Auto Bailout Update: Drove My Chevy to the Levee…
Rory Cooper /
The news of another auto bailout was met with a whimper last week. Surely, the little noticed request for an additional $22 billion was partly overlooked because $22 billion just doesn’t seem like a large amount of money after President Obama spent $787 billion of your borrowed dollars the week before. But the fact remains that many questions remain unanswered by Detroit, and unasked by Capitol Hill. For example:
How much money is the Federal Government committing to GM and Chrysler?
With the $39.4 billion in loans to GM and Chrysler, the auto suppliers asking for $25.5 billion, and the $25 billion in federal loans for automobile manufacturers to develop more efficient and cleaner vehicles, the total comes to $97.4 billion.
Are sales improving, giving Americans hope that the bailout will end soon?
For the month of January, GM’s sales plunged 49 percent, and Chrysler’s fell 55 percent. Non-Detroit companies did not perform much better. As sales continue to worsen, there is little doubt that the U.S. Government will be forced to either continue bailing these companies out, or admit this effort to be a failure. Having the government prop up a failing industry does not signal to consumers that these two companies are on the road to recovery.
Moreover, the companies’ plans for long-term viability do nothing to assuage that recognition. Senator Richard Shelby (R–AL) recently remarked, “The plans fail to demonstrate that either GM or Chrysler can reduce its labor costs to match its competitors. They also fail to show that the companies can reverse the decades-long slide in their market share.”
Are the United Auto Workers (UAW) making any concessions to help the Big Three become competitive with their foreign counterparts?
Ironically, the UAW reached a deal on labor concessions with Ford, the only U.S. automaker that is not taking federal money. In this deal, Ford can contribute equity, rather than cash to a union-run health care trust for retirees. Some may wonder why Ford was able to extract a union concession, albeit small, before Chrysler or GM. As Kristen Dziczek of the Center for Automotive Research points out, “The role of a federal partner at GM and Chrysler make it more difficult.” Ford Vice President Joe Hinrichs said, “The agreements, if finalized, will allow Ford to become competitive with foreign automakers’ U.S. manufacturing operations…”