Ah, Detroit’s automakers.
I almost called this post “The Big Three,” but I stopped calling them that years ago. I covered the U.S. auto industry for several years while I worked at the public radio station in Ann Arbor, Mich. Initially, I felt I had to come up with a different moniker because Chrysler became a German company when it was bought by Daimler. That deal famously came apart, but I still see no need to call anything about the U.S. auto industry “big” anymore.
I love the state of Michigan and always root for Detroit. I was born just outside of the city, and as I said, I lived near there for several years as an adult. My kids were born in southeast Michigan. I have many friends who work in or depend on the U.S. auto industry. A collapse of Detroit automakers would be devastating for many people I know and my home state.
But I cannot support a bailout.
Or, at least, a bailout that would leave everything as it has been.
It’s sad to watch General Motors, Ford, Chrysler, and the United Auto Workers go begging to Congress for help, but it’s even more baffling to me to think that an industry would be so incapable of pulling itself out of a roughly three-decade decline. For some reason, the Detroit automakers and the UAW have proven that they can’t make decisions that will put them on a long-term road to health and competitiveness.
Many people I know – and many national commentators – blame the UAW. It’s those cursed autoworkers, with their crazy demands for high wages and high-quality health care. Don’t they just see the reality? Obviously, I’m being facetious here. Still, the reality is really real, so to speak. There is a huge labor cost difference between Detroit’s companies and the rest of the auto industry. Clearly that’s unsustainable in the competitive environment that’s grown up in the U.S. in the last three decades.
But what about that competitiveness anyway? It’s been nice to see more national commentators actually acknowledge that Detroit’s car companies have been poor at delivering vehicles people actually want to buy. That’s management, folks. The UAW doesn’t walk into management’s office and demand that they produce boring clunkers that don’t measure up well to the overseas competition. And it was management’s decision to focus almost exclusively on trucks for a decade or more, which left the companies completely exposed to the sales-crushing force of high gas prices.
And lest we forget, every labor deal has two sides. Labor made its demands. So did management. And everyone signed at the bottom. And they did so for decades.
So what am I suggesting? That the Detroit automakers should be allowed to simply collapse – with all of the collateral damage to people and the larger economy?
No. That wouldn’t be very liberal of me, would it?
But does liberal in this case meaning propping up an industry that has been unable to help itself for so long? I don’t think so.
Liberalism demands that we do what we can to help ourselves – that we bear some personal responsibility for our own fate. But liberalism also acknowledges that sometimes we aren’t in control of what happens to us, and that we shouldn’t suffer extraordinarily because of that.
Liberalism also favors real people as opposed to creations like corporations.
So how does all of that apply here?
I don’t see any reason to save GM, Ford, Chrysler or the UAW themselves. These institutions are simply combinations of people that clearly are dysfunctional. They need some form of bankruptcy so that they can reorganize and/or merge into an auto industry that can actually compete.
That bankruptcy could take many forms, though. Traditional, Chapter 11, bankruptcy might be too dangerous at this point. The auto companies make a good point that few people would be willing to buy a long-term product like a car from a company that’s bankrupt. Plus, with the financial crisis, the loans usually used to get through a process like that (DIP financing) are simply not available.
Government could step in here. A “bailout” could simply be a special form of bankruptcy that gave them the funding necessary to restructure, while still imposing the need to restructure. We’ve seen something like this in the financial services industry.
But why do it at all? Because of the larger economy and the people.
On the larger economy, it’s true – as the industry and its supporters often point out – that a lot of jobs do depend on this industry. A complete meltdown would never be welcome, but certainly this would be the worst possible time to do it, with recession upon us. Detroit’s automakers benefit from having hung on long enough to go down when all of us together can’t afford to let them simply go down.
But here is what I think is my most liberal point in this post – we need to do what we can to prevent unnecessary suffering among the individuals and their families caught up in the meltdown of the automakers.
Put another way – save the people, not the corporations.
How do we go about that? For the most part, I’m going to punt on answering this question for now. I haven’t had as much time to consider this up to this point. Obviously there are some short-term tools that are available – extended unemployment insurance, helping to fund payments for continuing health insurance coverage, extending trade adjustment assistance to people who need to retrain to find new work. Obviously, this doesn’t fill all the gaps, but it’s a start.
Personally, I think if we spent as much energy trying to figure out how to help the people who are caught up in this as we did crafting a way of saving the companies, we’d come up with more and better ideas.
Also, over the long term, the big issues are stagnating wages and rising health care costs. People might not feel so bad about leaving the Detroit automakers if they knew they could make decent wages and have good health care coverage at other companies. Say what you will about the UAW, but they’ve taken care of their people in a way that the larger economy has not.
Yikes. A huge post. I could say other things, too. I don’t like these ideas to make the automakers produce certain environmentally friendly cars. I won’t go into that much right now. One thing on that, Toyota has taken the lead in environmentally friendly technology, and it did so by serving customers, not by forcing it upon them. (In the interest of full disclosure, my brother-in-law works for Toyota.)