All Posts Tagged With: "U.S. automakers"

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The debate over whether or not to bail out the Big Three is creating a divide between the North and the South:

Should taxpayers in Alabama be required to bail out automakers whose plants are concentrated in Northern states like Michigan and Ohio?

… Sen. Jeff Sessions, R- Ala., told reporters Wednesday, “I can not imagine a real justification for a worker in Alabama who does not have any health insurance at his company to be taxed to maintain a Cadillac health care plan for somebody in Detroit.”

Seems like a fair question, I suppose. But one might ask a similar question when it comes to federal aid to disaster-prone areas in the South:  Should homeowners in the North be taxed to rebuild homes in the South that are in areas known to suffer from periodic major natural disasters, like hurricanes, tornadoes or massive flooding?

As someone who leaves in a disaster-prone area of the country that’s received federal aid in the past after major natural disasters, I certainly appreciate the assistance of the federal government to areas devastated and unable to cope with the huge financial toll of such a disaster. I certainly think we as a country have some duty to assist our fellow Americans who may be facing a monumental financial disaster resulting from the impending major collapse of one or more major manufacturing companies that have historically been a bedrock of the U.S. economy.

Do I think there should be a bailout of the Big Three? Not in the manner in which they want it — with few strings attached and without a major restructuring of their companies. I don’t know what the best answer is. I’m more inclined to favor a bailout package that protects the workers and let’s the companies face the consequences of their extremely poor management over the last couple of decades.

In any case, this debate has created some interesting arguments, bedfellows and dividing lines. But, rather than diligently working on some sort of solution, Congress once again defers it to another day, leaving the problem for the next Congress and the next administration to deal with. Hopefully it won’t be too late in this fragile economic climate to come up with some sort of fix before it creates an even greater problem in the larger economy.

When the three CEOs of the Big Three automakers showed up on Capitol Hill this week looking for government handouts, ABC News noted:

All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.

… Wagoner’s private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.

Rep. Gary Ackerman (D-NY), who sits on the House Financial Services Committee, said what everybody was (or should have been) thinking:

There’s a delicious irony of seeing private luxury jets flying into DC, and people coming off of them with tin cups in their hands, saying that they’re going to be trimming down and streamlining their businesses. It’s almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. Kind makes you a little bit suspicious as to whether or not…we’ve seen the future. There’s a message there. Couldn’t you all have downgraded to first class or jet-pooled to get here? It would have at least sent the message that you do get it.

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Watch it:

Helen may be on to something. In an Op/Ed piece for The Guardian, Brian Beutler essentially says what Helen was saying: If the U.S. automakers need a $25 billion bailout, let those who profit most off the gas guzzlers the U.S. automakers have been building foot the bill for any rescue plan:

Here’s some data. According to the Bureau of Transportation Statistics (pdf), Americans drove about three trillion miles last year. To fuel all of that shuttling around, according to the Energy Information Administration, we purchased about 142 billion gallons of gasoline from retailers. A little bit of quick division and we find that, in 2007, the average vehicle mile was travelled with a fuel efficiency of 21 miles per gallon. Kind of pathetic.

At the same time, in 2007, the average gallon of gasoline ran about $2.80 – which is to say that Americans spent something like $400bn on gasoline last year alone. The EIA further reports that, in 2007, “distribution, marketing and retail dealer costs and profits in 2007 were 10% of the gasoline price”. Just for fun, let’s guess that “profits” accounted for 62.5% of that 10%. Well then: $400bn x .1 x .625 = (drumroll) $25bn! Let’s see …where have I heard that number before?

Overall, the oil industry collected $155bn in profits in 2007. That’s in no small part (about 16% if this math is right) thanks to a decades-long lobbying effort to keep vehicle fuel standards as low as possible, which, as collateral damage, has made the American fleet uncompetitive in an era of high oil prices. That, in turn, is one (a big one) of the many reasons the auto industry is sitting on the precipice of a major collapse. And if it needs $25bn to stay alive, I can think of one place where they can find that kind of money.

But, of course, Detroit hasn’t (and won’t) ask Big Oil to bail them out. They’ve asked taxpayers – or, more specifically, the interest-group-beholden men and women in the US Congress who supposedly represent the taxpayers. They’re the ones who will decide on the terms of an aid package. As they devise one, they should keep in mind the oil industry’s role in the auto industry’s woes.

Sounds like a good plan to me. Read the rest of the piece here.