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Bailout Alternatives -- Thoughts From Outside of the American Automaker Box

Submitted by christine on Thu, 12/04/2008 - 3:42pm.

A BUZZFLASH NEWS ANALYSIS
by Christine Bowman

Remember "Yankee ingenuity"? Share your ideas for the automakers in the "Comments" section below. 

The "Big 3" really need to hear from consumers. The CEOs are pleading their case to Congress, but have consumers had their say yet? Consumers are taxpayers, and we/they are being asked to rescue the distressed auto companies. Consumers also are workers who stand to lose jobs if the American automobile industry is allowed to go belly up. Consumers are investors, too, in auto-industry-related stocks. Everyday Americans stand to lose plenty, depending on what the outcome is for the Big 3.

Michael Moore, for one, has an alternative proposal (and a complaint). His American car breaks down all the time, yet he still owns one out of loyalty to Michigan workers. Moore thinks the country should buy all three companies up, change the type of vehicles they make, and hire new experts to run them. ["The Big 3 are, from this point forward, to build only cars that are not primarily dependent on oil and, more importantly to build trains, buses, subways and light rail (a corresponding public works project across the country will build the rail lines and tracks). This will not only save jobs, but create millions of new ones."]

Keith Naughton over at Newsweek says the Big 3 should become a bigger one. A merger is his answer.

Various voices are saying "Nationalize." Here's advice from Dan Neil, the Los Angeles Times' automotive writer: "By nationalizing GM, we can aim the company's astonishing resources at one of the biggest public-policy problems we have: oil. Restructured and refocused, GM could build green vehicles by the millions in a few years and still have the capacity to build gasoline- and diesel-powered pickups (which we'll still need) ... and maybe even some Corvettes on the side."

Ralph Nader, who owes his initial fame as a consumer advocate to GM, is calling for "resourceful government capitalism[to] advance shareholder rights across the board and compel a variety of corporate reforms and accountabilities long-desired by progressives and conservatives alike."

My thought is that the Congress could mandate some owner-friendly solutions to make the Big 3 cars more appealing to and more responsive to buyers. How about subsidies for buyers, like the subsidies that go to anyone electing to build "green"? How about mandating that the Big 3 promise repair-bill-free vehicles -- Guarantees could include all service appointments at the shop of one's choice? Maybe the unions should be allowed to buy out the CEOs? Adopt a co-op model, with worker owners? 

Or, hold an auction. Invite foreign carmakers in to bid on these assets, but require the winning bidder(s) to guarantee a certain number of jobs remaining on U.S. soil for a given number of years. 

One thing is plain. Just loaning money to the CEOs to do what they've already done would be taking a big risk with money American citizens can't afford to waste. 

We can come up with some alternatives. Remember "Yankee ingenuity"? Share your ideas in the "Comments" section.

A BUZZFLASH NEWS ANALYSIS

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sliding scale subsidization of only greener vehicles

Submitted by tomm on Fri, 12/12/2008 - 12:17am.
It makes more sense to subsidize the auto makers by helping buy cars for people instead of giving the money directly to the companies. That way someone besides the CEOs, advertising company execs, and overpaid football coaches gets something out of it. It makes still more sense to help people who would otherwise be unable to buy cars, who could exercise their skills if they had a reliable vehicle, and who would otherwise be using old polluters at best. The poor tend to use old gas guzzlers, and mandating hybrids and other more efficient or green cars would be a fast way to clean up the air, reduce carbon, and cut reliance on foreign oil. Otherwise, the bailout money goes to promoting and selling the same old gas guzzlers, making the oil and carbon situations worse, reinforcing the socially irresponsible choices of the last decades, and also digging the hole deeper for Detroit in the long run.
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Not and easy fix, but it CAN be fixed.

Submitted by GwenP on Fri, 12/05/2008 - 4:53pm.
The U.S. car companies have a number of problems to be addressed. First, they were the ones who bought up America's public transit systems years ago and dismantled them so we would be dependent on cars. Our "love of cars" then allowed suburbs to develop and other urban sprawl. The government can make one stipulation in that funding is used for the creation of public transportation. They destroyed it, they can help rebuild it again. Second, they continue to crack out the same garbage year after year. They also are not the innovators, but the followers of the Japanese car companies. It's time for them to put their brain power behind inovative cars. How about a solar car? Produce a car in which the roof, the windows and doors all collect solar energy. How many hours does our cars sit in the parking lots while we're at work? The real problem with this concept right now is that it takes too much area to collect the energy. Remember those by-gone years when a computer took up the space of a whole room? That same computer is now our laptops - thanks to the microchip. We need to produce a solar microchip which can store high amounts of solar energy. Third, Toyota wanted to build its North American Headquarters in the U.S. but decided upon Canada because of the expense of healthcare. The expense of healthcare coverage for the US automakers, as well as every other company in the US, is a HUGE problem and needs to be resolved by our government. The automakers can push the government to take action to change our whole healthcare system. Fourth, allow the employees to be co-owners of the company. The American workers are some of the hardest workers in the world. Allow them input into the production of autos and teh concepts of new cars. Fifth, charge a HECK of a lot of money to anyone wanting to buy a large, gas-hogging, SUV/truck (companies would be allowed to have trucks for their jobs, but would be given tax breaks if they used something which was gas saving/environmentally aware) The extra money gained from the purchases of gas-hogs by private consumers would be put back into a fund for "mass-transit production/alternative car concepts". The tax payers should certainly not hand over money without getting something in return.
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Put automakers to work building trains and subway cars?

Submitted by Susan S. Pastin on Thu, 12/04/2008 - 8:22pm.
Susan S. Pastin Chicago IL I like Michael Moore's suggestions also. The Big 3 have screwed up so badly, maybe we do need to nationalize them as a temporary measure, then break up each car brand and let them all compete! GM was supposed to build an electric car back in 1984! What happened?
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"big 3" - there's your problem, mack!

Submitted by ptb on Thu, 12/04/2008 - 5:57pm.
We're constantly being hit by this "too big to fail" brilliance, so let's fix it so the market (what there is of one) can actually function: break 'em up.
1: the US government takes ownership of Detroit manufacturing plants.
2: the automakers are forcibly broken into their constituent brands (Ford severs from Lincoln, Volvo, etc., GM explodes into Cadillac, Pontiac, Saturn, GMC, etc. = all soverign companies).
3: each 'new' company vigorously competes with new designs and technologies, and perhaps even contracts to share these ideas with other makers.
4: the best 2 or 3 new designs from each company then vie for contract with the federally (=taxpayer)-owned manufacturing; only the best models get manufactured that year.
5: the taxpayer reaps the benefits of the manufacturing contracts, and the automakers reap the benefits of being pushed to truly innovate and compete. A successful model could fasttrack to contract extension, for example.
6: such rapid innovation and short model-life would necessitate less manufacturing automation, and better assembly, thus ensuring a strong skilled manufacturing force; it would also raise costs for the designers unless they cut the fat internally and created more upgradeable and better-thought-through designs.
7: since most large metro areas HAVE NO NEED FOR MORE INDIVIDUAL CARS, the same process can be applied to mass-trasit solutions, which should offset the potentially higher retail cost of individual cars by providing up to date transit solutions for urban areas.
Imperfect perhaps, but it might work......?

I think the key here is the monopolization that has been allowed to take place - across all industries. A smaller company with more to lose will be forced to actually compete or die (and when they do die, they don't take the rest of the world with them!).
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yes, give the money to the consumers

Submitted by squanderer on Thu, 12/04/2008 - 4:35pm.

re: "How about subsidies for buyers"

Yes, there was a good article on that idea here:

http://www.washingtonmonthly.com/features/2008/0811w.leonard.html

He suggested that the government "offer a 50 percent rebate check to every purchaser of a new, American-made car produced by any auto company that signs up for a voluntary restructuring program with the federal government. The rebate would be paid by the Treasury Department, and then exchanged for preferred stock in the company that produced the car." (more details in his article)

This really solves multiple problems at once:

* Giving people a major incentive to buy a new car *now* would be a huge economic stimulus.

* Getting all those unsold cars out of inventory would solve the immediate problems of the car companies.

* Tying the program to a restructuring would address the car companies' longer term issues.

Imagine if, for the next 60 days or whatever, people knew that could get a brand new car for 50% off. I think the public response would be enormous, and it would both rescue the car companies and provide a major stimulus to the entire economy, in short order. Much better than giving the car companies money directly, which has no immediate consumer benefit and no immediate major benefit to the economy. That only benefits the car companies.

Also, this was the dollar does double duty, instead of x dollars going to car companies and another x dollars going into some other consumer stimulus program, like the last tax stimulus check. (And that check might have gone to things like paying down debt, which, while a good use of the money for the individual, would not be terribly stimulating for the economy as a whole.)

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