For Auto Industry, Hope Lies With President Bush

#Ford, #Ford
Gm Ceo Rick Wagoner, Ford Ceo Alan Mullally, And President George W. Bush

In the wake of last week’s groundbreaking elections, much of the nation has been taken with President-elect Barack Obama’s refrain, “Yes we can.” But for those with a stake in the Domestic auto industry’s survival, the more appropriate turn of phrase might be, “Will George Bush?”

The reason is simple: 120. That’s how many days General Motors likely has left until its liquidity drops below what it needs to stay in business. Ford and Chrysler are doing scarcely better, and would be unable to escape the black hole of a GM bankruptcy.

Conceptually it’s mind boggling: the mighty U.S. auto industry – the one that won World War II and mobilized the middle class – is down to its last four months. Politically, it puts the automakers in a different, far more desperate situation than most businesses. Senator Obama does not become President Obama for another two months. Factor in the tumult of a new Congress and the generally glacial speed of the federal government, and it’s safe to say the new president will still be organizing his desk in the Oval Office and house training his daughters’ new puppy when the U.S. auto industry goes down in flames.

Obama has promised he will meet the heads of GM, Ford and Chrysler before inauguration day, and Congress is said to be considering some sort of stimulus package during its last “lame duck” session of 2008. But by and large, the industry’s survival lies with the lame duck in chief – George W. Bush. Only he can approve legislation for a bailout and/or direct his administration to make funds directly available from other sources (i.e. the $700 billion bailout package).

For GM CEO Rick Wagoner and his fellow auto execs, this might be a sobering thought. Beyond the questions of competence that have earned President Bush a 27 percent approval rating, the auto industry has had a rather rocky relationship with the outgoing president. Throughout his two terms in office, Bush has insisted the auto industry clean up its own mess (to be fair, Obama sang a very similar tune until he started campaigning through Michigan). Perhaps more tellingly, the Big Three were never included in the administration’s relaxing of environmental standards. Autos became subject to harsher greenhouse gas standards even as coal factories and other polluters flew under the radar. CAFE standards grew harsher even as drilling increased and inspections of refineries decreased.

None of this means the automakers’ woes are W’s fault. He was right (as was Obama) when he said GM, Ford and Chrysler needed to reduce their reliance on big gas-guzzlers. But this crisis – regardless of who or what caused it -presents our much maligned president perhaps his last best chance at improving his legacy. The idea of a bailout for the U.S. automakers is still largely unpopular outside of Detroit - where people are awaiting the government’s decision as a condemned prisoner might hold out hope for a stay of execution - but it will almost certainly be recognized as the right move in the long term, saving hundreds of thousands of jobs.

Latest indications on where Bush will fall are mixed. The treasury department rejected GM’s request for some of the $700 billion approved for banks. But industry analysts say discussions continue, and think there is consensus that something must be done.

“Neither the Obama team nor the Bush administration believes that you can just put this on hold for three months,” auto industry analyst Joe Phillippi told me last Wednesday, before GM released its even worse than expected losses.

Here’s to hoping Bush will make the right decision and make sure that the U.S. auto industry does not end with his presidency.

mitchells
I don't see the benefit to the nation of 10s of billions of tax dollars. Maybe I didn't make it clear enough but I don't see why GM can't declare bankruptcy and come out a far smaller car company, keeping some limited cars, importing or "recycling" GM Europe vehicles and of course keeping the truck operations. Many workers and some plants would assuredly be picked up by other companies and the harm to the consumer would be minimal.Ford appears to be both viable (although not assuredly) and planning for the coming automobile world: more smaller, more efficient cars, fewer inefficient trucks.Chrysler's been a zombie for years; Cerebus had no clue what they were buying and wants to now leverage their lousy investment into one in GM. When they lost Water Bernhard and he wasn't replaced by anyone comparable it was clear even then it was a matter of time. I mean, the product in the last years of Daimler rule was awful, and coming vehicles are evn worse.So so much for the need of public money.I do agree with Mustang on one point: It's unspeakably awful how unfortunate it is that workers get screwed for years of mismanagement. I don't blame the workers completely for "legacy costs". It takes two parties to enter into a dumb deal. But my God, when this is over, GM will be a case study in how hubris destroys a large company's ability to adapt to changing times. I can dis the Wagoner/Lutz team but the problems started long before they took over. Job training is no answer. Many workers, I would expect, would find comparable work as any vacuum from GM is filled by other companies.But 10s of billions of tax dollars? haven't seen the substantive case for that yet. And if there is one, I'm open.
PacificGatePost
ONLY VERY DRASTIC ACTION WILL SAVE DETROITCongress: Here is a radical, but common sense and workable plan -http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html It is this, or bankruptcy. The American Auto industry should be saved but under new conditions.Do not leave it to the likes of Paulson or Congress to come up with a creative plan resembling interest in taxpayers' wellbeing.There is much creative talent hidden inside the Big 3 that has been smothered by mismanagement and the UAW.
frmuseum
Can we make up a list of things the Big 3 must agree to before they get bailout money?. Don't use our tax dollars to soak up red ink for unsold SUVs we all knew there was no market for.. Don't give them a dime until we see their plan to reach within 3 years strict mileage standards such as those set by California.. Don't budge until they start importing and/or making in the US models they thought were too "European" for Americans.. Don't support new models where design is simply an adversier's word and has no relation to function.. As with the investment firms, don't award failed executives with golden parachutes. Give them some unsold inventory and have them set up their own fire sales.. Don't apply bailout funds to "luxury" lines. That is an obscene contradiction in terms. We didn't bailout the Duesenberg - why should we bailout the Hummer? . Most of all, don't preach to us about what we want. That ship has sailed under the nameplates of dozens of forgotten models of the past 20 years.I'm sure all readers and responders can come up with a good list much longer than this. The point is Americans want something for their bailout dollar that car companies talk about but have totally lost touch with...Value and Quality.
MustangGTCS07
Mitchell, for you to say "let them go" is really stupid!! The big 3 are what this country were founded on, mobility wise. It's companies like these, if they go under, will cause the complete fall of the US. Do you have any idea how many employees these 3 companies have? You think the unemployment rate is high now?? Ford, GM and Chrysler need help, now!!! Yes, the CEO's have run these companies into the ground. Fine, fire thier butts and put someone in place that has a real brain. As for being a socialist, maybe you are in the wrong country bud!! This is America, not the USSR.. And maybe the president elect is your president elect, but definately NOT MINE!!!!
mitchells
Even though I'm as much of a socialist as the president-elect -- probably more, the situation is both hopeless and as such, there is nothing the government can do.But first a little history and context.Chrysler in the 70s involved loan *guarantees* in a market far stronger for the Big 3. Which is to say, the loan guarantees were a relatively safe bet.The market now is far different. GM's mid-to-long term outlook is not good. Y'all know at least as well as I that GM has a dearth of compelling product. (Chrysler has the ingenuity to make what they could cheaply and efficiently -- for a low cost, I mean.) In other words, unlike with Chrysler, any loans, loan guarantees, etc., would likely be money thrown away.More: Current management at GM has done damn little in eight years over than managed, well, unsuccessfully. They had their "crack" experience: deluding themselves that the day of the high-profit, inefficient SUV would last forever so why plan for a tomorrow that would never come. Except it did. GM and Ford both during the flush years took their fat profits and spent them buying niche companies instead of a little R+D to be ready for the inevitable lean years. And maybe, when things were profitable, start with the buy-outs on the ground that they were leaner, didn't need so much manufacturing resources and workers. Make offers across the board that couldn't be refused.Too: maybe realistic lease pricing would have helped.And GM is really just seeking to rip off the government. GM Europe is reasonably healthy and GM in China is apparently doing OK. Only North America is a problem. Fine. Let it go. GM wants to stay in business? Fine. Import the GM Europe cars here, manufacture some here in otherwise mothballed factories. Keep the truck operations.All of which can be done without my tax dollars.GM is as entitled to government handouts as the Wall Street speculators, which is to say not.

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