vocal opposition to the position of the Senate Republicans, President Bush was forced by events to reverse his previous opposition to using TARP funds for the automakers. Maybe he now feels that the economy cannot withstand another major hit due to rising unemployment lest his attempts to improve his legacy be adversely affected. Businesses have already eliminated nearly two million jobs this year alone, and some economists predict it could reach three million by 2010. This could cause people to remember who was the real destroyer of the middle class when the GOP goes after Obama in 2010.
Article comments
— go to most recent comments1 - Brunelleschi
Really-
Good article. You raise some good points.
The taxpayer was forced to bail out big business, so it could re-group and eliminate jobs. Use the workers to pay for getting rid of workers.
That's like a king sending out representatives to collect arrows from the serfs, and taking them back to defend the castle. All the serfs have are less arrows.
2 - JC in OBX
First, your analogous use of Christ to large businesses makes no sense and is highly offensive. Second, relying on Jim Rogers for factual support that most banks are bankrupt is about as worthwhile as relying on Karl Marx.
3 - Dave Nalle
Realist has a history of using dubious and self-serving sources, JC. But at least he's entertaining.
His ongoing attacks on Republicans are particularly humorous. If there's only one Republican left on earth and the sun goes nova, Realist will blame it on that one Republican.
Dave
4 - Jet
Nr. Nalle has a history of using dubious and self-serving sources, JC. But at least he's entertaining. Especially the one about the lady with the "O" on her cheek.
His ongoing attacks on Democrats are particularly humorous. If there's only one Liberal left on earth and the sun goes nova, Dave will blame it on him... and Rush Limbaugh
Jet
5 - marlowe
Hey! This ain't bad! I subscribe to NBER too... So it isn't dubious Dave. I had an article out way back in the Summer where I said essentially what R is saying here... If you think the monied interests were going to go quietly into the night you're terribly naive.
The 8000 lbs gorilla in the room is HEALTH CARE costs re: Big Three. Let's face it - no matter what you think of their management style those costs are killing ALL of American business.
The obvious solution? Nationalize the health care system. The "health" industry (and that RIGHT THERE tells you where we went SO wrong in this country) is gearing up for the fight of its life.
It won't take the Obama adm. long to point this out - that the GARGANTUAN COSTS of providing worker health care - even into retirement is destroying out manufacturing base - what's left of it. Odd that so much of American manufacturers have headed overseas in the past 30 years - NOT JUST for cheaper wages but where health care is supplied BY THE GOVERNMENT...
So I think Big R is spot on here... Sorry Dave... (altho your assessment of why I am getting overflow of fundies to my ancient article on Obama and the claim of some on the Christian Right that he was/is the Antichrist is spot on too...)
Long time boys. Miss ya all! I'll try to swing by more often!
Marlowe...
6 - Glenn Contrarian
Why are the Republican senators so against the LOANout - it's not a 'bailout' - of the Big Three? It has NOTHING to do with 'saving American jobs'. As with so many other things with the conservatives, follow the money and the ideology:
As Rachel Maddow pointed out: "In this case, it's a foreign, non-union car companies in the southern senators' home states. South Carolina, home to Senator DeMint and Lindsey Graham is home to two BMW plants. Republican Senator Mitch McConnell's home state of Kentucky, it's also home to Toyota's largest plant outside of Japan.
Senator Richard Shelby, the top Republican on the banking committee, he has foreign automakers, Honda and Hyundai and Mercedes in his home state of Alabama. And Senator Bob Corker, who presented the Republican plan that may be moving ahead today, he's from Tennessee, home of a Nissan plant. All foreign plants, all non-union."
On the same show, Robert Reich pointed out "not only are the foreign automakers in the south and they by and large non-unionized, but 18, count them, 18 Japanese and Korean and German companies have-they have announced 18 new plants in the south. Foreign automobile companies are actually building 18 new automobile plants in the south, and they will all be non-unionized."
Perhaps the most telling fact is that NONE of the Republicans listed above demanded wage and benefit cuts for the Wall Street executives during the BAILout OR wage and benefit cuts for the Big Three executives for the LOANout.
It's only the little guy, the blue collar worker, whose wages they want to cut...and they're willing to let three million jobs that depend on the Big Three go straight down the tubes so they can tear down the unions.
Here's the absolute proof: "This is the Democrats' first opportunity to pay off organized labor after the election," read an e-mail circulated Wednesday among Senate Republicans. "This is a precursor to card check and other items. Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it."
Now, let's wait for the conservatives to bring up the frankly illusory '$71/hr' wage the UAW workers are supposedly earning....
7 - Jet
I tip my hat to the research department!
8 - Clavos
The Big Three build crappy cars (compared to the Japs, Krauts and even the Koreans) and they build the wrong kind of cars; they've done so for about four decades. If we "bail them out," we're only reinforcing their bad business plans, and they'll be back in a few months for more.
Make 'em go Chapter 11, like the airlines did, and shake out the deadwood.
Don't give them our tax dollars.
9 - Jet
The bottom line means more to Clavos than thousands of jobs lost
10 - Jet
By the way bankruptcy means no more warrantee repairs. I have a beautiful '04 Sebring convertible that I've had next to no trouble with for five years.
By the way, when they changed the body style a couple years back to something that looks Japanese, everyone stopped buying them.
11 - Clavos
You bet it does.
That's what all of you bleeding heart types don't understand: that healthy companies provide jobs and growth.
Giving these car companies that are so ineptly operated and which are strapped with archaic work rules our tax dollars will not preserve jobs for more then a few months; then they'll need more money, in a never-ending cycle, which benefits nobody, including those workers.
It's just throwing good money after bad.
Forcing them into reorganization under Chapter 11 will result in far fewer job losses AND healthier, stronger companies when they emerge from bankruptcy. The airlines offer classic case studies in the efficacy and benefits of that alternative.
Ask the workers at the Jap plants in Tennessee and throughout the South if they like their jobs and feel confident they'll have them for years to come.
12 - Dan(Miller)
Here's an idea. The Big Three auto makers (and other distressed companies) could offer warrants, exchangeable for common stock at today's prices, or for cash in some set amount, in five years, as selected by each option holder. Then, those who feel that bailing out (or "loaning-out") these companies is a good thing could individually put their money where they want the Government to put everyone's money. Those who invest in these options would feel really good, and each should receive a bumper sticker proclaiming "I helped save the ___ industry!" Everyone else could buy bumper stickers proclaiming "The ship was sinking but I was too stingy to help bail."
The warrants should be priced low enough to make them affordable and high enough actually to do some good.
This would make just about everyone feel good, without stressing those who think it's a dumb idea, while doubtless rewarding with a substantial return on investment those who want to help. Perhaps the profits could even be made tax free. What a deal!
Dan(Miller)
13 - Clavos
Nice idea, Dan. You know lots of folks in DC; sell it!
14 - Jet
Oh yeah that's right you're from the south. that explains it.
15 - Jet
Oh yeah great idea... for those who have a loose thousand laying around.
16 - Clavos
You'd be surprised how many do, Jet.
Just a few weeks ago, I ran into a guy who had a loose $4M laying around.
I separated him from it.
17 - Jet
I bet you agreed with McCain when he said middle class people make around $2 million a year too.
18 - Dan(Miller)
Hey, guys. It was just a way for those who think the "bailout" or "loan out" is a good idea to play an active, supportive role personally, and for those who don't to sit this one out. Just about everyone could afford, say, $10.00 for one warrant, and many could afford to buy even more.
I remember back in the olden days when school kids invested their pennies in stamps, ultimately exchangeable for savings bonds -- or maybe it was war bonds, I forget.
How about some sort of Green Stamps? For each dollar spent at a participating store, a stamp would be issued, and with enough they could be exchanged for warrants. This would doubtless help merchants out during these hard times, and the funds going to the distressed industries would almost certainly help.
Assuming that enough folks really care.
Dan(Miller)
19 - STM
One of the key issues here is the support jobs.
There are many, many more jobs that will go beyond just those employed by the car makers, probably across most states.
These go across a whole range of sectors from car dealers to tyre suppliers, importers, raw meterials, mining (iron ore for steel, which is how we make our big bucks in Oz, so it's not just America that suffers), thousands of auto workshop small businesses (mechanics, for instance) and parts manufacturers.
It'll be blood on the sand, rivers of it.
Bailing out the car makers is a WAY better option for America and ordinary Americans than bailing out merchant banks who caused this whole crisis in the first place.
If you think you have problems now, wait until the big three - plus the foreign builders - go under.
Mind you, if I were in charge of a government about to dole out billions to these companies, I'd be applying some conditions - like trim the fat at the top ... you know, the people who drove these companies into the ground in the first place.
They can blame the financial crisis all they want, but the truth is they've been making crap cars for too long.
In some cases, when you total up salaries, share entitlements, bonuses, package perks and golden parachutes, one of their jobs equals 1000 ordinary workers' jobs.
That'd be a good way to start cutting costs.
Part of the problem at the moment is that some top corporate executives have been getting paypackets that far outweigh their worth.
In fact, it's absurd and obscene.
Time for all that to change as we move into a new era of austerity.
Your government should be legislating to set a maximum figure for CEO and top-level management pay packets way under what they are now for executives at these companies - as a non-negotiable part of the condition for getting the money.
Because otherwise, we all just know that they're going to keep their jobs (and their lifestyles) while thousands of car workers get fired to temporarily improve the bottom line.
Clueless. They've run out of ideas, and they should be the ones paying for it.
20 - Clavos
Under a well though out Chapter 11 reorganization plan well administered, there's NO REASON for downline jobs to be threatened; cars will still be built.
And, depending on the tractability of the unions in re redrafting work rules, there's no reason for auto workers to lose their jobs, either.
Ask any supplier to Continental or USAir.
I wouldn't give Wagoner or Mullaly or Nardelli the sweat off my balls if they were dying of thirst, much less my hard-earned dollars.
21 - Jet
Clavos, when I was in highschool, an art teacher read us a very detailed description of a house, and then we were assigned to make a painting of it.
30 students, 30 different houses.
Your perception of the world is radically different than mine. We're equally convinced that what we see and perceive of this world is completely accurate, but if either tries to describe our reality to each other, we're convinced the other is wrong... completely wrong.
I'm giving up, because sooner or later this butting heads is going to damage any respect we have left for each other.
22 - Glenn Contrarian
Clavos -
The automakers going into bankruptcy is NOT like, say, an airline going into bankruptcy.
Why?
Because if an airline goes bankrupt, the planes, and the support systems for those planes especially the spare parts that those planes need for the life of those planes ARE STILL THERE.
When it comes to comparing airplanes and autos, an airline going into Chapter 11 is analogous to Hertz or Alamo going into Chapter 11 - they're not MANUFACTURERS - they simply use the MANUFACTURED product.
A more correct comparison is what would it be like if ALL of America's major airplane MANUFACTURERS (Boeing, Lockheed/Martin, etc.) declared bankruptcy. Would the other countries still buy those planes even though the spare parts may not be available ten years down the line?
Same thing with cars - these are MANUFACTURERS...and would you want to buy a car if you KNEW that the spare parts for that car might not be available four or five years down the line?
Maybe you would. Maybe that wouldn't bother you.
But it would bother MANY people who would then choose to go elsewhere than to buy a Ford, GM, or Chrysler. The people have to KNOW that the support for their vehicle will be there when they need it. Otherwise, they won't buy the vehicle.
And your Republicans were willing to let the American auto manufacturers fail at a cost of three million jobs...just so they could put the UAW out of business.
Better rethink your priorities....
23 - Clavos
Actually, Glenn, I spent thirty years as an airline executive (during some of which i was part of a reorganization), and I see distinct parallels.
But, OK, you convinced me...
Shut 'em down, period.
And I don't give a fuck about the UAW or any other union. It's insanity to throw away good money on moribund enterprises.
They're done--they started dying forty years ago, this is just the death rattle, and we're fools if we waste resources on them. They long ago lost they're ability to even discern their market, let alone compete in it, and they stopped making good cars in the sixties.
If you're worried about the workers, fine. Give THEM the billions, make them retrain (pay for the retraining), and relocate (paid), and keep 'em at full pay while they do so, but don't try to save a dead industry out of misplaced national pride.
Those billions being spent to revive all these industries that killed themselves are being raised by printing more money. The hyper inflation we will begin to see in less than two years is going to make all inflationary periods that have gone before look like child's play.
24 - Clavos
BTW, except for ESPKs kept on stations without maintenance bases, most airlines learned long ago to acquire parts on a "just in time" basis, rather than attempt to stock them (particularly if they're stupid enough not have a standardized fleet)--it ties up too much capital.
25 - STM
Clav and co,
they're far from being moribund enterprises.
What I do know about them is that they were pumping out a plethora of average designs and spreading themselves way too thin.
Ford Australia and Holden (GM's Aussie arm) went at this a different way, and it's paid off although they won't be totally immune.
They each focused on a couple of really good local designs to be built in Australia, with quite a few variants of those designs of course, and also shipped in most of the good sellers from Ford and GM's European designs to give buyers a choice, including the new Focus and the Astra.
Holden's RWD Commodore is now exported around the world rebadged, including to the US in left-hand drive as the Pontiac G8 (although could the timing have been any worse?), Ford's Territory SUV is a really popular design here (despite the odd problem) and is totally different from anything Ford does in the US or Europe, and its new Falcon turbo 6, also on a rear-wheel drive platform designed for Aussie tastes and conditions, has just won Carsguide's Car of the Year Award.
This is the key to doing well ... less is more when it comes to cars. There's so much choice out there anyway, and spreading yourself too thin is absurd. US makers have been pissing close to the wind for years, and now the cyclone's arrived.
The US carmakers just seemed to have gone ballistic over the past couple of decades with a huge range of mediocre designs rather than a small core of really good ones.
We are lucky here that we have a small population, but it doesn't mean the approach was wrong and couldn't work elsewhere and so far, it's been borne out by the fact both Aussie arms of Ford and GM have been among the best performing of the respective corporations.
The US manaufacturers may now be forced to trim the fat from their offerings just to survive.