Detroit: Answer the Call
By: Ara

[cross posted at E Pluribus Unum]

I've followed the progress of bailout talks with the Big Three with greater than average interest. Detroit is my town. I grew up in Detroit. I'm a product of Detroit public schools -- and I'm a better man for it. My kids were born and raised there; and members of my immediate family still live there. And I was there last weekend which is what got me thinking about what's eventually going to happen to my old hometown.

So here's the thing: there is no one without blame for how we got here. And consequently, everyone will have to sacrifice something to make it right before it's all over.

Bankruptcy: in fact if not in name
As Marcy pointed out, Chapter 11 bankruptcy (reorganization, not annihilation) is simply not an option for GM or any of the others. When a firm reorganizes it counts on credit to help tide it over during the transition period. But as we know, there is no money available from the normal sources. GM is out of cash; it cannot borrow, so it's on the brink. In situations like this, Chapter 7 (liquidation) is the only likely alternative. In this scenario, GM would be carved up like a Christmas goose and all the good stuff (electric cars) would probably go to foreign corporations like SAIC.

So what to do?
It seems like the Feds are ambivalent about a bailout, but call it what you will: it's a better alternative than actual bankruptcy. In return for the money, some oversight body (other than bankruptcy court) will have to guide the automakers through reorganization by attaching all sorts of conditions to the granting of the bailout monies. It'll be a roaring nightmare of regulations and micromanagement but there isn't a better -- or more likely -- alternative to it.

In terms of management...
...I say load them into the tumbrels and head for the guillotines. These are the guys who never met a long-term strategy they didn't hate. They fought increased fuel economy standards like 28 day old zombies (although they weren't alone -- more on that below). They killed the electric car. They were descended from the crowd that fought seat belts and emission standards. They deserved to finally pay for their sins. Shareholders will also take a hit. And if, for example, municipal pension funds are hard-hit, that will have to be part of a larger solution for bailing out cities and states.

What about unions?
Now, the temptation will be to point the finger at unions as well -- after all, "more work for less pay" isn't exactly a brilliant long-term strategy. But the fact is, the unions have already negotiated agreements with the Big Three that has put them on the glide path to parity with the Japanese automakers operating in the US -- probably by 2010 from what I can gather.

Health care and pensions

More importantly, whatever plan that gets crafted is going to have to address -- and respect -- the legacy costs of pensions and health care for union autoworkers who worked hard, played by the rules and have every right to expect that they will be taken care of. This would be the time to finally pass something along the lines of the Health Care for Hybrids Act, Obama's long-ago proposed legislation that would allow automakers to receive federal assistance to help pay their legacy health care costs -- if they invest some of their savings in building more fuel-efficient automobiles.

Speaking of fuel-efficient automobiles...
...I'm tired of all the players -- management, unions, and Republican AND Democratic enablers in Congress (I'm talking to you, John Dingell) and even consumers saying it cannot be done. I say throw out all the old assumptions and start from scratch.

  • Bigger cars are safer? Yeah, only if you hit a smaller more fuel efficient car.

  • Bigger cars cannot be fuel efficient? There is some dispute about that.

  • We've squeezed all the efficiency we can out of present designs? Come up with new designs.

Fact is, we cannot afford to ride that freaking oil-price roller coaster ONE MORE TIME. Yeah, gas costs less than half of what it did 10 weeks ago -- so freaking what? You're going to start driving SUVs again? Nuh-uh. Know what? That's how addicts talk. Time to go to rehab. Time to wake up from that amnesiac coma and smell the coffee. "Drill baby drill" is an idiotic solution to our problems. Better to massively subsidize the manufacture, distribution and sales of something along the lines of plug-in hybrids than ride the price of oil into the toilet one more time.

President-Elect Obama was right:
[T]here is so much more to do...[L]et us ask ourselves — if our children should live to see the next century...what change will they see? What progress will we have made? This is our chance to answer that call. This is our moment.

Naomi Klein rightfully identifies the (bad) changes that historically follow massive shocks to the system. this time we need to engineer good change to follow the massive shocks that we are living through now.

Let's answer this call, let's meet this challenge -- our kids are counting on us to get it right this time.