Saturday, December 13, 2008

The Loan Arranger, To The Rescue!

After several weeks of good news/bad news, it appears that Congress has stopped trying to help the American auto industry (actually the Senate stopped the House) so the White House appears ready to step in and do "sumpthun" about it!

George Bush has done a lot of idiotic things in his term, and this is not one of them.

For all the recent Conservative Capitalist talk of the need to "Let the auto companies work out their problems in Bankruptcy like any other corporation", going Banko is not the solution here.

Avoiding the argument raised by bailing out the financial sector, which is a service industry producing nothing tangible, we need American auto companies for many reasons.

They are major drivers (oops) of the economy in many parts of the country, including all of the ancillary and supporting industries and businesses that provide parts and services to them.

They are a necessary component of any serious wartime effort to mobilize; we need workers skilled in producing such vehicles, as a security issue, even if we do our best to avoid war in the future.

Manufacturing is a staple of a strong economy. In the past, when the great powers of the world became rich, they shipped labor intensive work to cheaper countries, and focused more on finance. The Dutch, the Spanish and the British all once ruled the world. When they slowly changed from manufacturing powerhouses to finance powerhouses, they at first got richer, then they slowly lost economic strength, stumbled, and began to lose their supremacy. At the same time they also overstretched their military around the globe, and they ran up huge deficits in their spending. These compounded their problems, and hastened their decline as world powers.

Sound familiar?

The reason America became a superpower, then the superpower, was because Great Britain lost their position, and after competing for a couple of decades with a cardboard cutout of a juggernaut called the USSR, we took it.

Our innovation and manufacturing strength provided for economic strength, which provided for military strength. Our Democratic system of government and our economic strength have been great forces in tandem (for the most part) and are what have given us the ability to be a superpower. Sometimes we let our military strength go in directions it should not, but that is another argument.

The American auto makers actually have been competitive in the past, and are competitive in parts of the world now, and can be competitive in the future. Ford does very well in Europe, and GM does well in China, and Chrysler has in the not too distant past both great designs and very profitable years.

If we let our manufacturing companies go away, we lose those jobs, we lose those skills, and we risk losing much more.

If we feel we do not need or want to be a superpower anymore, then we need to make decisions about going that direction. We cannot let things happen to us without discussion and without generating public policy in a new direction if that is what we want.

Bush is right to help them survive. The reasons for their dire straits right now are many, including less innovative and exciting designs in many of their models, and lower quality than some of their competititors, as well as higher costs to build (primarily because of higher labor costs) than most of their competitors. And maybe one or all of them need new leadership to really get turned around.

But the real reason they are in such serious trouble right now is that sales fell so sharply late this year. And in that debacle, Detroit is not alone.

November sales fell over 30 % for Ford and GM, and about 40 % for Chrysler.
November sales fell over 30 % for Toyota and Honda.
November sales fell more for Toyota and Honda than they did for Ford.

Does anyone really believe that if Toyota or Honda start to fail, that the Japanese Government will not find a way to rescue them?

And if you believe that those two companies will not be allowed to fail, you get a hint as to why our Big Three should not be allowed to fail either.

Sure, it hurts to see billions going to financial firms that in many ways contributed to our terrible economic troubles, and sure you can say why throw more billions at the huge auto corporations, but you would be missing the larger point;

Even if the bailout of the Wall Street Finance Goobers was or is a huge mistake, saving the car companies is not a mistake.

In fact, it is just the opposite.

It is an imperative.

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