Monday, November 17, 2008

Why Does The GOP Want To Destroy The Auto Manufacturing Sector?


Three dangerous reactionaries

I can't say what I liked less as a kid, going to the dentist or going to a Broadway musical. But I've never gotten one musical, or one scene from a musical, out of my head. I was around 10 when my mother dragged me to see the musical adaptation of Al Capp's comic strip, Li'l Abner, at the St. James Theater. There was this one song that I associate with the Republican villain of the piece, General Bullmoose and it has the Johnny Mercer-penned line "What's good for General Motors, is good for for the U.S.A." (Bullmoose did another GOP theme song, "Progress Is The Root Of All Evil," but that wasn't as catchy.) Mercer actually adapted the line from a Senate confirmation hearing for General Motors CEO Charles Wilson, who had been nominated Defense Secretary by President Eisenhower. When asked if he would be capable of dealing impartially with his old company, Wilson didn't seem to comprehend the idea of conflict of interest and said "I thought what was good for the country was good for General Motors and vice versa."

Bullmoose and Wilson were the unabashed capitalists of the 1950s but today's much more extreme version, the rump Republican Party, is out to eliminate General Motors. Really. Today GOP Senate leaders Jon Kyl (R-AZ) and Richard Shelby (R-AL) put into words what far right ideologues have been braying about for some time, that the U.S. should just let GM fold. They announced they will oppose the plan to rescue the company from some of the funds allocated for ameliorating the Wall Street crash, calling it a "dinosaur" whose "day of reckoning" is coming.
Democratic leaders want to use $25 billion of the $700 billion financial industry bailout to help General Motors, Ford Motor and Chrysler.

Senators Richard Shelby of Alabama and Jon Kyl of Arizona said it would be a mistake to use any of the Wall Street rescue money to prop up the automakers. They said an auto bailout would only postpone the industry’s demise.

“Companies fail every day and others take their place. I think this is a road we should not go down,” said Mr. Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee.

“They’re not building the right products,” he said. “They’ve got good workers, but I don’t believe they’ve got good management. They don’t innovate. They’re a dinosaur in a sense.”
Mr. Kyl, the Senate’s second-ranking Republican, added, “Just giving them $25 billion doesn’t change anything. It just puts off for six months or so the day of reckoning.”

With only two Republicans on record in support of a rescue plan-- George Voinovich and Kit Bond, each of whom represents states with auto parts factories and each of whom has to face the electorate in two years-- it is unlikely that the Senate will pass a bill over Bush's promised veto.

A few days ago Alex Ortolani and Mike Ramsey at Bloomberg speculated that the cost of just a GM collapse, leave Ford and Chrysler out of this for now, would cost the government something in the range of $200 billion. I guess Kyl and Shelby missed that one.
The Center for Automotive Research projects that federal, state and local governments would lose $108.1 billion in taxes over three years in the event of a 50 percent reduction in U.S. automaker operations.

Job losses would total 2.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing, the Ann Arbor, Michigan-based group said in a report on Nov. 4, three days before GM disclosed its cash drain.

"The government has real costs it would have to foot'' in a liquidation, said Bob Brusca, president of Fact & Opinion Economics in New York and a former chief of international markets at the New York Federal Reserve.

"They don't get those income taxes any more from the workers, they don't get the taxes from the corporation, they don't get local loss of taxes,'' Brusca said in an interview.

States pay an average of $279 a week for unemployment benefits for 26 weeks, according to Jennifer Kaplan, a U.S. Labor Department economist. The payments can last as long as 39 weeks in some states including Ohio, where the jobless rate was 7.2 percent in September.

The federal government also might "be on the hook for the pension benefits and health benefits'' for workers thrown out of their jobs in an automaker collapse, said Dana Johnson, chief economist with Comerica Inc. in Dallas.

Yesterday emptywheel, whose lives in Michigan, looked at a possible GM bankruptcy from another perspective-- a purchase of part of the company by China, something that could well be engineered by China's #1 mole inside the U.S. government, Mitch McConnell.

So why is the far right of the Republican Party so gung-ho on seeing the auto industry fail? You need go no further than Rupert Murdoch's union-busting propaganda sheet, the NY Post for an answer. Murdoch has Dallas-based, right-wing hack Eric Torbenson explaining the Republican Party position:
GM needs more than a loan; it needs a double debt-ectomy and a new business model. It's locked in asphyxiating labor deals, has dealership franchise agreements that it can't break and faces huge pension bills its rivals don't. The company's retiree medical benefits bill was $3.3billion in 2007-- the company is trimming that back next year but still faces mounting costs its foreign foes don't pay.

Predictably, he blames much of the woes of the business on "decades of collective bargaining with unions... The United Auto Workers can blame management all they want for the predicament, but the compensation numbers are sobering. Detroit's workers earn more than $70 an hour compared with $45-$48 for the non-union shops of Toyota and Honda in the US. You can argue until you're Ford Oval Blue in the face about why the wage gap exists, but Detroit's carmakers start the sales contest already down two scores to the imports. Years of strikes and threatened strikes forced the Big Three to buy labor peace at a price they can no longer afford. The scenario gets even worse when you look at the Big Three's pension woes."

Anti-union reactionaries like Kyl, Shelby, Torbenson and all the Hate Talk radio Republicans also complain about how the Big 3 made all the wrong decisions in terms of SUVs vs fuel efficient cars. Do we credit that to rank hypocrisy, malfunctioning memories or lies? When Democrats had the temerity to offer tax incentives for the kinds of small, fuel efficient cars consumers are now clamoring for-- and buying from foreign automakers-- the GOP not only voted them down but rammed through Tom DeLay's SUV tax loophole, ramping up gas guzzler manufacture.
Lacking any incentive to improve fuel efficiency and battle imports on style notes thanks to the cushy truck business, the Big Three doubled down on gas-guzzlers just before crude oil prices soared.

In the era of $4 unleaded, the Big 3 spit out fleets of guzzlers that required $100 fill-ups and tepid sedans that, while better than '90s era Detroit metal, still choke on Accord and Camrydust. As the economy slowed and consumers put off new car purchases, the trucks are still too expensive to drive and even deep discounts won't move the inventory. GM's sales were down by nearly half in October.

My proposal: all the executives and politicians who made those bad decisions are fined-- their net worth-- and that's the first money that goes into solving the crisis. Who would object?

An afterthought: Auto manufacturers have gone from giving 73% of their political bribes to Republicans in 1996 have equally to Democrats and Republicans in 2008 (with neither Kyl nor Shelby getting a dime). It'll be interesting to watch how big recipients in the GOP-- McConnell, Cornyn, Chambliss, Inhofe and Roberts-- vote. I might add that the automotive industry as a whole has kept doling out the cash overwhelmingly to Republicans, 71% in 2008, only slightly down from their average-- although here again, neither Kyl nor Shelby got anything from them this year. (Kyl has scarfed up $315,760 in past years and Shelby took $141,663.)

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At 3:54 PM, Blogger Roy said...

Kyl is a low life. He needs to be targeted for defeat. I do not think we need to bail out GM, but for reasons that are good for the US not for Kyl.

At 9:57 PM, Blogger tech98 said...

The Big Three doubled down on gas-guzzlers just before crude oil prices soared.

But "nobody could have anticipated" that gas prices would go up in the midst of a war and US occupation in the middle of the world's prime oil-exporting region.
Sounds like the Big 3 are infected with the same kind of Powerful Stupid clubby cronyism, short-term greed and conformist authoritarian groupthink as the Chimp White House.

At 10:39 PM, Anonymous Anonymous said...

I thought the US auto industry had destroyed itself?


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