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Editorial: U.S. automakers get their bailout

Posted by on September 25th, 2008 at 10:31 am

A massive lobbying effort spearheaded by General Motors, Ford, and Chrysler has resulted in passage of a $25 billion package of low-cost loans to help them re-tool for the “next generation of fuel-efficient motor vehicles”.

Automakers originally wanted $50 billion (twice what they got last go-round), and even then the plan was supported by both Barack Obama and John McCain. Lobbyists also said they needed the money because U.S. government policies that have hurt their bottom lines.

Critics tried to call their bluff, but to no avail. One analyst with the conservative Heritage Foundation called the loan proposal bunk. As reported in an Associated Press article last week:

“The auto industry certainly is in trouble, but it needs to be restructured,” he said. “The elephant in the room is the fact an election is going on.”

Fresh off their $25 billion victory, auto industry lobbyists are now scrambling to get in on the Big Bailout of the financial industry being debated in Congress. Yesterday, Steve Parker with the shared a snip from car industry newspaper, Automotive News:

“The American Financial Services Association is asking Congress to allow auto finance companies and other institutions to tap the $700 billion bailout fund designed for the troubled mortgage industry. The trade association, based in Washington, DC, also is proposing that automobile loans be classified as “troubled assets” along with home mortgages.”

The U.S. auto industry just got guaranteed government loans so they can sell more cars, now they want relief for all the poor folks saddled by car debt they created to begin with.

What’s wrong with this picture? Nothing if you’re in the auto business.

I realize how important the U.S. manufacturing sector is and that thousands of Americans rely on these companies to support their families. But the truth is that the car business is on the wane and that’s a great thing for our country.

Americans are driving less (more than 53 billion miles less from November to August compared to same period last year) for many reasons, and it’s not just about high gas prices. Cities are improving their biking and public transit infrastructure, more people are making the environmental connection, the carfree movement is taking hold (several major cities now have Sunday Parkways type events) and every day, more people realize that the romance with cars they’ve been sold since childhood is turning cold.

There are myriad benefits to less car use — one of which is less people getting killed.

In August, the traffic death toll reached its lowest point since the 1960s, a direct result of fewer miles being driven.

But despite the common sense notion that driving less (and buying fewer cars) is a positive trend for America, we have an industry going through (well-deserved) rough times and a government that is happy to cave into their needs.

Where are all the millions automakers made selling unsafe, oversized, gas-gulping SUVs that only now some Americans are wising up to?

Adding insult to injury is that they’re lobbying under the guise of producing “fuel-efficient” vehicles. Does anyone else see the irony here? Didn’t GM kill the electric car and wasn’t it automakers and their suppliers who colluded to run public transit into the ground?

Our nation must realize that the promise of hybrids and other fuel technologies are not the solution to the many problems that come with auto-dependency. It’s not just about saving gas, it’s about saving lives and making our lives better.

Remember how Sunday Parkways felt? The sense of community we had, the great feeling of seeing so many people being active, smiling, and playing in our once car-dominated streets? Those feelings had nothing to do with fuel-efficiency; they had everything to do with the absence of cars.

Remember how it felt the last time you were stuck in (car) traffic? The sense of stress and frustration that came with it? Those feelings would not have changed if you were driving a hybrid; they would have changed if not as many people were driving to begin with.

People are choosing to drive less, and the U.S. auto industry is running scared. Major dealerships are closing all over the country, sales are down, and many factories have already closed their doors.

We need to let this natural shrinkage occur. We need people to re-examine their relationship to their cars. We do not need to help an industry that has run rough-shod over the cultural and physical landscape of America for way too long.

The preservation of our livability and the preservation of a sustainable and safe transportation system that gives Americans mobility choices should take precedence over the preservation of a few thousand blue-collar jobs.

For everyone enlisted in the national “bike movement”, girding for battle in the upcoming re-authorization of the transportation bill, take note of how the auto industry throws their weight around in Washington.

— As always, I’m open to your feedback and thoughts.

NOTE: We love your comments and work hard to ensure they are productive, considerate, and welcoming of all perspectives. Disagreements are encouraged, but only if done with tact and respect. If you see a mean or inappropriate comment, please contact us and we'll take a look at it right away. Also, if you comment frequently, please consider holding your thoughts so that others can step forward. Thank you — Jonathan

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    Adam September 25, 2008 at 10:57 am

    How about the bike industry gets a $25 billion dollar bailout. Then we can increase factory space and up production of bicycles so everyone can ride!

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    Brad September 25, 2008 at 11:06 am


    When one considers that 1 in 14 jobs has a link to the American auto industry then it is easy to convince lawmakers to bail out Detroit yet again. While I share some of your sentiments regarding the industry and cars in general, the pipe dream that investments in bikes and mass transportation will offset letting Detroit die is sheer folly.

    I grew up in a GM factory town in Ohio. When factories shuttered in the 1980’s the city went into a recession that persists to this day. GM is closing the last factory as we speak and if it wasn’t for the Air Force base in the suburbs, the city would most certainly go the way of Youngstown, OH or Flint, MI. For natives, think about what Portland was like about 1979-1985 – run down, little economic activity, a dying timber industry, rampant unemployement and you now what people in Dayton, OH and Saginaw, MI live like.

    Should Congress stipulate that the money needs to be used to develop alternative fuel vehicles? Yes. Should the cash be used to re-train union workers or fund buyouts for older laborers? Again, yes. Should we expect the “Big 3” to get lean and focus on a cleaner future? Absolutely. But letting them fail and giving away remaining heavy goods manufacturing ( plus military contracting, aerospace, computing, and other non-auto divisions) to overseas concerns is foolish. Our economy must evolve in order to flourish again. Amputating an economic limb without long and thoughtful consideration of the downstream consequences is incredibly stupid.

    I know this is a bike site but local events such as Sunday Parkways and some vague sense of community are trivial compared to the ability of millions of American families to pay for food and shelter. Communities with high unemployment, abandoned rotting houses, empty storefronts, and lots of homeless families are not very liveable or sustainable. Instead of visiting Orange County, CA or San Francisco on your next vacation, take a trip to Canton or Steubenville, OH to see what I mean.

    Freshly paved bike lanes, shiny Dutch styled bikes, or bikey fun won’t make a bit of difference to those folks. As thoughtful as your writing about the local bike scene is, you seem rather myopic when the scope extends beyond the friendly confines of Biketown, USA.

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    john September 25, 2008 at 11:12 am

    The big three were making huge profits off of these SUVs for years. They deserve to go under if they didn’t have the common sense to save some for making more efficient cars. And then rather then make cars that are actually efficient, they develop Ethanol cars which drive everyone’s food prices up.

    It’s a sad commentary that 4 door sedans that get 80 mpg (and can 100mph) have been available in Europe for 10- 15 years and But not here! I thank our government for that too, Thank you congress! Thanks Oregon congressmen!

    Instead Detroit is worried about horsepower and an aggressive vehicle image, that make the practical among us snicker, knowing the inadequacy. All the marketing people as well as most of the management in Detroit should be fired for being such idiots. What’s sad is all the workers, which could be out of jobs, and are held by the Detroit management as hostages before Washington, “help us out or all these people will go hungry”.

    Meanwhile, do i really care? Yes but like a lot of you, i ride my bicycle everywhere, so personally it does not affect as much. But we are still a car-based society and some sort of Bridge is needed.

    And then there is T boone Pickens, whose intentions and long term ideas are good, but his Natural Gas cars idea is about as stupid as can be. Natural gas might be plentiful, but it sure is expensive, and not all that efficient, and a lot of homes are heated with it. What is he thinking ?

    If you haven’t guessed it I am for Diesel, bio diesel or Vege oil cars. Loremo, making a 150 mpg car, using the KISS principle, meaning it is affordable too.

    Speaking of houses, Architects too need to get there heads out of their asses and start designing Passive Solar Homes. All buildings in the US could be designed to require no other heat source then the sun (this is not solar panels but much simpler, ie just well placed windows)! Instead they design giant Glass greenhouses that are about the most energy in-efficient structure available.

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    Jonathan Maus (Editor) September 25, 2008 at 11:17 am

    Thanks Brad, but you’re making many assumptions about my opinion that are simply not true.

    “the pipe dream that investments in bikes and mass transportation will offset letting Detroit die is sheer folly.”

    I am not saying that’s what should happen.

    Also… this is not about “letting Detroit die”. I think they need to make some difficult adjustments in their business model and not have their hands out under the guise of making cleaner vehicles.

    “Amputating an economic limb…is incredibly stupid.”

    again, I’m not saying anything should be amputated.

    “events such as Sunday Parkways and some vague sense of community are trivial compared to the ability of millions of American families to pay for food and shelter.”


    my point was a larger one in trying to dispute the notion that the only reason people are driving less is because of high gas prices.

    “Freshly paved bike lanes, shiny Dutch styled bikes, or bikey fun won’t make a bit of difference to those folks”

    I didn’t write anything about bike lanes dutch bikes or “bikey fun”. Not sure where you got that.

    “you seem rather myopic when the scope extends beyond the friendly confines of Biketown, USA.”

    thanks for that input. I shared some things that I felt needed to be said.

    Bottom line for me is that I am not a fan of the auto industry and I think it’s a mistake to let them do whatever they want simply because the employ lots of people.

    it comes down to net gains or losses.

    What’s worse to you… the economic impact of their industry to our country… or the millions and millions of people killed and injured, the impacts to the environment, the loss of community, the huge public health problems because of the lifestyle that automakers have spent billions shoving down our throat, etc…

    I would take a recession over that any day.

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    Mike September 25, 2008 at 11:19 am

    “Lobbyists also said they needed the money because U.S. government policies that have hurt their bottom lines.”

    It is actually poor management that has plagued the US auto industry. No foresight, an inability to control the UAW, and good old fashion greed. Government policies as they pertain to the auto industry are laughable.

    “The preservation of our livability and the preservation of a sustainable and safe transportation system that gives Americans mobility choices should take precedence over the preservation of a few thousand blue-collar jobs.”

    Unless you happen to be one of those few thousand. And make no mistake, by few, what you really mean – or should realize-is that it is a few 10’s of thousands of Americans that ARE becoming unemployed. Not will be.

    It is hard to explain to a 3rd or 4th generation GM employee that his losing their job and becoming destitute is good for the country and livability. Tell his children that they are actually going to be better off in the long run by falling through the cracks now.

    If you think I am being melodramatic, you should do a little research into what is truly happening in the “Motor City”. Go spend a week in Dearborn and Redford. I bet that you would come back a little more sympathetic.

    I am not advocating the bail out of the auto industry; but nor am I about to neglect that the A.I. is made up of good people with families and obligations, just like us NW cyclists.

    We need a restructuring. If the A.I. needs that money from the government, which is ultimately from all of us taxpayers, then we should have a say into its’ management. No longer should upper management be paid millions of dollars for a job poorly done. No longer should cars such as the Charger be developed and put into production.

    I realize that this is not the forum to champion for auto workers, but please realize this is not about their career paths… It is about them being people, people who need help. When we help them we will be helping ourselves.

    The strongest economies are those that produce. I suggest we evaluate and consider alternative “bail out” options before closing any doors.

    Lastly- Instead of “everyone enlisted in the national “bike movement”, girding for battle in the upcoming re-authorization of the transportation bill, take note of how the auto industry throws their weight around in Washington”, we start making suggestions and throwing our weight around? We (“everyone enlisted in the national “bike movement””)could use a little organization.

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    Mike September 25, 2008 at 11:24 am

    Make no mistake Jonathan, we are not talking about a recession.

    This would be a full on depression.

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    a.O September 25, 2008 at 11:38 am

    Mike, you act as though this is a choice between letting people starve and having compassion. That’s a false dichotemy.

    The issue is why we’re spending more money to provide corporate welfare to people who have failed repeatedly over the past 30 years to put a competitive product on the market instead of doing something that will actually solve the problem.

    The UAW and other employees do not need to jobless and homeless simply because we don’t bail out their bosses failed companies. We can provide job retraining and temporary assistance to these people in a way that gets them on to a new career outside the inevitably declining manufacturing sector. That would be much a more compassionate act toward these families – helping them succeed long-term – rather than stringing along a management philosophy (build crap and wait for the government subsidies) that is doomed.

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    ME 2 September 25, 2008 at 11:59 am

    Great link and comments Jonathan. For my 2 cents, this politics plain and simple and rewarding those who use lobbyists.

    Mike you pretty much have it right that the Big 3’s head in the sand, pigheadness is largely responsible for their poor bottom lines and the dieing factory towns in MI and OH.

    Anyone ever hear of the Partnership for a New Generation of Vehicles (PNGV)? This is a program conceived in the mid-1990s and it involves mostly US taxpayer money and a small chunk of change from the “Big 3” which would be the primary beenficiaries of new fuel efficient engine technologies.

    Japan had a similar program, but it involved a much more equitable financial split beteen public and private automaker money. Surprise, surprise this is the effort that resulted in the hyrbid engines in Honda Accords and Toyota Priuses.

    The PNGV program has resulted in a few billion spent, but nothing to show for it.

    Meanwhile, Toyota has became the 2nd largest automaker in the US. That is it employs more Americans than Ford and the German-owjed Chrysler. They are also the most financially well of auto company because, and this in the words of someone I know who works for Toyota at their US Corporate HQ in LA, we have the most fuel efficient fleet in the market. They got killed on their Tacoma trucks, but are making a killing off of the Prius.

    US policymakers should be awarding ingenuity, but instead they seem to be punishing it. I personally wouldn’t shed a tear if the Big 3 went away and they were replaced by companies like Toyota who can deliver jobs to the US workforce without the constant hand outs their “competition” keeps asking for.

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    Hillsons September 25, 2008 at 12:06 pm

    Where’s my bailout?

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    Milton September 25, 2008 at 12:06 pm

    I figured you lefties out there would be all over this government incursion into the free market.

    Just wait, at the rate the goverment is moving to take over the private sector it will only be a matter of time until you get all your needs fulfilled by uncle sam.

    “tofu in every pot and a street car in every garage”

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    wsbob September 25, 2008 at 12:10 pm

    It’s kind of hard to sell to people something they don’t want. This is one reason auto industry executives offer to explain why for so long they put so much stock in production of SUV’s and novelty high performance cars such as the Charger and the new Challenger that’s about to come out.

    Would U.S. residents have wanted the Prius if SUV’s hadn’t been such a dominant product in the U.S.? That might sound like a pretty goofy question, but public tastes, preferences and variable sense of economic realities are factors driving the U.S. auto industry.

    Read in last Saturday’s O Drivetime section that Ford has a good selling 65 mpg diesel sedan that they produce over in Europe and London. Won’t be introduced here, because Ford’s market studies suggest the American buying public won’t consume enough of them to make it pay for itself.

    The auto industry relies on massive product turnover that must be extremely expensive to manufacturers. Could a little less built in obsolescence help resolve that problem? I know they’re exhaust emissions are awful compared to the standard of today’s modern vehicles, but I can’t help but think of the 60 year old American cars that are supposedly still being driven around every day in Cuba as regular transportation.

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    Anonymous September 25, 2008 at 12:14 pm

    Off of the bike thing, but it caught my eye in another comment so I’m assuming it’s fair game:


    I’m not sure how much you actually know about home design in the United States, but as an architect I can tell you that we typically do not design a majority of the houses you see. That is done by developers/contractors. Hiring an architect to design your house is pretty rare.

    At any rate, when we are hired for home design we generally do design with sustainable techniques.

    In most cases, for any building we are hired for, we design with any sustainable technique. However, we are faced with a few more obstacles than “having our heads in our asses”.

    I can tell you right from the start, not every house in the United States could be designed to be heated solely on passive solar heating. Some could, sure, but not all. Not even a majority. There are too many variables.

    Secondly, where we have a larger ability to save energy is with cooling. But that takes convincing people that they don’t need to be so reliant on air conditioning.

    I could go on and on about this because I know what I’m talking about – but this board probably isn’t the right place to inform the world about sustainable design and construction techniques.

    Please refrain from implying that my entire profession is blinded by the inside of their rear ends – you simplification of sustainable design implies that you are not well educated on the matter.

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    El Biciclero September 25, 2008 at 12:14 pm

    This is what happens when people aren’t responsible for themselves and don’t make prudent choices. Foolish and greedy/lazy citizens depend more and more heavily on government to take care of them. Communism, here we come!

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    BURR September 25, 2008 at 12:36 pm

    It’s kind of hard to sell to people something they don’t want. This is one reason auto industry executives offer to explain why for so long they put so much stock in production of SUV’s and novelty high performance cars such as the Charger and the new Challenger that’s about to come out.

    There are a few underlying reasons SUVs and high performance vehicles are popular in the US:

    1. Profits on SUVs are higher because they are classified as light trucks and they don’t need to meet the higher safety standards for passenger vehicles

    2. Consumers didn’t ‘request’ or ‘demand’ these vehicles on their own, the demand for them was created by a massive advertising campaign by the automakers

    3. the US is a world leader in subsidized fuel costs, making fuel-inefficient vehicles much more attractive to consumers

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    T Williams September 25, 2008 at 12:37 pm

    Letting flawed business models die is free enterprise at its finest. People employed by dying industries are not serfs. They are not bound to these careers. They can reeducate/retrain and find new avenues to provide for themselves & their families. That’s the American way.

    Frankly, I’m a bit worn out by how many “essential” industries must be saved with my tax money. It’s the same story every time: speculation creates a bubble that pops and then it’s depression time!

    Screw our “essential” industries & corporations – let ’em swing in the noose. We Americans have become complacent, blind, and fat. It’s time we relearn what it is to live within our means and reconnect with our communities.

    We give our lives & health & money up for some “dream”, a dream that is guided in part by the very corporations that are now in trouble. Screw them.

    I say, bring on the Global Depression! Let’s get the global market back on track the correct way by allowing the rock-bottom to be found naturally, not languish in a false financial security blanket, only to be truly crushed a short time later when reality rears it’s head… only now we’re $700 billion shorter in cash.

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    D. September 25, 2008 at 12:49 pm

    F*** cars–make a Big 3 bailout the basis of a national mass transit revival.
    All three of these companies can build buses of various sizes. Why not use this as an opportunity to begin the active breakdown of the private-auto culture?

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    BURR September 25, 2008 at 1:04 pm

    Personally I’d much rather have rail than busses – as long as the tracks aren’t a hazard to cyclists

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    Anonymous September 25, 2008 at 1:05 pm

    The “big-three” should’ve restructured years ago.. Now they want the feds to bail them out too.. There’s clearly something wrong with a system that supports bad economic decisions.. Unfortunately, neither political party has a monopoly on subsidizing inefficient corporations.. Time for some third party influences to tackle these issues. I’m over helping the rich get richer..

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    john September 25, 2008 at 1:06 pm

    Anonymous #12, obviously you haven’t read much on the subject (whereas i have read half dozen books on the subject, most written by Architects, and the attention-catching sentiment I used, i plagiarized from them), or you would know that a passive solar home is both a warm home in the winter and a cool home in the summer. Yes, individual houses are obviously built by contractors, etc, but the basic designs are typically done or could be done by architects.

    From all that i have read, it would be no issue at all (no higher cost, no more complication, no environmental limits, even upper minnesota, or rainy NW) to make passive solar homes. So yes The majority, if not all homes in the US could be made passive solar. Ignorance is bliss though and comfortable. Start by reading: The passive solar house / James Kachadorian. 7 copies in the Multnomah CL.

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    joe September 25, 2008 at 1:07 pm

    well, if you are going to take the time to travel to Detroit to see the effects of the past 25 years – take the time to drive through Gross Pointe, Birmingham, Bloomfield Hills, etc.

    Continuing to reward companies who are this poorly managed is a dead end. I think that, even with this package, at least one of the big 3 will go bankrupt within the next year or so.

    hopefully, whatever companies pick up the pieces will have more sense.

    in the mean time, bike on!

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    Seth September 25, 2008 at 1:18 pm

    So large automakers need a bailout because they can’t handle their business properly? Yeah, lets give them more money. Hmmm.

    If we must support the auto industry – which is debatable – then we should probably do something productive with the money like provide it with a performance contingency. How about 5 billion to the first company that can meet some sort of mileage milestone and everybody else – sorry, you should have tried harder.

    Sometimes the best things happen when people come up against hard times. I have heard many stories of people that lost their job, and it was the last incentive they needed to follow their dream or start a business or do something that was more meaningful to them rather than the same old grind.

    I had a corporate job and it sucked. Now I run my own business and I look forward to every single day.
    95% of my customers are cyclists.
    Your mileage may vary.

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    matt picio September 25, 2008 at 1:20 pm

    Looks like there’s been some good input so far on this. Here’s mine, apologies for the length. Full disclosure: I was born in Detroit and lived there for 20 years. I spent 2 of those years working for automotive suppliers, spent 6 months in and around the design centers of the Big Three, and my father was a career GM employee who worked there for 38 years. I’m going to go out on a limb and say that while I’m by no means authoritative, I feel I’m qualified to speak on the subject.

    Each of the so-called “Big Three” has a massive credit arm to facilitate automotive loans. Generally, over the last 20-30 years these credit arms have gotten pretty good at weeding out the high-risk borrowers from low-risk ones. The credit orgy of the last 5-7 years has undone a lot of that work, and as a result the credit arms of Chrysler, Ford and General Motors are going to drag down all three companies to a lesser or greater extent.

    The automotive industry is the last “real” heavy industry in the US. It’s an unbelievably massive collection of infrastructure, equipment, and property that directly employs nearly a half-million people in the US and indirectly employs more than 10 million. Believe it or not, the current US industry is about 1/8 its former size in terms of number of employees. GM alone builds and ships some 300,000 cars each MONTH, and the North American auto industry typically produces 15-21 MILLION cars and light trucks every year.

    GM hasn’t turned a profit since 2005, about the same time gasoline first reached $3.00 a gallon. The entire industry is in free-fall, after 2 decades of cashing in while marketing and selling some of the largest and most fuel-inefficient vehicles ever. There are 2005 SUVs that get worse gas mileage than the 1985 Ford F-150 I was driving the same year. (I replaced that with a 30-mpg Pontiac Vibe, and went car-free last year)

    One problem is that the industry can’t turn on a dime. Once they’ve identified a problem, it takes 5 years to react to it. They have to design the new vehicles, build and test the concept car, order and manufacture new tooling for the plants, re-tool the plants, and make massive adjustments in the items and materials that they order for assembly. A single car may have over 400 vendors, all of which are building parts to specification. During the manufacture or the re-tooling, some of those vendors will have quality issues, some will go out of business, and the industry has to accommodate that and adapt. The supply chain literally wraps around the world and involves tens of thousands of companies when you take into account the 100+ automobile models in production at any given time. Anything that negatively impacts the Big Three impacts the entire US economy, even with the reduced role of the Big Three and the recent decline in mileage and auto use.

    The good news about the government bailout is it will likely prevent the uncontrolled collapse of the Big Three. The bad news is it will encourage bad behavior by shoring up the industry during a time when it should be retooling itself for electric vehicles, or better yet, converting to a more effective transportation use, like passenger rail, transit, and bicycles. (not that THAT’s likely to happen)

    Jonathan asks “Where are the millions”? A handful of millions went to pad the accounts of top-level automotive executives. Much of the rest went to the salaried and hourly workers (some of THAT money went into the UAW’s coffers), and the pension plans which cover former workers ($7 billion per year on average). Realize that in GM’s case, 300,000 cars per month equates to 3.6 million cars per year (3.87 million in 2007) – representing $70B (that’s BILLION with a “B”). That’s just in North America – GM worldwide sales were 9.4 million cars, North American sales are barely more than 1/3 of that.

    GM in 2007 had $181 billion in sales worldwide, and in a typical year, might make a profit of $2B-$12B. Much of that is issued to GM shareholders as a dividend. Most of GM’s stock is held by its employees, about 99% of whom make under $100,000 a year (an assembly line worker makes about $28 an hour, or about $58,000 a year) – most of that money returns to the economy to make additional purchases. GM keeps about $25B in cash for operating funds and to weather downturns. In the last year, GM has suffered a $2B-$3B loss each quarter – and even though GM’s sales are $180B, it’s assets (other than the cars in the pipeline) are much, much smaller. GM also lost $4.3B in 2007 in “bad paper” – losses due to the mortgage arm of GMAC.

    Really, the bailout package represents about 10% of the amount of money those 3 companies pump into the US economy each year. Does there need to be change? Absolutely, and the auto industry has been shrinking every year. It needs to happen, but an uncontrolled collapse of any of those 3 companies would further devastate the economy of SE Michigan and seriously damage the economy of the US. On a local level, Freightliner is owned by Chrysler and is one of Portland’s largest employers with 3,170 local workers. Indirectly, the company likely supports 2-5x that number of employees in local businesses that Freightliner contracts with.

    The auto industry throws its weight around because it literally reaches into every corner of the economy. We absolutely need to advocate for change, but the industry hangs over us like an elephant – put the elephant on a diet, don’t saw off its legs. The bailout is significant, but it’s actually a lot smaller than the absolute numbers suggest.

    To put it in perspective, it represents 70 days of combat operations in Iraq.

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    Matthew Denton September 25, 2008 at 1:44 pm

    About 2 years ago GM was running a “help us find the way forward” campaign, and so I sent them a letter, (a real letter with stamp and everything,) telling them that they should retool their closed plants to build windmills, that there was a lot of money to be made in windmills, and that many of the producers of them were sold out years in advance, and the actual generator on a medium sized windmill was about the same size as SUV, and about as complicated, so much of their assembly lines would actually be perfect for it…

    I never heard back from them, and as you can see, they didn’t do it, and they are losing around $1B/month…

    (I can’t claim credit for the idea, it came from Lester Brown.)

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    Mike September 25, 2008 at 1:48 pm

    A.O.- Saying no can lead to people starving. Please read my entire post; I am suggesting that we investigate the problem at hand, come up with several solutions and proceed from there. I am not a proponent of corporate welfare, nor of a knee-jerk “NO”.
    I believe that people like Seth (#21) could have the answer.

    Perhaps we help GM re-tool to build highspeed rails? Corporate welfare of a sort, keeps thousands of people employed, and would actually create new industry in the US, while also creating new opportunities for existing industries.

    Joe- You are exactly right. Salary caps would be needed for the individuals who kept their jobs through this. They should not be becoming millionaires by failing the stakeholders. However, that being said, when was th last time you have been to those areas? Grosse Point is old money, but Birmingham and Bloomfield Hills are not what they were 6 months ago, let alone 2 or 5 years ago. For those of you not familiar with the suburbs being mentioned, they comprise of thousands of homes identical to what you see on West side of Skyline. 4000-7000 sq ft homes, becoming empty and being sold for $200k.

    The change is coming, no doubt, and I am excited for it. I think we should embrace and try to control it creatively, not just let it happen.

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    Mike September 25, 2008 at 1:51 pm

    Thank you.

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    jack September 25, 2008 at 2:28 pm

    nice post matt

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    Anonymous September 25, 2008 at 2:53 pm

    @ John –

    A half dozen books? That’s… not very much.

    While I agree that passive solar heating should be used more often than it is, it is simply not practical (or even possible) to use in all situations.

    If it was as simple as well place windows then it would be fantastic. But it’s not.

    At any rate, I have better things to do than argue something I know very well, have been educated on and certified in, have practiced for many years, with someone who has read 6 books.

    Have the last word if you’d like, I’m not going to read it.

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    jami September 25, 2008 at 2:55 pm

    $25 billion was enough to buy every person in america an $82 bicycle. or $82 worth of health care or education.

    put another way, congress just made you and every american you know loan $82 to the ceos who knew oil wouldn’t last forever, who promoted the humvee anyway.

    i don’t think we’re getting that money back.

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    Evan September 25, 2008 at 6:19 pm

    Our country has been built around cars since World War II – that’s more than 60 years. And I don’t just mean roads that were built to move cars instead of streets to move people. We got ourselves into this whole mess because the auto industry lobbied to get us here.
    SUVs are not popular because they are cool, they are popular because they are exempt from CAFE, and once the automakers figured that out, that’s what they pushed. Take a look at new cars and see just how many “cars” are considered light trucks. Dodge PT Cruiser, Subaru Outback, the list goes on. All exempt from CAFE.
    Then take a look at how many other countries tax gasoline. And look at the cars they drive. They are smaller, more efficient, more practical, and less likely to knock over a building if the drivers lose control.
    The automakers made money hand over fist on trucks and SUVs with 20-year old technology, but they can’t make a compact car that will last more than 100,000 miles, and even if they could, they’d be selling it at a loss.
    Should the US Government bail out the automakers, or should the automakers bail out the US government???

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    a.O September 25, 2008 at 6:35 pm

    Mike, I got the gist of your post and I agree with you. Mine was unnecessarily critical of yours. I know Jonathan and it was the implication that you perhaps thought he didn’t care about the people affected that got me going on that one.

    Bottom line: This action by Congress is ridiculously regressive. My point was that saying no to this doesn’t have to lead to people starving. We can do something else to help these people that doesn’t reward the gross incompetence that these corporations have exhibited over the past 20-30 years…something that respects the “market” that the people in Congress profess to worship. Near the top of my list would be re-tooling that manufacturing capacity to build high-speed rail.

    But I’m that guy who would create jobs by building massive amounts of wind, solar, and geothermal manufacturing and production capacity throughout the US, along with electric vehicles, simultaneously solving our two biggest problems, global warming and peal oil. I guess that makes me an old-school Democrat, even though I don’t respect their leaders much.

    I am literally dumbfounded at the blatant political pandering and lack of leadership of Congress. I’m not surprised by that crap from our War Criminal President. And I’m glad that much of America has become outraged at this corporate welfare – it’s about time they woke up to this egregious breach of their trust.


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    Eileen September 25, 2008 at 9:01 pm

    You know what, sometimes change hurts. We love to talk about the free market and use it as an excuse for why corporate america exists as it is, how about actually letting it take it’s course? Yes, there will be unemployment. I would rather pay unemployment to the auto workers, and maybe make small business loans to some of them, than bail out a dying industry that NEEDS to die.

    The sense of entitlement that Americans have for our current lifestyle is obnoxious. WHY do we deserve to live better than anyone else on earth, especially if we can no longer compete? How much are all these bailouts going to cost each of us?

    I can just think of so many better things to do with that money than giving it to auto companies and investment bankers. How about funding some of the unfunded education mandates? Public preschools, teacher training, smaller class sizes, trade programs, making higher education affordable, whittling down the national debt, microloans to underdeveloped countries, infrastructure for underdeveloped countries, increases in social workers, services and support for parents, universal healthcare… and on and on. We love to react and treat symptoms and complain about problems but we never do anything to change the underlying causes for the problems. Preschool is cheaper than prisons, helping 3rd world countries would be more productive than complaining about illegal immigrants and supporting new industry or re-training auto workers makes more sense than bailing out companies that made poor choices.

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    BURR September 25, 2008 at 10:54 pm

    +100 Evan!


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    matt picio September 25, 2008 at 11:46 pm

    jami (#28) – not really, we just loaned about $0.05 to the CEOs, and about $1.25 to senior management, and about $20 to auto workers. Another $20 is paying the pensions of former career automakers, and the balance is filtering down to tool & die shops that support the industry, plastics factories, steel mills, glass works, rubber manufacturers, and hundreds of other companies.

    This is like turning a supertanker, it takes time and sustained effort. The automotive industry represents the largest remaining heavy industry left in the country – 40+ separate feeder industries (Steel, aluminum, glass, rubber, plastic, textiles, etc) and all of the equipment, capital and knowledge needed to run them. It’s all been headed in the wrong direction, and we need to turn it in the right direction while keeping the industries working and employed at the same time. If we fail to do that, companies go under, the assets get sold, and much of that machinery ends up in China and India.

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    Pete September 26, 2008 at 1:02 am

    I’m confused. I see convincing arguments about the dire effects of not bailing out the “big 3” auto makers, yet ME2 makes the point that a Japanese company has risen to be the second largest employer as the others have increasingly moved manufacturing to Canada and Mexico. All these companies are filling the same transportation needs for the same general market, so why are the Japanese succeeding? They innovate. They turn on a dime. Why on Earth would I want my taxes going to help companies that haven’t learned agile business practices turn out 300,000 inefficient cars a day?? I would much rather see them go to retrain the unemployed people these companies have already let go for industries more relevant to the changing American landscape.

    So I understand the point that the bailout is to prevent an immediate crisis, but how does it actually change anything and not require another bailout down the road (i.e. next election year)?

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    D. September 26, 2008 at 7:28 am

    Two books that combine to give a good picture of how the Big 3 shot their own feet out from under themselves:
    “The Reckoning,” 1984, David Halberstam’s parallel histories of Ford and Nissan which illustrated the devolution of US manufacturing to being “a plaything of finance,” and “High and Mighty,” 2002, Keith Bradsher, about the repackaging of old technology as new which is the sport-utility vehicle. When we bought our last car a few years ago, there was no Chevy Civic, no Ford Outback, no Plymouth Prius–those two books explain why!

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    Geezer Guy September 26, 2008 at 8:56 am

    I can’t wait for my bail out money. I’m getting close to retirement and due to bad choices I made during my working years I don’t have the money to retire, so I think I should get some of the 700 Billion dollars too. Its all my fault I can’t retire now so there for I should be bailed out.

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    Peter W September 26, 2008 at 9:32 am

    Does anyone else think there is a strange difference between how we treat the public sector and private sector?

    Consider this:

    If public schools are performing poorly, the federal government cuts their funding.

    If private automobile or finance companies are performing poorly, the federal government gives them billions of dollars in aid.


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    wsbob September 26, 2008 at 9:33 am

    The Japanese are innovating alright. Or, maybe they’re just responding to what has been the steadfast approach to American carmaking: the bigger, the faster, the better. If instead of big guzzlers, the U.S. auto industry had for been making small sippers, Japan might have responded by making large SUV’s. It’s all about the market. I appreciate Burr’s comment up in #14, but the fact is, nobody forced Americans to buy gluttonous SUV’s despite effective marketing campaigns and tax write-offs.

    Americans wanted and chose to buy that crap, creating a market demand that for decades, has squelched the possibility of successfully building the U.S. auto industry into a leading world producer of smaller, fuel efficient vehicles. Americans never have needed U.S. automakers to provide them with small fuel efficient cars because if they ever wanted one for a second car (because again, for decades, no self respecting American would rely on one those puny things for their primary transportation), foreign countries were already producing excellent models.

    I’ll agree with Matt Picio though, that it’s very unrealistic to let the U.S. auto industry go hanging in the wind because they’ve screwed up. Much as is the case with the banking industry, the U.S. auto industry is inextricably linked to entire U.S. economy and the millions of Americans that rely on it to survive.

    Hopefully some kind of moderate balance can start to be approached now the U.S. auto makers are serious about making strides in the electric car market.

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    Bent Bloke September 26, 2008 at 10:29 am

    Anybody else see Jonathan get a mention on KGW in regards to this story? It was on the evening news last night.

    Kudos to Jonathan!

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    Bent Bloke September 26, 2008 at 10:41 am

    wsbob @38:

    The US automakers DID make small, relatively fuel-efficient vehicles after the Gas Embargo of 1973. Remember the Ford Pinto? Chevy Vega? They were crappy, rushed out to compete with Toyota and Nissan. That’s also when the Big Three started importing foreign-made vehicles and rebranded them as their own. I had a Ford Courier pickup that was actually a Mazda B1800 with a different grill and tailgate.

    There were a lot of vehicles with wimpy engines around then. People bought them because gas was expensive and hard to come by sometimes. But then gas became more available, the price dropped, and people started wanting more powerful engines again.

    Cars are status symbols to a lot of people. They think bigger and faster means more status. I never have figured out why people think something they owns defines their character. It doesn’t. It reflects your character.

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    Pete September 26, 2008 at 2:06 pm

    wsbob, BB, thanks for your insights. How about, instead of $25B, maybe a fraction of that with specified performance metrics and measurement techniques, and maybe a time table for review of these results indicators? In other words, yes you get bailout money, but you have to use it for bailing out efficiently and show improvement in revenue and job preservation. Isn’t that what happened with the Chrysler bailout? The minivan was created and Iacocca repaid the entire loan? My understanding of that history, anyway, don’t quote me as fact.

    BB, you’re right about status. Bigger and faster sucks. Now lighter and faster, that’s another story… 😉

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    El Biciclero September 26, 2008 at 3:05 pm

    Related to the rash of bailouts being considered right now:

    From the Oregonian:

    Odds get worse for Columbia River I-5 bridge money

    Here is a quote from the article:

    “Northwest members of Congress have positions of great influence on transportation issues. Nevertheless, winning more than $400 million or more for a single bridge project — at a time of federal budget deficits, declining gas tax revenue and controversy over congressional earmarks for transportation projects — amounts to wishful thinking, they said.

    “The housing crisis and $700 billion bailout package Congress and the White House are working on this week put even more pressure on federal finances.

    “The gloomy outlook reinforces the likelihood that motorists will be charged tolls to help finance construction, and calls into question the scope of the project. Cost-saving measures also could work against Portland’s efforts to ensure a grand design for the bridge.”

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    Opus the Poet September 26, 2008 at 3:26 pm

    I was reading in another blog that they should just take the $85B they were going to give Lehman Bros and AIG and give it directly to the people (that would be you and me) which would work out to roughly $250,000 per person after taxes. With that most people could pay off their mortgages with lots left over to create new businesses. I personally have been trying to start a bike building business for years, but because I don’t have the capital to buy tools, parts, and raw materials I have been scraping by recycling cast-off bikes from the curbs into bikes that can be ridden by adults without pain. I could be making the next generation of Human Powered commercial vehicles instead…

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    Mike September 26, 2008 at 4:26 pm

    While I applaud the idea, the sad thing is how many people would rush out and buy SUV’s.

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    Opus the Poet September 26, 2008 at 5:02 pm

    Or Priuses (Pria?) or whatever? NBT just as long as they spend it on American products (which actually leaves out most of the SUVs as they are made in Mexico) The thing is The People can do a much better job bailing out the economy with that money than people who have demonstrated inability to manage a company (except to extract a lottery winner’s size annual salary before running it into the ground). Paying off mortgages and buying stuff would employ Us, and also getting rid of debt then frees up money which can be used for other things, like paying living expenses. i would even let the CEOs of all those failed companies have their share, if they leave the companies they ran into the ground and never lead another corporation again.

    Also since there is so much local infrastructure going to ruin, how about selling naming rights to various bits and pieces. I know a couple of HS locker rooms I would like to plaster my moniker over. Have fundraisers to get some of those bailout $ from the people to the projects that need work. “Potholes on this street repaired by a grant from Opus the Poet.” “Curbs and sidewalks on this block courtesy of a grant from Opus the Poet.”

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    Opus the Poet September 26, 2008 at 5:04 pm

    And yes I know that not everyone is as altruistic as I am.

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    007 September 27, 2008 at 12:50 am

    crooked damn country

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    matt picio September 28, 2008 at 11:19 am

    Pete (#34) – very valid points. I’m not saying the $25B shouldn’t come without conditions. Government should be using this opportunity to change the direction of the industry.

    As for Toyota “turning on a dime” – they don’t. They are nearly as slow as GM, Ford and Chrysler to implement change. Where they excel is in their ability to forecast where the market is going and their willingness to start making the change well in advance of the market shift rather than milking the current trend until its end.

    We really need to be punishing the senior exec who got things into this mess – which is why the bailout should have conditions. If we just let the companies fall, we’ve allowed the market to take its course, but we also punish a million or more workers who are just trying to work a job to support their families. All that does is shrink the middle class, and the top execs will jump ship with a nice severance package and move to other companies.

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    wsbob September 28, 2008 at 11:46 am

    How much in the way of conditions can congress propose and implement before running into the wall of ‘too much government interference’? This seems to be an ever pressing conflict surrounding the concept of regulated free market capitalism that the U.S. owes it success to.

    As a part of the bailout due to the banking crisis, some congress persons were suggesting that some level of public ownership of the loan companies that ran into such trouble, be a condition of the bailout. I haven’t heard lately; wonder how well that idea flew.

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    a.O September 28, 2008 at 3:03 pm

    “If we just let the companies fall, we’ve allowed the market to take its course, but we also punish a million or more workers who are just trying to work a job to support their families.”

    Not necessarily, Matt. There is no reason why a different plan could not provide financial assistance and job re-training to the Big 3 employees while allowing the inevitable to happen, instead of continuing to prop up managers who are destined to fail – or, perhaps more accurately, destined to show up on DC with hat in hand again in a few years.

    The idea that you have to continue this corporate welfare to help the people who really get hurt when these corporations fold is just not true. When other manufacturing jobs disappeared during the Clinton years, the administration’s policy was not to keep feeding the companies cash, but to create industry-specific assistance and re-training programs.

    I say give the money to the workers and let the managers pay the price for their bad decisions.

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    Eileen September 28, 2008 at 8:39 pm

    250,000 per person??? That’s not right. That can’t be right. When I first read that I thought, “hell, yeah, give ME that money.” but then I realized that 250,000 per person is more taxes than the government collects in a year, so now I have to step in as the resident math teacher and inform you that 85,000,000,000 divided by 300,000,000 americans only comes out to $283 per person. That might buy you groceries for a month if you are a vegetarian. Even when you include the 700B for wall street, it is only a couple of thousand per person. I’m wondering if the article you read meant to give it to the employees of those companies. No thanks please, just doing my part to stamp out math illiteracy when I see it.=)

    In any case, I’m not worried about the unemployment. It just feels so frustrating and ironic that for most of my life I’ve complained about corporate america and been given the argument that it is what Americans want and we choose that with how we spend our dollars. Well, now that it’s failing, why are we bailing them out??? Maybe the fallout of this painful transition could be a return to simpler times and a comeback of the small business. Let’s let it happen. If we are worried about all those employees, then give THEM the bailout money, not the corporations!

    If they would give HALF that money to schools, we could solve so many problems. Or, we could eliminate hunger in this country where 13% of our children don’t know where their next meal is coming from (probably more now). We could set up a healthcare system where NO ONE had to worry about whether to pay the rent or go to the doctor. Social services are SO cheap in comparison to so many other things. This bailout makes me more than frustrated, I’m fuming. I’m absolutely outraged at the misplaced priorities and the openly greased palms of the Good Old Boys. BTW, If Oregonians pass the merit pay for teachers, while we are being forced to implement unfunded mandates…

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    matt picio September 28, 2008 at 11:30 pm

    Opus (#45) – “most of the SUVs are made in Mexico” – really? Where are you getting your information?

    Explorer, Mountaineer, Ranger: Kentucky
    Expedition, F-Series: Michigan (F-series also Kentucky)
    Navigator: Michigan
    Nissan pickups: Tennessee
    Sidekick, Tracker: Ontario, Canada
    Escalade, Tahoe, Yukon, Suburban: Texas, Wisconsin
    Saturn Outlook: Michigan
    Rainier, Trailblazer, Envoy: Ohio, Oklahoma
    Silverado, Sierra: Michigan, Ontario

    I could go on for Ford and Chrysler, but most SUVs are built in the US and Canada (almost exclusively Ontario), not Mexico. Mexico has quite a few plants, but not as many as the US.

    Ford’s Mexican plants build mid-size sedans, not SUVs. Mexico’s other biggest assembly plant is Volkswagen. Only GM SUVs are built in Mexico, like the Suburban and the Avalanche, and GM’s newest Mexico plant only builds for the Mexican car market, not the US. GM also has plants in Ecuador and Brazil which build for the South American market – US sales only account for 1/3 of GM’s revenue. Chrysler builds Ram trucks there, but also PT Cruisers.

    a.O. (#50) – It’s not the managers who are the problem, it’s the executives. (managers are middle-class low-end white collar workers who typically make about $60k-100k per year, only about 1.5x what the line workers make) The money should come with strings attached, to motivate the industry to change. The main reason I’m concerned about keeping the industry is the equipment and facilities it contains. The automotive industry is the last real heavy industry in the US – we’ve exported the majority of our manufacturing to other countries, and the equipment has also gone overseas. With energy costs where they are, we need to re-localize production. We need hi-speed rail, and transit, and the automotive industry has the equipment and facilities to construct that, as well as the transportation connections to do so – all at low cost. If we lose it now, we lose it for good.

    Job re-training is great, but you can only re-train about 50%-70% of the workers. For a 100,000 person employer, like one of the Big Three, that means 30,000-50,000 people are going to be severely impacted. Not only that, but what about all the pensioners? I’ve made some simplifications in my prior post, but the issue is a lot more complex than what can be discussed in these comments.

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