The Gasoline Companies Should Fund the Big Three Bailout - VIDEO ENHANCED

Making the Case for Not Bailing Out the U. S. Car Companies

Is America Allowing the Big Three to Fail or Have the Big Three Failed America?

By Marc J. Rauch
Exec. Vice President/Co-Publisher

Originally published November 17, 2008

A few weeks ago Congress approved a $25 billion aid package to the American car companies to help them design and build the vehicles of the future; cars and trucks that would utilize alternative fuel propulsion systems.

You’ll recall that around the same time that they agreed to provide this aid package to the carmakers, Congress debated and approved two other aid packages (one to insurance company AIG, the other to the banking and Wall Street firms that made such a mess of the financial and housing markets). These two bailout packages amount to about $800 billion.

Now, there is a movement afoot to allow the carmakers to shift the focus of the $25 billion alt-fuel vehicle aid package (from helping them create the next generation of alt-fuel vehicles to using the funds to shore up their poor general financial condition), and to provide at least an additional $25 billion in aid for the same cause.

As I was leaving Detroit on Friday evening, after spending two days at the Propane Engine Fuel Summit, I listened to a local radio talk show host harangue his audience about those (in and out of Congress) who are against allowing the car companies to get off the hook (again) to develop cars and trucks that don’t rely on gasoline, and to award them the additional $25 billion for their financial debacle. “Is America going to just let the Big Three fail?” he screamed. “Don’t you stupid people realize what will happen to this country?”

When I arrived at the airport, I went online and read an urgent email message sent to automotive journalists by Chrysler entitled, MAKING THE CASE FOR ASSISTANCE. The email also directed readers to a video message, which is embedded at the bottom of this page.

The video story presents the importance of the auto industry in America and cites numerous significant statistics that add up to: If the auto industry fails, America will fail; basically the same point that the radio host was trying to make, but without the yelling.

The impressive stats presented by Chrysler are correct. The automotive industry is America’s largest and most important industry. (In fact, the auto industry is not just the most important business sector in the United States; it’s the most important in every industrialized country in the world.)

The greater auto industry includes the three U.S. carmakers that are collectively still known as the “Big Three,” as well as tens of thousands of supportive dealerships, fabricators, service firms and financial institutions. In all, as the video points out, millions of Americans earn their living from one part or another of the auto industry.

However, there is a giant disconnect in the argument presented by the talk show host, as well as any case presented by Chrysler, General Motors or Ford that if we (the American people) don’t ante up the $50 billion to save the U.S. car companies from bankruptcy that we (the American people) are allowing them (and the country) to fail.

To begin with, even if the Big Three went bankrupt and eventually ceased to exist, the automotive industry in America would continue; it’s not like we would suddenly be stranded on empty highways without any ‘wheels,’ or left with broken down cars and no place to go to get them repaired. There are, after all, other automakers manufacturing cars and trucks in the U.S. and others that sell their foreign built vehicles in this country. These plants and dealerships employ American workers, who pay taxes to our local and federal government. And there would still be ample opportunity for service facilities, fabricators, aftermarket products, etc., etc., to prosper. Any vacuum left by the disappearance of Big Three products would be filled by other manufacturers. If we want to insure the continuance of a strong domestic assembly-worker base, Congress could simply mandate that all or most vehicles sold in America be manufactured in America. The industry would be changed, but far from shuttered.

Secondly, approval of the $50 billion aid package will do nothing to solve the immediate financial crisis. It will not re-open any closed plants, it will not stimulate vehicle sales, and by shifting the focus of the first $25 billion away from helping to build alt-fuel vehicles, it will certainly not create a new fleet of desirable new technology cars and trucks. In short, giving the car companies a $50 billion gift is throwing money down the toilet. There would be no reason for the American public to buy new American vehicles, and get themselves further in debt.

Rejection of a bailout plan that allows GM, Ford and Chrysler to return to business-as-usual is not a matter of the public allowing them to fail. It is the American car companies that have failed the American people. If a sacred debt ever existed between the U.S. carmakers and the American public, it’s not that the public owes them; consumers have already paid for the vehicles produced and sold by “Detroit.” The cars and trucks weren’t given away free. And if you factor in the finance charges that most of the purchases accrued, then the public not only paid for the vehicles once, it may be said that they paid for the vehicles two or three times over. Using the fear of the demise of America as the reason for granting $50 billion in aid is essentially asking consumers to pay for the cars and trucks all over again, while the carmakers return to manufacturing relatively uninteresting gasoline-powered vehicles.

The American people already bailed out the Big Three fifteen years ago during the Clinton Administration by providing government loans, tax incentives/credits and favorable environmental regulations. Instead of working in earnest to fulfill their part of the deal, they chose to make and sell gasoline-guzzling vehicles that took advantage of semantic loop-holes to shine us on. While these actions resulted in Detroit experiencing several of the best financial years they ever had, today we’re left waiting for a token alt-fuel vehicle effort from the Big Three that isn’t really even worth considering, vis-à-vis the request for a tax-payer provided $50 billion aid package: GM will have one electric vehicle ready for sale by late 2010 (the Volt), one electric Chrysler model ready for sale by mid 2010, and no real commitment by Ford, except that they think they’ll be ready to mass market electric vehicles by 2020 to 2025 (twelve to seventeen years from now).

These efforts aren’t enough. If GM has a good electric propulsion system, that same propulsion system should be slated for use in every GM model, whether it’s a Chevrolet, or a Buick, or a Saturn, or a Saab, or a Pontiac, or a Cadillac. For example, the new gasoline-powered Camaro is also slated for 2010 delivery, why aren’t they planning for a Camaro Volt. Chrysler is looking at three potential electric models, but will only select one to actually manufacture. Sorry, that is simply not good enough; every Chrysler model on sale should offer an electric variant. If the best that Ford can promise is more than a decade away, then they should do a ‘Willie Wonka’ and close up shop until they’re ready to re-enter the auto business with relevant products.

And with all the misery, there’s still no discussion about the Big Three selling energy efficient, low polluting CNG and propane vehicles in the U.S., even though they make and sell them in other parts of the world. The Auto Channel has reported extensively on this issue. There is a great opportunity for the Big Three to salvage what they can of existing models by converting them to use these fuels. This might actually add some sizzle to their lackluster product line-ups.

If all that GM, Ford and Chrysler offer in exchange for a $50 billion aid package is business-as-usual, then they should get the aid from the people that benefit the most from their gasoline-powered products: the gasoline companies. If I recall correctly, Exxon/Mobil earned a $40 billion-plus profit this past year, and that’s just one gasoline company. The combined oil and gasoline companies could easily provide the aid. Considering that the American people have paid hundreds of billions of dollars for two wars that have done nothing more than protect the earnings capabilities of the OPEC members and the gasoline companies, we’ve already done more than our share.