California AG says feds may have to bail out US automakers
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]
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Reader Comments (Page 1 of 3)
Mattlach 9:42AM (5/16/2007)
Absolutely not.
If U.S. automakers can't compete they deserve to go out of business. This is how the market corrects itself and shifts towards comparative advantage.
Government protectionism and subsidies whether it be to the auto industry, farms or any other business does nothing but create gluts in the world economic system and make it overall less efficient.
This kind of thinking needs to stop and it needs to stop NOW!
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Mike 9:54AM (5/16/2007)
Note to ALL officials, elected and appointed:
STOP PANDERING 100% of the time!!!!!!
It is OK to be yourself, or to try to strengthen/enforce existing laws. You do not have to pander to the nutroots to get your name in the paper.
These damned people could politicize a hoagie sandwich for gods sake.
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John 10:00AM (5/16/2007)
They don't call it La-la land for nothing...suddenly an AG is an expert on the auto industry? The legacy costs that are such a burden to the domestics has nothing to do with the ability to make fuel efficient vehicles. GM, for example, makes more vehicles that get 30+ MPG, than Toyota does. There are things that the gov't can do to help the domestics, but this isn't one of them.
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Steven T. 10:04AM (5/16/2007)
Significant federal healthcare reform could be quite valuable to the Big Three, I would think.
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A. Blinkin 10:04AM (5/16/2007)
A solid manufacturing base is vital for national security reasons and if you don't understand this then you're just not paying attention (market be damned).
With that said, the domestics aren't in trouble because they can't make a fuel efficient car, they're in trouble because management has done an exceptionally poor job (no, not unions) and because the U.S. healthcare system makes our labor extremely noncompetitive.
I see indications every day that management finally gets it so really just fix healthcare so that we're at least on par with other civilized, modern nations and they'll do fine.
This is nothing more than posturing by some nut AG trying to shame car makers into making more fuel efficient cars.
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amp 10:14AM (5/16/2007)
Pardon my frankness, but he's full of shit.
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FAB 10:07AM (5/16/2007)
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..
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Todd 10:07AM (5/16/2007)
"If U.S. automakers can't compete they deserve to go out of business."
I agree, but a note of caution. Imagine nightmare scenario if domestic automakers start filing for bankruptcy only to be bought by Exxon and the like. They would allow them their ultimate wet dream of having cars that can only use a specific brand of gasoline.
Underperforming domestic automakers shouldn't be given rewards ( read: tax payer money ) for failing, but letting them fall into the hands of private investment firms is even worse.
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bmoredlj 10:10AM (5/16/2007)
Subsidies would only further damage the auto industry's image in people's minds. They'll appear as if they only exist because they cheated with the fed's help - not because they're viable, competetive entities that solved their own problems.
No one can tell me the Big 3 aren't trying to improve - they are. For now, everyone should just cool down, sit back, and see what happens. If they can't dig themselves out, that's no reason to jump in the hole with them.
Of course, if the taxpayers of the great state of California would be willing to foot this multi-billion dollar bailout bill on behalf of the rest of us, well, go right ahead!
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Be Oh Be 10:14AM (5/16/2007)
What's really crazy is the Big 3 do make fuel efficient cars as well as trucks.
Why do politicians and the media overlook this? There's got to be some reason? I think they overlook it because it's easy to overlook it, and trendy to overlook it. Politicians need votes, and the media needs to sell magazines. It's just that simple.
#3 is right - GM has more cars on the road w/30+mpg than Toyota, but nobody talks about that.
Pathetic.
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Gardiner Westbound 10:25AM (5/16/2007)
General Motors, Ford Motor and Chrysler are losing money and close to collapse because their executives built mundane automobiles, failed to develop new engines and transmissions, worried more about Wall Street than engineering, did not enforce high quality standards and made short-sighted union concessions.
Toyota, Honda, Nissan, Mercedes and BMW operate nonunion North American plants. Their labor costs are much lower than the Detroit companies, $42 an hour including benefits at Nissan versus $70 at Ford. The newcomers have negligible pension costs because their workforce is younger, and hardly any retiree health care outlay. They are all profitable.
The Big-3 kept Wall Street happy by inflating profits and deferring costs. When the unions demanded large pay increases the companies instead increased pensions and retiree health benefits knowing the bill would not come due for decades. Now the piper has to be paid. Why should it come out of the taxpayers' pocket?
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geo.stewart 10:25AM (5/16/2007)
not advocating the AG's viewpoint but #1, you need to wake up. Both Japan and Germany 'assist' their automakers in some form or fashion; tax breaks, infusions,... Not sure about Korea. Swedish companies were bought out by US. English companies were either bought out by others (Aston, Jaguar, Land Rover, Mini) or are very minor players (Lotus).
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Solo Racer 10:31AM (5/16/2007)
"Of course, if the taxpayers of the great state of California would be willing to foot this multi-billion dollar bailout bill on behalf of the rest of us, well, go right ahead!"
NO THANKS!
As for "legacy" costs, the management dug their own graves on that one back in the '70s, opting to throw pension money and continuing health care coverage to retirees in lieu of raising wages.
The health care system in this country is a mess. More and more care is done by lower paid technicians, yet costs are out of control. The free market has not made the situation better, as it should have.
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Gary Lowe 10:34AM (5/16/2007)
When did Jerry Brown get a lobotomy? It's nice to know that with 10 trillion dollars in debt the United States government still has enough money to buy Queen Elizabeth dinner and bail out the Moe, Larry and Curly of corporate debacles.
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Nellydesign 10:38AM (5/16/2007)
Brown is an idiot. Companies (ALL COMPANIES) produce what the customers have said, and shown, that they want. There have been and are small, fuel efficient vehicles made every day by every car company, but up until recently, the big desire has been for SUV's and Trucks. When there is a demand in the business world there is inevitably a supply. Businesses can't refuse to accept market conditions just because of differing ideologies. That's what makes businesses fail.
That being said, auto companies have definitely dropped the ball on predicting the future shift that was going to occur and continued to produce and develop huge gas guzzlers that people are starting to go away from. Even Toyota, that bastion of green thinking, produced the new Tundra, which is so big and powerful (and fuel intensive as a result) that the company is worried it won't sell in the current climate. Why did they build it? Because they failed to completely forsee the current climate and that is their fault. But they didn't maliciously decide to create a fuel intensive vehicle as a big middle finger to mother earth. They were creating product to fill a perceived demand. Well, guess what, the demand is dwindling. So they, and every other manufacturer, has to adjust.
Anyway, Brown is still an idiot who makes statements and creates litigation just to get his face on CNN. He sickens me.
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CJ 10:46AM (5/16/2007)
What!?! It's not my fault they aren't doing well, why should I have to bail them out?
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5 Watt 10:48AM (5/16/2007)
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.
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Jay Evans 10:51AM (5/16/2007)
# 7
"Imagine nightmare scenario if domestic automakers start filing for bankruptcy only to be bought by Exxon and the like. They would allow them their ultimate wet dream of having cars that can only use a specific brand of gasoline."
Hmmmm, Let me guess... A member of the Reality-based community?
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Jon 10:57AM (5/16/2007)
The only federal assistance the Big Three (are we allowed to call them that again?) need is what all American manufacturing companies need: realistic healthcare and a level playing field when competing abroad. In a word, fairness.
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rem83 11:00AM (5/16/2007)
WTF? Why does everyone keep saying the Big 3 don't make fuel efficient vehicles? Is it because they don't have a lot of hybrids, or because they sell a lot of SUVs that don't get good gas mileage? Import SUVs get just as bad mileage as American ones do and GM's small cars do as well or better than Toyota's or Honda's.
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