Obama's Tough Love for Detroit
Obama tells ailing automakers no more federal funds without better plans. But can he push them to produce not just better cars, but mass transit?
President Barack Obama threw some tough love at GM and Chrysler on Monday morning. In a much-anticipated speech, he said that neither of the ailing automakers deserve additional billions from the federal government--yet. Obama noted that his administration had reviewed the respective restructuring plans of the two firms and that "we have determined that neither goes far enough to warrant the substantial new investments that these companies are requesting." But this is not his final answer. The president offered each "a limited period of time" to work out better plans. In Chrysler's case, that means sealing its merger with Fiat within 30 or so days.
Obama's speech was good politics and probably good policy. After the AIG bonuses controversy and with bailout fatigue setting in, Obama was able to show he can come down hard on corporate screw-ups. He essentially forced out GM CEO Rick Wagoner and now is pressuring GM and Chrysler to go further in remaking themselves. This has led to the obvious question, which was indeed asked of White House press secretary Robert Gibbs at Monday's briefing: why is Obama being more of a hard-ass with Detroit than with Wall Street? Gibbs did not take that question by the horns--though he did point out that the feds were not particularly kind to Wachovia and Merrill Lynch. But this asymmetry aside, Obama is seizing the opportunity to signal he won't throw billions at just any collapsing corporate behemoth.
The president does appear to want to reach the point when he can bolster GM with more federal money--and use federal leverage to push the company to manufacture cleaner and greener cars. He said that in the next 60 days,
my team will be working closely with GM to produce a better business plan. They must ask themselves: have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets or are they still saddled with so much debt that they can't make future investments? And above all, have they created a credible model for how to not only survive, but succeed in this competitive global market? Let me be clear: the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company.
As for Chrysler, Obama was tougher on the tough love, declaring, "It is with deep reluctance but also a clear-eyed recognition of the facts that we have determined, after a careful review, that Chrysler needs a partner to remain viable." In other words, Chrysler, submit to Fiat, or die. But, he added, if that merger (or takeover) can be worked out--and a "sound arrangement" reached--he'd be willing to kick in $6 billion in loans. (Soon after Obama's speech, Chrysler announced it has agreed on the terms of a formal alliance with Fiat. What a coincidence.)
Obama realizes that an auto bailout is not popular. So when he discussed potential further federal funding for the GM and Chrysler, he emphasized the promise of a federally-enabled new-and-improved Detroit building cars of the future that pollute less and lessen the nation's dependence on foreign oil. He also attempts to strike a communal tone: "When a community is struck by a natural disaster, the nation responds to put it back on its feet. While the storm that's hit our auto towns is not a tornado or a hurricane, the damage is clear, and we must respond." In other words, what's good for GM workers is good for the country.
So in addition to pushing GM and Chrysler to craft plans that will allow him to assist them--like Tom Cruise urging Cuba Gooding, Jr. in Jerry Maguire, "help me to help you"--Obama announced a few other initiatives to boost the carmakers. He said that he will get stimulus package funds out the door PDQ to purchase cars for the government, that the Treasury Department is working to free up the flow for credit that can finance car purchases, and that the IRS will be promoting a new tax benefit that allows purchasers of new cars to deduct sales and excise taxes. He also signaled that he is sympathetic to congressional proposals for tax credits for consumers who turn in gas-guzzlers and buy new fuel-efficient autos.
Yet one question is, how far will Obama go in attempting to transform the auto industry? He will be demanding that GM's and Chrysler's plans contain provisions for the stepped-up manufacturing of greener vehicles. Can he go farther than that?
Earlier this year, Jamie Kitman, a columnist for Automobile magazine proposed that Obama turn this moment of crisis into a grand double-dip and nudge the automakers to build mass transit equipment:
[N]ow is the time for them to build new things. New kinds of cars, trucks and buses--in fact, GM is already at the forefront of hybrid bus production--that don't run on gasoline, or use less of it. And how about trains, trolleys, and subway cars? We used to manufacture them here, but those once-lucrative industries have been ceded to foreign competitors. It’s time to reclaim these honorable lines of work on our way to actually doing something about energy independence and curtailing carbon emissions.
There is a great precedent. During World War II, President Roosevelt directed the manufacturing giants of the day to bring the fight to that era's Axis of Evil. The best Detroit executives were chosen to oversee the wartime conversion of automobile factories to build the weapons of war. American industry, staffed by autoworkers, became an “arsenal of democracy” turning out airplanes, tanks and guns for the war effort.
Could these dinosaurs of the industrial age turn around and do more than simply make better automobiles? Figuring out how to stay in car business appears to be a difficult enough task for them. But could they be part of a grander national retrofitting involving trains, trolleys, and trams? (Of course, GM did its bit to kill mass transit in years past.) In The Washington Monthly, Phillip Longman, a senior fellow at the New American Foundation, recently wrote that a freight rail electrification project could employ many laid-off auto workers, and he pointed out that GM until only a few years ago was the nation's "dominant diesel-electric locomotive maker." Were Obama to elbow GM and/or Chrysler (with or without Ford) into producing smarter transportation--assuming there's a market underwritten by stimulus spending or fueled by just plain demand--that would be going the extra mile. But before Obama can consider doing, he will first have to keep the automakers on the road and out of the junkyard.
Great Post
This is a wonderful post. I think Barack is doing a pretty decent job and has taken many steps to show that he is serious about eliciting change in the Executive Office. I think that there are still a lot of challenges, and you can expect that it will not always be easy and that he will have to make many tough and unpopular decisions. People might enjoy this list of the top ten signs the president’s gig is harder than you thought: http://www.toptentopten.com/topten/signs+president+gig+is+harder+than+you+thought
21st century business reform/car rant
I don't think that Pres. Obama should pull his punches with ANYbody. These are changing times. Companies, large AND small, are going to have to reform their business operations. Everything from gas stations to Exxon itself, from Larry's Garage on up to GM, and everyone in between, needs to find a leather awl and make one more notch in that belt so they can cinch down. We are in a recession. That means that the economy is not doing very well. The economy could end up doing even worse than what we've seen so far. We might see a full depression. With any luck, we won't, but everything's kind of up in the air. No one is really sure what's going on, or what's going to happen, so a 'semper gumby' approach is probably the wisest.
A lot of people in CEO-land have been accustomed to the high life, living it pretty high on the hog for a long time. For people in that strata, it's not really going to be all that noticeable, because they've all got an extra million bricked away somewhere, and if they don't, well, then they're not very good at being rich people I guess. Everyone below them is going to 'drown' first, though, and when the lower levels have all blub-blubbed their last, well, then it's not looking so hot for on-time arrival for anyone else either.
The people that manage these corporations, whether they make cars or sell securities or cheeseburgers or whatever, these people are all supposed to be college-trained. MBA's, all that jazz. There was no problem in them figuring out how to down-size before, why the sudden reluctance? Because they, themselves might have to 'downsize', learn how to get by on 1/2 million instead of a full million, one million instead of two? Cry me a river. Cry me a river. A lot of people in this country gave up driving 'cause they can't afford gas or the insurance anymore, and it's not looking so good for em at the grocery store either, living off other people or The Government or fresh air in some cases, so yeah, cry me a river, exec-people.
Let's JUST look at GM for a second. I'm a big GM fan. I've liked every GM vehicle I've ever owned. Simple to work on, economical, inexpensive to maintain. But, that was in their pre-Escalade years. What's happened since? Now, every model has more computing power than most people have on their desks at work, a 'no touch' sticker on the hood, and a 30k price tag in the window. I'm sorry, I don't care what color you paint it, if you're going to charge top dollar for new transportation that incorporates full healthcare coverage and retirement benefits for everyone that's ever set foot on GM property into the final sale price, then you can keep it. I'll find an '83 something-or-other and press that into service, or keep driving what I'm driving for a couple more decades. GM and the other automakers aren't the only people that can stamp out a piece of sheet metal, or form a mold and start casting parts, one thing they probably HATE is that you can keep their stuff running for decades with aftermarket components, and if they try to get rid of that industry and buy up everything in the scrapyards, then we can and we WILL make our own parts, and entire cars, if need be. The concept is fairly straightforward, and anyone that's ever worked on a repli-car or a race car or in a body shop or a tow yard probably has a working knowledge of what goes into a car. It's 4 wheels with a place to sit, something to make it go, and room for your groceries. In some countries Not The United States, they are already fully multi-fuel, and high-efficiency, with their little sewing-machine engines and fuel-sipping injectors atop.
But wait, spare the rod. For, Chevy used to build something called the Metro. Well, Geo Metro, whatever the thing was, it was a little egg-shell with a 3-cylinder engine, and hated universally by all. Over in europe, where GM is more or less known as 'Opel', they build another little eggshell, cute little car, easy on gas, small enough to shoe-horn in between the Mercedes SUV's on the sidewalk where there's room. And, that's another thing.
The global car shortage. Who knew that the world was about to run out of cars? My god, what would people do if the dealer lots weren't crammed full? Walk? Ride horses? Bicycles, even? I shudder to think of people having to revert to MOTORCYCLES. Those poor people, dying of hypothermia in January just trying to get to work. It's inhumane to consider subjecting those poor souls to anything less than split-zone climate control, heated leather seats that automatically self-adjust(where's the in-seat vibrator ;)), the space-based no-thinkum navigation system, the heads-up dashboard driver information interface data readout something-something, the hands-free safety hazard communication system, the lazy-blankard radar-guided rear bumper child detector, or any of the other 24,860 pounds of USELESS GARbage that some companies see fit to outfit their vehicles with. No wonder they get negative MPG. They treat a motor vehicle like a defense contractor treats a soldier, as a revenue enhancer and nothing more.
I want a car(take notes if ya want) that has the following. Either an inline-4 or inline-6 gas/ethanol engine, a 5-speed manual transmission, a heater, wipers, headlights, turn signals, and juuuust enough computer to run the ABS and the fuel injector, good ol' vacuum running the power brakes, maybe a power steering pump and maybe not, everytime you put a belt-driven accessory on an engine it eats into the available HP and affects MPG, and an AM/FM radio with a 'line in' jack so you can play your portable music player through it, airbags 'cause those are mandatory, ONE more module for that, but keep it small, 3-point belts, and that's it. I think if they built to the general specification outlined above, they could get to 35MPG without maiming themselves or putting in more than say, 3 hours of overtime per week.
Here's another GM concept, or for all the automakers. Want to make money, help the environment? Open up a rebuild shop. Make it SO good that you could take something like a 77 Ford LTD station wagon, and turn it back out the door meeting current smog standards and getting into the 25-27 MPG range. Sure, it's a heavy car, but that's what overdrive and fuel mapping are for. Then, turn right around and built light trucks the same way. V-6's now produce the same or even MORE power than you used to be able to get out of the older V-8's, the blocks are lighter, the parts are cheaper(less cylinders, stands to reason), and they'll fit in the same hole that you took the 400 CID wallered-out smog generator out of, and the driver will never know the difference except when they go to fill up and don't have to take out a loan on the wife to get to work. That's also eco-groovy, because it takes LESS energy to fix up an old car to more modern standards than it does to build a brand-new one.
Barack wants to do some legislation where they take a lot of old rigs off the road, and I guess there's some support for that from a safety standpoint, but the problem is still that there's so MANY cars, building a whole bunch of new ones is just going to repeat the pattern, plus it trains 'consumers' that cars are disposable instead of learning more about the vehicle they're operating, and that's a national problem, if you really want to talk fuel efficiency, you have to adjust the 'nut behind the wheel' before you worry about the rest of the car, because ALL cars are 100% low-emissions and highly fuel-efficient when parked and the engine is off, they burn NO gallons if not driven, and if people are 30% smarter about how they use cars to begin with, it doesn't matter if the GuzzGargle8000 only gets 7MPG, those miles will be to/from the places they NEED to go, necessity driving only, instead of in line at Taco Hell or taking up more space on the highway in the Great Race of Lemmings In Shiny Metal Boxes To Nowhere. Don't need to drive? Don't turn that key! Also, when people Do drive, they need to learn that this: - - is about all the farther you need to push that gas pedal in order to make the car move, not the full-throttle neutral-drop 'model' that some people seem so inclined to follow in their daily motoring practices. Just because they do that stuff 'on TV' doesn't make it right for the morning commute. That one's a hard habit to break, but it's also part of becoming an adult and an individual and using your head, don't 'monkey see, monkey do' something you see in a car ad or what the moron ahead of you just did, because we DO imitate each other, life imitates art and vice versa, and the fine, fine folks at Madison Ave. are all OVER that action, because it's their bread and butter. (They make movies, too!). Think before you turn the key...I also think more gas stations need to have air compressors available. Tire check! Ok, I'll shut up, now.
Klaatu marachas necktie
Obama Motors
I think this goverment take-over of GM/Chrysler will be a true test of capitalism versus communism (sorry, that was the only antonym the thesaurus had for capitalism). Yes, the enconomy is a jungle, where the fit survive and the weak die. GM can only suckle from Obama's busom for so long.
Ford was wise not accept the handout for a couple of reasons. One, Ford will be able to run their company like an automaker (a smart automaker) knows how to run an auto company. They will not be run by Obama and public opinion polls. Two, overall business (for Ford) will improve when consumers decide to buy a car. They will think, do I buy from a company that will be around later or from a company that might not be around later? We're not talking about deciding between McDonald's or Burger King.
Think about it, would YOU rather have a GM (Government Motors) car or a Ford car. That's just my opinion, but look at the roads now and compare them to a few years down the road (no pun intended) and see the difference. It would be ironic to have the automaker which started the industry ends up owning the industry.
This is scary
I think Barack is doing a pretty decent job and has taken many steps to show that he is serious about eliciting change in the Executive Office.
Well, THAT'S certainly true. Remember just a few months ago when these pages were full of wailing and gnashing of teeth about "executive overreach" and the dangers of consolidating power in one man? Obama makes Bush look like Ron Paul.
The title of this piece says it all. The President is seen as a Benevolent Parent, elected to tell us what to do, punish us for our sins, and make us better people - the law and the Constitution are secondary considerations. The President is not our parent, and not our boss - it's quite the other way around, in fact. His Constitutional obligations are to keep a path clear for us to solve our own problems - not to solve them for us. People who elect politicians because they yearn for "tough love" from Daddy are actively working against freedom, liberty, and our founding principles.
Just remember, if Obama can do it to GM, then the next Republican President can do it to you, because absolutely anything you can think of doing "affects" interstate commerce. See Wickard v. Filburn. You might not be so happy when it's YOUR freedoms under assault.
Obama is holding the
Obama is holding the automaker's feet to the fire. Why didnt he do the same to the financial giants that helped start this mess we are in? Seems like that money was given w/o hardly any conditions. Sort of a double standard if you ask me.
Autos vs. banks
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tagged as:
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Pres. Obama can hold the automakers feet to the fire much more easily because they produce tangible goods. Short and medium term results are easily visible. Banks and finacial institutions produce and most, paper. Seeing results here is much like looking at murky water and declaring it clean.
I wanna buy a research paper
I wanna buy a research paper online on this topic.
Obama is taking the best
Obama is taking the best leadership he could give to the industry. It's about time for Detroit to boost the market again. As well as pushing for the best cars and parts (fog lights). And also take note how difficult it is on dealing to Detriot for a President who has long received political and financial support from unions and workers.



























