Well, no, they didn’t. “They,” or rather, the outgoing President Bush, did give Chrysler and General Motors enough money to stave off bankruptcy in December. But since then the patient has continued to hemorrhage money at a shocking rate.
Chrysler sales were down an unheard of 55 percent last month, compared to a year ago. General Motors sales were down about 50 percent, Ford, the imaginary bright spot in all of this, was down 42 percent, when you factor in its slumping Volvo subsidiary.
Not only is there no sign of a recovery, there is no end to the slump, which seems to be accelerating. These companies need to sell cars, and they need cash if they are to survive.
The cars aren’t selling. That’s partly because people can’t get loans because of the credit crunch. It’s partly because people can’t get credit. It’s partly because nearly four million Americans have lost their jobs since this recession started.
And many, many millions more today live in fear of losing their jobs. So for all those reasons, few of us are buying cars. Right now, the only potential source the car companies seem to have for large amounts of cash is getting more from Washington.
Incidentally, the bailout money we are doling out to them isn’t stored in a vault somewhere in Fort Knox. We don’t have it.
What’s happening is that your government is going out and borrowing this money, some of it from China, and then lending it to the auto companies, which hopefully will someday pay us back.
Someday. But as bleak as this all sounds, it’s possible that the worst thing we could do right now is to stop supporting them.
If Chrysler or General Motors or both should fail, it would set off a ripple effect that could involve more than a million jobs, among auto workers, suppliers, and others with jobs connected to the industry.
Worse, it could cause great worry, or worse, among the hundreds of thousands of Americans who depend on pensions from one of the formerly Big Three. The stock market crash may mean these plans are all underfunded. Last week, we learned that Ford may have to kick in an extra $3 billion or more to its pension plan .
What the answers are may not be clear. However, it is clear that the domestic auto industry as we've known it, with three major stand-alone automakers, is no longer supportable.
Possibly some recombination of our domestic auto industry into a single major corporation, or maybe two, could enable it to survive.
What is clear is that we need intelligent and bold decisions on the part of both the industry and the Obama administration, and we need them soon. We are very close to the edge of the cliff. And if everyone goes over it, I don’t know how we‘ll ever get back up.
Those who are pro-choice, or in favor of allowing same-sex marriage, aka Democrats, also tend to be more willing to regulate business, and enforce anti-trust regulations designed to see that nobody got to be too big. They also are far more inclined to require private enterprise to do things that protect the environment.
Unbridled free-market economics were largely out of favor between the time the New Deal started and Ronald Reagan became President in 1981. Since then, however, we’ve celebrated the market. Our leaders have generally held the view that government regulation was bad, and that we’ve had way too much of it.
That was certainly the prevailing philosophy over the last eight years, but in the end, things didn’t turn out so well.
The stock market crashed last fall, the federal budget deficit is higher than imagination, and John Maynard Keynes seems to have been resurrected from the dead.
The federal government has poured hundreds of billions into the market to try and stimulate it back to life, and is gearing up to pour in nearly a trillion more. Yet so far the patient still isn’t breathing very well, and the doctors are getting more worried.
Those dwindling few who still hold to the old-time free market religion think the sure cure for everything is tax cuts. In my view, they are obviously people with limited knowledge of the potholes on I-94.
But while it is easy and popular these days to expose the silliest of the Bush administration’s economic banalities, Dr. Peter Ubel has tried to something deeper and more controversial in his half-sobering, half-entertaining book, Free Market Madness. The good doctor is not just challenging the right of the Enrons of this earth to steal our pension funds. He’s questioning to what extent we ought to be trusted with free choice at all.
As a physician, he constantly sees patients who don’t exercise when they should and don’t eat healthy food even though they know how important that is to their welfare. For a moment, I thought I was talking to my doctor. Libertarians might say that an individual has a perfect right to do with their own body what they want to. Trouble is, we don’t live in a vacuum.
If I lose my health insurance, get diabetes from eating poorly, and have to be taken to an emergency room, I may well cost society many thousands of dollars. Smokers have cost the government billions. The question is, what do we do about it? The good doctor is too smart to suggest any simple solutions. Instead, he is in favor of what he calls “carefully calibrated restrictions on our freedoms.” Sounds good in principle.
That is, as long as I get to do the calibrating.
Governor Granholm’s decision to do all she can to boost the electric battery industry in the state could be even better news.
And a lot of people are excited about a new Ann Arbor-based company called Sakti3, which just might be near a breakthrough in developing the next generation of lithium ion batteries.
I don’t want to throw cold water on any of this. Right now, a big chunk of what Michigan needs is hope. But I think we should be a little cautious about putting all our psychological eggs in one basket. We in this state have, after all, gone through many rounds of what I call the “Hudson’s Building” syndrome. Hudson’s, if you weren’t around, was Detroit’s signature department store, sort of like Macy’s in New York. Generations of people flocked to it, in the era before shopping malls. Women used to dress up in white gloves before shopping there. Then times changed.
The J.L. Hudson company, which no longer exists, shocked the city at the end of 1982 by announcing that the flagship downtown store would close. But everybody agreed the building itself was as much a part of the fabric of Detroit as General Motors.
Some new great thing had to be done with this building. So, periodically, there would be front-page headlines announcing that the Hudson’s building was going to become a luxury hotel. Or a casino.
Or this, or that. Nothing ever happened, and in 1998, they finally blew it up, accidentally taking a chunk of the People Mover with it. Now -- I realize this isn’t a perfect analogy.
Saving the past and creating the future are two different things. It’s just that it is easy to believe what we want to believe. My seventh-grade science teacher told us that the only real question is whether we would be driving cars that were electric, or powered by solar cells.
He may be right yet. But he told us that in 1963, and the technology hasn’t developed as fast as he expected. General Motors’ announcement that it intends to make the batteries for the Volt here is exciting news.That is exactly the right thing for this automaker to say and do at this time. But at the risk of being Cassandra, I must point out that this is a company whose very survival is in question. And GM almost certainly depends on the government lending them more billions later this year.
Announcing a plan to outsource battery production to India would not be a good idea right now. We should also bear in mind that we don’t know whether the Chevy Volt will in fact become this century’s Model T. We don’t know if it will be even a limited success.
Someday, some new venture somewhere in Michigan will, almost certainly, take off. But for now, putting all our hopes on one possibility could be a very risky thing to do.
At the time I was thinking of becoming a historian, a slightly more respectable occupation than a journalist.
I wasn’t sure about that, but I knew that I was never going to be in a position to pay ten thousand for a car. Nowadays, of course, ten thousand dollars might get you a used Honda Civic.
I haven’t gone to the auto show in a long time. But this year, I think I actually might, despite, or maybe because of, all the media moaning about how diminished this show is compared to past years.
Some of this moaning, I suspect, is because our ailing auto companies have turned off the spigot on all the freebies that the media used to enjoy in such abundance. Chrysler, for example, provided acres of free food and booze at a renovated old firehouse across the street from Cobo Ce nter.
This was greatly welcomed by the media, because it was traditionally the first time they had gotten free food from Chrysler since the company’s Christmas party a month before.
Yet this year the freebies have dried up. That’s largely because these great pillars of private industry are being kept in business by billions in government loans they just received. To use that money to throw a well-lubricated party might not be seemly.
Especially, that is, in the eyes of the lawmakers who Chrysler hopes will give them more money later on.
So while there may be no freebies, I think this year’s auto show might be worth seeing because we are on the cusp of something new. If the current financial crisis has made anything clear, it is that the old auto industry is finished.
It has to change or die. My guess is that this year’s show will show us the industry in its transitional phase. Sort of like the world at the end of the age of the dinosaurs. Some of those old lizards are still thrashing around the swamp.
But the spotlight is shifting to the mammals -- or in this case, the hybrids and the electric cars. Chrysler is exhibiting a hot new electric concept Dodge. To be sure, there some gas powered cars that look interesting, such as the newly redesigned Ford Taurus.
But I have to confess that my concept of a sexy car has changed over the years. Today, I am turned on by comfort, safety, and reliability. That’s what I look for when I buy a car.
I love looking at Corvettes, but no longer feel the need -- or ability -- to impress anyone with what my car looks like.
This year, however, I suspect we may be looking for something altogether new among Detroit’s entries at the North American International Auto Show. We’ll stare, and wonder - could this just possibly be the car that might enable this company to survive?
If they have a car, it is a 1967 Subaru, and they would trade it for a subway ticket in a Paris Metro minute. However, as far as I can tell, none of these people have children in hockey leagues that require the transportation of vast amounts of equipment to rinks in different parts of the community several times a week.
The second type have traditionally thought any spending on mass transit is throwing money down a rat hole, and that transportation dollars ought to be used to further widen I-75 instead.
Finally, there are those in favor of mass transit -- as something for other people to use. They think we ought to build it, but privately think they are unlikely to use it often, though they may be willing to try taking it to a hockey game.
What that means is that they aren’t especially willing to fight for mass transit or make sacrifices for it. And as a result, nothing much has happened over the last thirty years.
Here’s what few of us realize. If we had a convenient mass transit system, it would not only change the way we get around the community, it would change our communities themselves.
New York City has a vast number of distinctive neighborhoods, from Greenwich Village to Spanish Harlem, that have retained their character in large part because mass transit makes it easy to get to them and for them to flourish without changing their nature.
Detroit isn’t like that at all. People in Southeast Michigan remind me of tribes of polluting nomads, who live in an area for awhile and them move on, leaving their buildings behind.
Vacant buildings, and acres upon acres of flat or high-rise cement parking lots. The world cannot sustain this lifestyle, and we won’t long be able to afford it either. We got a brief taste of the future last summer, when gasoline prices soared past our pocketbooks.
They have lessened now, but not for good. China is coming on strong, competing for every last drop of dwindling fossil fuel reserves. Finally, even those who worship the internal combustion engine are beginning to get it, in part perhaps because the auto industry, like the old gray mare, ain‘t what she used to be.
Four years ago, when Washington handed Michigan $100 million for a light-rail line between Ann Arbor and Detroit, Brooks Patterson sneered. Last month, he signed on to a long-term, mass transit plan for the tri-county area.
Now all we have to do is find the money to pay for it.
Stay tuned.
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