Friday, December 12, 2008

Our Friends in the Senate

Once again I find myself in the unusual position of praising the Republicans in Congress. Once again it is because they seem to be the only people in our government nowadays who have any sense of how wrong and terrible it is throwing all this money at private enterprise like we have this year. First it was the Republicans in the House standing up (briefly) for the American people and the majority's desires in voting down the $850 billion financial bailout earlier this fall. In the end, of course, those same Republicans passed the bill after billions in pork was added to it, proving that they too are despicable politicians and that, in the end, there's not a soul in Washington who actually cares what their constituents think. But at least for a brief moment, I got to actually feel some small sense of pride that there were actually some people in Washington who share my feelings on things.

Well, it's happened again now, as this time it's the Republicans in the Senate who have resoundingly voted down the $15 billion "bailout" bill for the Big Three U.S. automakers. I'm sure this will only last about as long as the rejection of the financial bailout earlier this year, but I plan to enjoy it while it lasts regardless.

There are so many things wrong with this auto "bailout" bill, it's hard to even begin, and frankly I have covered most of them here already so no need to rehash. First and foremost, though, is that this particular bill is nothing even remotely resembling a bailout, which is why I feel I have to use quotes whenever referring to it as such. The Big Three came to Washington last week with very little in the way of real restructuring plans, and with requests for a total of $34 billion needed to weather the economic storm currently facing these companies. As I wrote about, I would suggest that it is highly dubious if even that $34 billion could ever save any of these companies given the massive strategic problems facing them and their unwillingness combined with inability to make the drastic changes needed to put them back on a path to long-term profitability and growth.

But in the end, since Congress knew they couldn't find a way at this time to get these companies their $34 billion, and since in their heart of hearts they know that the $34 billion is not likely to fix the problem long-term anyways, they came up with this brilliant proposal: let's just raid a fund that was supposed to be for automakers who make more energy-efficient vehicles, and just give the Big Three $15 billion (now it's $14 billion, actually) out of that fund despite the companies not making the required fuel-efficiency strides to warrant those distributions. The funniest part about this $14 billion "bailout" package that was passed by about 45 votes in the House on Wednesday evening is that everyone in Congress knows it isn't nearly enough to keep these companies afloat. The plan here, instead, is simply to get these companies enough money to limp along for another few months, with full knowledge that all three of GM, Chrysler and Ford will by necessity burn through these funds and will be back in Washington in the Spring, with their hands out and palms upturned, needing more. But by then it will be Obama's problem, and there will be 58 Democrats in the Senate, and so maybe the liberal spenders in Washington can approve a larger package for the automakers then.

15 billion dollars. Fifteen. Billion. Billion. I keep saying it to myself because it is a disgustingly huge number, and it is literally proposed to be handed to the car companies with very little in the way of actual strings attached, with full knowledge that the money will be gone in a matter of a small handful of months, where we will be right back where we are today, all just $15 billion lighter in the pocketbooks. Fifteen billion dollars. The clowns in Congress are counting on the fact that, after the redonkulous $850 billion spent in bailing out the banks of this country, the $300+ billion to bail out and nationalize mortgage giants Fannie Mae and Freddie Mac, the $29 billion to bail out Bear Stearns last spring, the $130 billion and counting to bail out insurance heavy AIG, and most recently the $250 billion spent to bail out financial services behemoth Citigroup, Joe Q. Voter will either be too shellshocked, or just too enured to these laughably huge numbers to care much about another $15 billion. Hey, it's only 15 thousand million dollars, right? We just gave well over a trillion to various financial institutions over the past few months, so what's another fifteen thousand million dollars? Of taxpayer money, lest we forget.

I say Stop The Madness. I have been very public here about the obvious need to do something to save the auto industry in this country, something which many people who are on the naive side about the true state of the economy right now are not in favor of. We need to do something to save these companies. But that's exactly where I differ from our spendfreaks in Congress, in particular those on the left who have supported every single bailout undertaken or proposed by anyone in government during the past eight or nine months. I want to save the automakers, give them a long-term lifeline that will ultimately lead them to profitability and a path for growth and survivability going forward. This requires, among other things, as an absolute necessity, massive, major, sweeping concessions from the UAW in terms of wages and benefits for GM, Chrysler and Ford employees. Simply appointing a "car czar" without any real stated power is a foolish idea since anyone who understands the industry knows that the most powerful union in the world will not give in ono the required concessions without being absolutely hands-tied-behind-its-back forced to. And now, with the industry on the brink of collapse, now is clearly the best time to get the requried concessions out of the UAW, not after the industry has been given billions upon billions upon billinos of dollars of fresh cash, with a promise for another 2-3 times more coming in just a few months once the new liberal majority is in power in Washington, DC.

The Republicans in the Senate stuck up for us late on Thursday, just like those in the House did a few months ago, albeit briefly. They stood up for what was right, and showed that they are pretty much the only people under that Rotunda who even make an attempt to actually understand the plight that the American people are in right now. They didn't tell the automakers to go screw and refuse to give them anything. They merely required that the UAW make the concessions necessary to enable the long-term survival of Detroit now, when the leverage is far and away the best to make the union agree to these otherwise undesirable changes. And the UAW balked -- big time. Because they never planned to make the concessions to begin with, which means that our $15 billion would literally disappear over two, maybe three months, and then we'll be right back at square one. It wouldn't even be Spring by the time these companies will be right back on the brink of bankruptcy again. The UAW would see to that, as they have shown this week.

So no dice for Detroit. If they still want to go forward with three times as many brands and three times as many dealerships and three times as high of benefits and wages as Toyota and Honda -- and this is after their proposed restructurings, mind you -- then so be it. But I'll be damned if I'm going to support paying them $15 billion of your and my money to do it. Let's just hope that this time these Washington pussies stick to their guns, and that our a-hole lame duck executive doesn't find some loophole to throw some cash at these companies under the auspices of some kind of national emergency. So far our track record with bailing out our largest companies has been nothing short of abysmal. The $850 billion financial bailout has been a disaster on all counts, with bank stocks trading at less than half of where they were when the bailout was announced just a few months ago, and with our own investments in common stock in these companies already down some $10 billion. Nice move huh? We've all see what AIG has done with the $85 billion, and then $130 billion, we've thrown their way so far. What a joke. Now another $15 billion to companies who make brazenly clear that they have no intention of slimming down to compete with their better foreign rivals?

There is only once chance for the Big Three to survive long-term, and that is to completely overhaul their models now. So far we're nowhere near that point. So I Just Say No to the $15 billion.

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Blogger Easycure said...

I'm for stopping the madness as well...sometimes we have to let companies fail. Bankruptcy is not necessarily the end of an industry. We still have airlines, right?

I do have concerns about the confidence lost in both our national and global markets which will cause billions in "accumulated wealth" lost across the board. But I figure it's easier to get confidence back later than trying to prop up poorly run auto companies for future failure.

We should let chips fall now instead of extending the pain further out. I just hope it works.

9:40 PM  
Blogger Riggstad said...

The auto industry is in flux because the used car market has caught up with them. Leasing was a train wreck and no one wants to spend $50k on a car they can buy for $30k with a 20,000 miles on it and 3 years of free maintenance.

Take a look around. It's saturated. And the lending aint happening as easy as it was. Their system has caught up with them. Not to mention the fact that people are staying in their vehicles longer. The baseline is small but the statistics show a very sharp upward trend on tenure.

The unions have played their part as well. That whole system of getting paid 9k with free benefits for being laid off UNTIL you get called back is retarded and hurtful to the companies.

I see the sense in not letting them fail, but at some point it will take something drastic to do so. So why not now?

10:45 PM  
Blogger Riggstad said...

I should have said the auto industry is in flux PARTLY....

not only. But I think you get the point Their business plan needs to be adjusted. I think that is obvious.

10:47 PM  
Blogger Riggstad said...

Oh, and WTF Cole Hamels???

10:47 PM  
Blogger Mondogarage said...

So you're blaming the whole mess on the unions?


So what concessions should the non-UAW characters involved have to make? And please don't tell me a CEO giving up his leased jet equals 100,000 employees taking 30% pay cuts.

It's illustrative that the two Republican senators speaking out the loudest against the are the ones with the most vested interest in seeing the US automakers fail because they have Honda and Toyota manufacturing plants in their states (e.g. Tennessee and Alabama).

12:20 AM  
Blogger Bayne_S said...

1) I am guessing Mondogarage has never voted Republican.

2) Kudos to Hoy for being consistently no bailout across all industries.

The wife's sisters family only buys GM vehicles. They think they would continue to do so in bankruptcy but they also always buy used.

GM being bankrupt would not change my buying decision as they have already burned me as a customer due to the poor quality of Buick Skylark my wife insisted we buy when she was 6 months pregnant.

I (like Hoy) would have preferred US avoided descending into socialism entirely. But just because we have started does not mean it has to continue across every industry.

12:48 AM  
Blogger Riggstad said...

"the unions have played their part as well" is hardly BLAMING THE WHOLE THING ON THE UNIONS...

please, stop spinning things.

2:03 AM  
Blogger Julius_Goat said...

You know who I blame for mis-apprehending Riggstad's point?

The unions.

2:12 AM  
Blogger Hammer Player a.k.a Hoyazo said...


2:29 AM  
Blogger DuggleBogey said...

Actually Mondo, I work in a GM plant in Tennessee.

12:36 PM  
Blogger DuggleBogey said...

And there's no Honda or Toyota plant in Tennessee (cough Nissan)

12:37 PM  
Blogger Hammer Player a.k.a Hoyazo said...

Let's give Senator Shelby a little benefit of the doubt here:

"Shelby's spokesman on the Senate Banking Committee, said the senator has consistently opposed taxpayer-funded bailouts.

'He opposed the Chrysler bailout in 1979 when there were no foreign auto manufacturers in Alabama, and he opposed the recent $700 billion bailout of the banking industry,' Graffeo said.

'Bailouts generally don't work, and this is a huge proposed bailout, and I fear it's just the down payment on more to come next year,' Shelby said on the Senate floor Thursday night. 'These companies are either already failed or failing, and that's a shame. These aren't the General Motors, Ford and Chrysler I knew.'"

8:40 PM  
Blogger Mike G said...

Wow I'm glad you have this mess all sorted out, Hammer, I was worried to death that our nation's problems wouldn't be solved by some clever armchair general before we descend into armageddon. But you've done it! Brilliant.

5:12 AM  
Blogger Mondogarage said...

"I (like Hoy) would have preferred US avoided descending into socialism entirely. But just because we have started does not mean it has to continue across every industry."

I, too, would have much preferred this. But I think it's garbage reasoning to not try to invest an amount in attempting to save one of the largest manufacturing sectors of the economy, when that amount is only 3-4% of what was given to the Wall Street fat cats (with almost zero accountability or measure of control).

As for bailouts failing, the 1980 loan guarantees given to Chrysler paid off handsomely (at least until nearly 30 years had passed).

And mondo has voted Republican (on rare occasion, admittedly).

If there had been no bailout of the investment bankers, I would be a lot more okay with no bailout of the domestic auto manufacturers. But the truth is, just as many of the investment banks' debt was very much tied into each others' failure, so is the US auto industry. And for the bankers (who arguably equally built their own mess, blamed entirely on their own greed leading to impossibly creative debt securitization and leveraging) to get their asses taken out of the fire, but a manufacturing sector that ties into at least as many jobs (just not centered on Wall Street) gets the big F U, is just....wrong.

That said, I can certainly understand why anyone who opposed one bailout under any circumstance would oppose the other.

So did Sen. Shelby actually cast a vote against the 1980 Chrysler loan guarantees? I can't say I knew he was in Congress that long...

7:48 AM  

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