Automagically in Cash

I watched the Hearings in the Senate and the House last week, with the CEOs of the Detroit Three, the UAW President, and other interested parties.

From the beginning of the automaker’s plea for a loan or bailout from the government, which currently is like a huge tit that multiple parties in this crippled nation wish to suckle for their own financial resuscitation, I have found it hard to be sympathetic to the dilemma of the companies who should have seen the handwriting on the wall ages ago. Their desperation is the consequence of their own dereliction of vision. . Management kept on making big vehicles and gas-guzzlers when their competitors in Europe and Asia were building smaller cars with better fuel-efficiency. Those smaller vehicles are going to be the wave of a more sensible driving future. But the Big Three were reluctant to transform themselves and are now paying the price. They are in the soup and they now want to pull us taxpayers in it with them.

Their management seemed to have forgotten the iron law of Capitalism: That states that failure is part of the dynamic of Capitalism and those that fall by the wayside will be replaced by a better idea. It’s called “Creative Destruction.” But, so the argument goes, we should make an exception in this case. Why? Because the Detroit Automakers are more than just a business; they are “Cultural Icons,” and thus loom large over the Industrial History of the Western World. And according to some, they have plenty of juice and innovation left, if only they can get back on their feet and push the makeover process. In addition, if they were to go under it would throw between 3 to 5 million people out of work, not only UAW workers, but also dealers and suppliers. The domino effect would be devastating. It would cut the heart out of our manufacturing base. It’s a strong argument, especially when you consider the nation’s unemployment figures are approaching 7% and 533,000 people lost their jobs in November. Besides, it looks discriminatory to see Congress quickly come to the aid of Wall Street and the its financial crisis, while short-changing a blue-collar industry in Michigan where the unemployment rate is above 10% already. Main Street needs help every bit as much as Wall Street—perhaps more because resources would be lesser and fewer.

In sum, since Bush and Paulson are busy sitting on their hands till they leave town, I am persuaded Congress or the Fed will have to do something, as the above facts are too scary to ignore. I would be in favor of a “bridge loan,” adding $10 or $15 billion to the $25 billion already allocated for the makeover. That would take them to March, at which time the Obama’s Brain Trust will have gotten their bearings in the new government and should be ready to tackle the problem. We just have to cross our fingers that we can make it through 40+ days without a total collapse.