• May 16, 2007

Of all people and of all places. Normally, California is the state that launches all sorts of initiatives that drive carmakers into a frenzy. Now, The Golden State is the one asserting that the national government might need to drop a few billion large to save The Big Three -- with a few left-handed compliments to go with it, of course.

Jerry Brown, the California Attorney General, said "The American auto industry is in deep trouble and they may require subsidies. They may have to be bailed out by the federal government that has just enabled their inefficiency and their gas guzzling." It's an intriguing position, because essentially, what he's saying is that the government that has allowed American car companies to be profligate with natural resources must now bail them out because it has allowed them to be profligate with natural resources. Twelve states are suing the US government over federal fuel efficiency standards, but Brown is then asking the government to bail them out if there are drastic penalties to pay or changes necessary for those automakers to enact. Brown said "The auto companies are in such a mess, because they persistently refuse to build fuel-efficient cars, that they might find it financially impossible to do the right thing. If that proves to be the case, I think Congress has to look at ways of helping them."

The case won't be decided for some time, but the NHTSA says that is out to balance "economic practicability and technological feasibility," and that it is more concerned with energy conservation than environmental protection. At heart, while it looks like Attorney General Brown wants to do the right thing -- who's the piper, and who's really responsible to pay?

[Source: Reuters]



I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 48 Comments
      • 7 Years Ago
      The big 3 problem isn’t cash but costs. Pension cost where predictable and as result are fully funded. Healthcare costs rose exponentially and they were caught off guard. If they could improve the cost and quality of healthcare both the automakers and the nation as a hole would be better off.
      • 7 Years Ago
      All of you Nippon Heads and Liberals need to take Economics 101. The Big 3 do NOT need more of our tax money along with its much higher taxes on us and oodles of new stupid government regulations and administrative jobs. All they need is a chance to COMPETE on a relatively even basis with the Japs. Let's let the American capitalistic economic system work. Look what it has delivered for us-greater freedom and economic opportunities than anywhere else on Earth.
      • 7 Years Ago
      Government bail-out would be unwise. The government DID guarantee a loan to Chrysler in 1980 and Iacocca's success paid off the loan early.

      But Chrysler eventually was taken over by Mercedes which made a mess of it.

      It would have probably been better if Chrysler had been allowed to fail 27 years ago. Car buyers and auto workers would have gone to GM and Ford. Chrysler has been a weak pain in the ass for decades (some of their cars were good, some not).

      The UAW must give further concessions because the promises made 30 years ago under duress cannot be kept. Without the union's drag on the domestic car makers, they'd do OK IMO.

      In any case, Jerry Brown has this one quite WRONG.
      • 7 Years Ago
      #21 Jamie

      I think you have misunderstood how economics work.

      First off, Manufacturing is alive and well in the U.S. It has just switched to different markets than where it started.

      All too often people equate manufacturing with automotive manufacturing. This couldn't be further from the truth.

      We have tons of major manufacturing companies producing everything from medical devices to missile defense systems. As a Manufacturing Quality Engineer in the U.S. I am in very high demand as a result, because there just aren't enough qualified tech people here to fill all the positions available. Even so, more and more in modern society, manufacturing is no longer the backbone of the economy as it was in the 19th century. We have evolved a more and more effective service industry as well.

      It's all about the theory of comparative advantage (which despite its name is more of a fact than a theory) In layman’s terms it states that if the U.S. for example is better at making medical stents than Germany, and Germany is better at making cars than the U.S. we should each focus at what we do most efficiently and both of our countries will be better off as an end result. (there's more to it than this, but I'd rather not spend the rest of the day explaining it)

      By bailing the auto industry out every 10-20 years at a cost of billions of dollars we are spending more resuscitating a non-viable industry than it is buying us. Not only does it make the world economic markets less efficient, but it also costs us too much in tax dollars, taking away from spending on infrastructure and research that can further future viable business opportunities, and in the long run puts us economically worse off than we are.

      Economic isolationism like you propose would be even worse, and probably result in the economic ruin of our country.

      Now, to change the topic. Yes, healthcare is too expensive in the U.S, but this is more due to inefficiencies in the healthcare system than anything else. Universal healthcare would not solve this. It would just shift it from the employers to taxes, and guess what, everyone (including employers) would have to pay more taxes. The bill has to be paid, and the difference in costs to the automakers will not be significant just because we change our healthcare system.

      The biggest problem the U.S. Auto industry has is the UAW. They have over inflated salaries and benefits for years. $20-$30 per hour ($40k-$60k/year) is ridiculous, even for a seasoned assembly worker. These are jobs that any McDonalds burger flipper could do after you train him on how to hold a wrench. In other words, they should be minimum wage jobs.

      The second largest problem the auto industry has is that they make poor product development decisions. I could rant on and on here, but I have to get back to work, so I am going to leave it at that.
      • 7 Years Ago
      Ironically, the domestics produce far more vehicles I'm interested in than the imports do. Toyota hasn't had a vehicle I'm interested in since they super-sized the Tacoma, and outside of their Acura line-up Honda's never had a car I'd want to own.

      Toyota has 6 SUVs in their product line-up, 4 of which most greenies would consider "gas guzzlers". Their flagship SUV, the Land Cruiser, is only rated at 13/17. That's worse than any modern diesel pick-up truck.

      The Chevy Tahoe, one of the most popular full-size SUVs on the road, is currently rated at 15/21 and they're releaseing a 2-mode Hybrid Tahoe this fall.

      The Chevy brand has only 4 SUVs in their product line-up, and that's counting the Suburban and Tahoe as 2 separate vehicles, and GM as a whole only has about 6 SUV platforms total (not counting the Avalanche as an SUV).

      And Chevy has 8 car models that are rated at 30mpg or better on the highway. Toyota doesn't even have 8 car models total. Chevy's only car that can't reach 30mpg or better is the Corvette.

      Chevy also put out the first hybrid full-size pick-up truck.

      Ford currently only has 3 SUV models (4 if you count the Expedition and Expedition EL as separate vehicles, and 5 if you count the Edge as an 'SUV') and one of those SUVs (the Escape) has been available with a hybrid powertrain for a couple of years now.

      IMHO the only place the imports have a stronger portfolio is in the small city-car segment.
      • 7 Years Ago
      I agree with Mattlach 100%! If the Americans can't make proper cars, desired by the market, then they will have to close down. Maybe they can open a burger joint.. that seems to sell well..
      • 7 Years Ago
      Pardon my frankness, but he's full of shit.
      • 7 Years Ago
      What!?! It's not my fault they aren't doing well, why should I have to bail them out?
      • 7 Years Ago
      Does anyone think this is especially difficult public policy? Put a high tax on high gas consumption at the pump and each year during DMV registration. Tax credit for super high mileage cars at DMV registration and these folks don't worry about pumb prices and taxes because their cars get great mileage.

      Pay big time for bad stuff and get a credit for good stuff.

      Initiate these two simple taxes and the market will take care of itself - it aint rocket science.
      • 7 Years Ago
      "Man, crazy law makers, if they want to do this for the big 2 then they should also extend the same sort of treatment to other larger US companies who can't compete globally on their own feet, like Boeing. Oh wait, we've already done that in the past."

      You guys must all live in this dreamland where foreign companies don't receive government money. Who does Boeing compete with? Airbus, a company that is so closely tied to the EU that they might as well be a gov't agency.

      Al you DA's who say these companies should live or die according to market demands have no clue the extent to which foreign governments prop up their own manufacturers. If you did you'd realize that many times gov't subsidies are required just to stay even.

      Might I respectfully suggest that one learn a little bit about the world economy and world markets before tossing out hot opinions on what the U.S. government should and shouldn't do.
      • 7 Years Ago
      Japaneses and Koreans are all making cars here in the US, and hire skilled US workers. Why they can be profitable and big 3s can't? 3 things, one is the management and accounting, two is the union, three is the design. If Chinese would open a factory here in the US someday, it would be a non-union factory. Union is a big problem, they leech on the workers who doesn't really care about their agendas but have no choice and must join in. It represents an out dated socialist concept even the "communist" China doesn't even practice anymore.......=-D
      • 7 Years Ago
      Man, crazy law makers, if they want to do this for the big 2 then they should also extend the same sort of treatment to other larger US companies who can't compete globally on their own feet, like Boeing. Oh wait, we've already done that in the past. Maybe it's time we stop acting like this is just another crazy politician pandering and face the facts that we've done it before (sure via defense contracts for planes we don't need, et-al) and will likely do it again.
    • Load More Comments