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  • Morning Bell: A Better Way to Help Detroit

    Almost 30 years ago, a steep rise in oil prices drove consumers to buy smaller, more fuel-efficient cars. Cars that American auto manufacturers simply didn’t make. The resulting huge drop in sales drove Chrysler to the brink of bankruptcy, but before the market could play itself out, President Jimmy Carter came in “rescued” Chrysler with $1.2 billion in loan guarantees. At first glance it may appear that Chrysler was saved from bankruptcy. But a closer examination of the record shows that even with the loans, Chrysler went through a quasi-bankruptcy. Most of Chrysler’s creditors were forced to take losses just as they would have had Chrysler gone through Chapter 11, and the company ended up firing almost half its workforce, including 20,000 white-collar workers and 42,600 hourly wage earners. The only people that benefited from the bailout were Chrysler shareholders.

    Fast forward 30 years and sadly little has changed. Again, a steep rise in oil prices is driving consumers to buy smaller and more fuel-efficient cars, and again Detroit automakers are stuck with gas guzzling fleets that no one wants to buy. And, again, Detroit has its hand out in Washington begging for taxpayer money with the threat that if they do not get it, thousands of Americans will lose jobs. Senate Majority Leader Harry Reid (D-NV) told The New York Times: “I think it’s extremely important that we try to do something. These are jobs. These are cars that we should be selling — or manufacturing in America, not someplace else.”

    But there are plenty of auto industry jobs being created every day right here in America — and with no government help. Toyota recently opened a new plant in Texas, and is building another factory in Mississippi. Toyota already produces more than 1.5 million cars in America, and that number is set to soar as more factories like those in Texas and Mississippi come on line. Unlike the Detroit automakers, Toyota has a union-free workforce, which gives the company a huge competitive advantage. Toyota still pays good wages but its workforce is younger, not burdened by seniority rules, and the company has smarter and lower benefit costs.

    If Washington really wanted to help Detroit, they could end the regulatory nightmare that prevents profitable, fuel-efficient cars from reaching market. For example, Ford is going to sell a car that gets 65 miles per gallon starting in November. But this car will only be available in Europe. Why? Because the car runs on diesel and environmentalists here in the United States have fought to keep diesel taxes high and refinery capacity low. As a result, the car would just not be profitable here in America. A national energy policy that afforded Detroit more engineering options to make more fuel-efficient cars wouldn’t cost the taxpayers a cent and would undoubtedly create more jobs and reduce our oil consumption.

    Worse, an automaker bailout would also set a disturbing precedent, resulting in even more private companies clamoring for government sponsorships. Any number of companies could make the case that their respective industry is vital for the economy. There has already been talk of bailout requests from the airline industry. Where will it end?

    Quick Hits:

    • Authorities arrested at least 25 militants with suspected links to al Qaeda in connection with the deadly attack on the U.S. Embassy in Yemen.
    • According to the Pew Research Center, anti-Muslim and anti-Jewish feelings are rising in several major European countries.
    • The AFL-CIO is preparing to target at least 1.5 million households with anti-John McCain mailers in battleground states and across the country.
    • According to Rasmussen Reports, only 7% of voters think the federal government should use taxpayer funds to keep a large financial institution solvent.
    • According to Gallup, 72% of Americans say they have a great deal or a fair amount of trust in their local government compared to only 42% who say the same thing about the federal government.
    Posted in Ongoing Priorities [slideshow_deploy]

    14 Responses to Morning Bell: A Better Way to Help Detroit

    1. Ken Jarvis - Las Veg says:

      "Cars that American auto manufacturers simply didn’t make."

      WRONG!!!!

      Cars that ARROGANT American auto manufacturers simply WOULD NOT make.

    2. Jim Burns, Fairfax, says:

      Excellent morning bell! As a former Detroiter who still has relatives working in General Motors plants and who still drives a GM car, I say the federal government and taxpayer should not bail out the automakers. The Big Three automakers were slow in recognizing the import threat until it was too late to do anything about it. The American auto companies built cars with shoddy workmanship for so long, many Americans began buying foreign cars and have not bought American cars since. I was even against the Chrysler bailout. Government bailouts of these companies are not good. We have a free enterprise system in America and it should be kept that way. The taxpayers should not be paying for automaker executives or any other enterpreneurs incompetence. Let the automakers go out of business. Then they can regroup and make better more affordable cars for Americans to buy.

    3. wm. vickey, cincinna says:

      is this Detroit auto industry bail-out really to benefit the auto workers in Detroit? Or, is it a Dem strategy to garner the Michigan vote for the Dem bail-out 'heros'??

    4. Robert Russell says:

      Exactly right on all counts. For forty years, I was a loyal Chrysler buyer. After three lemons, I finally wised up and bought a Ford. Once was enough there, and I bought a Honda CRV for my wife, and later a Camry hybrid for myself.

      The difference in reliability and driveability, as well as customer service, is like night and day.

      American CEOs grab their large bonuses without regard to their performance because boards of directors are also CEOs and set the bonuses. The Marines have a none-printable term for it.

    5. Robert Chatham, Hous says:

      If the "AVERAGE" Joe Citizen, does NOT WAKE UO soon, This country is going DOWN THE TUBES ! !

      What is a FACT is that "THE GREENIES" have almost RUINED this Country. Also, WE MUST put one GREAT AMOUNT of BLAME on the EXECUTIVES of The Large Companies of This Country.

      between these two Factions, AMERICA has experienced A SEVER DECLINE since 1970.

      As a FORMER Furniture Executive, I saw how "THE GREENIES" and The NEW WAVE "FRATERNITY" BOYS, from IVY LEAGUE SCHOOLS have Totally Destroyed that Industry.

      Starting back in the Early 1970's The Growth of "THE SIERRA CLUB" (and others) created The EPA and OSSHA Which basically STYMED THE GROWTH OF FURNITURE PRODUCTION ! ! !

      After that the "IVY LEAGUE FRAT BOYS", started the MOVE to "SCREW" the American Furniture and Fabric Workers" by Getting to "THE BOTTOM LINE" ! ! ! And moving 1000's of JOBS to China and India and other Countries, to show "WALL STREET" how they are GOOD SOLDIERS of PROFIT ! !

      Today, China, (and Other Countries) are NO LONGER VERY INTERESTED in the Furniture Industry and Fabric Production. In fact These Countries are closing Furniture Factories by the 100's. And The Fabric Mills are on the Decline.

      PLEASE DO NOT MISUNDERSTAND ME, I am NOT suggesting that the USA, become anti Trade.

      What I am Suggesting is That The RESTRAINTS on Manufacturing, which have been imposed primarily by "THE GREENIES" and their MISTAKEN AGENDA, is causing a GREAT DECLINE OF THIS COUNTRY ! !

      WE can NOT Compete Internationally as long as the Manufacturing Community have their HANDS TIED BEHIND THEM.

      And WE cannot Create Competitively Priced Goods and Services with GOVERNMENT INTERFERRENCE, created by "THE GREENIES".

      The SAME is TRUE with OUR Energy Situation. Not only are "THE GREENIES" causing Problems at the "PUMP" but THEY have the USA in a SERIOUSOUSLY DANGEROUS POSITION in the DEFENSE of OUR COUNTRY.

      PLEASE WAKE UP AMERICA, and STOP "THE GREENIES' and their OFF BALANCE AGENDA ! ! !

      OH,,YES,, I DO BELIEVE IN GOOD STEWARDSHIP (in ALL Things) and RESPONSIBLITY TO "MOTHER EARTH" and YOUR FELLOW MAN ! ! !

      Also, I believe in COMMON SENSE !! and THE PRESERVATION OF THE UNITED STATES of AMERICAN ! ! !

      Respectfully Submitted;

      Robert Chatham

    6. Ken Slusher, Forest, says:

      I agree that it is time for the government to stop bailing out companies, banks and the like. The folks that are running theses companies have long known that fuel economy was needed and would someday be in the forefront of everybodies mind as gas and oil prices pushed higher and higher.

      What did they do? They made sure they had their golden parachutes and incentives in place but nothing much else.

    7. Michael J O'Bri says:

      Spot on with all these comments and as is the Morning Bell. Detroit has perhaps the worst management of all american companies, although Wall street is not far behind.

      Detroit had many years to examine their 10 year strategy and business models, yet did little to address flaws in their business model except to look at quarterly results. Unions have crippled the business, but it is management that gave away the store. Now Senator Reid wants to put taxpayer money at risk with a poor management team to bail out Detroit. So let's understand this: congress bails out the big 3 after $900 bn has been spend on people and corps that gambled and cannot pay their bills. The big three wants the taxpayer to gamble and trust them, while if there are rewards all of the proceeds go to stock holders and management.

      The national debt and deficit is staggering. Who will bail out the government when the dollar become worthless. And when does these bail outs end, what is the final event that stops these taxpayer give aways.

      The new term of the decade is :"TOO BIG TO FAIL." What constitutes TOO BIG? Now with government endorsement Bank of America took on Country wide and Merrill Lynch, B of A is too big to fail.

      Let's keep government out of the private sector, Detroit must better understand market forces and adapt for survival. Odd is it that the Japanese big 3 do not have the same problem. And Chrysler never recovered, bought by Daimler in 1998, then dumped in 2007. Bail outs never prevent the economic inevitable.

    8. Austin, Provo, UT says:

      Brilliant.

      I just don't understand how these politicians get where they are without understanding the economy.

    9. Larry Townley Monroe says:

      I agrre that there should not be a bail out of auto makers. I do take exception to you lambasteing the unios as if they are all of the problem, yes they are a small part of the troubles that have befallen the big three, but before they got so involved in politics the unions gave the average American worker many wonderful things.

      We all agree that a forty hour work week is a good thing, Unions brought that. Paid vacations, again the unions. Time and a half for hours over forty, yep unions gave that to the American work force too.

      Now the unions have turned to trying to apply socialist dogma to us rank and file members, and many of us are rebeling against it.

      Both the Republican Party and the Heritage Foundation need to wake up, you have more conservatives in the unions (rank and file) than you do liberals. You/we need to work harder to bring the upper echelons of the membership over to our side.

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    11. Edwin Buck, Albuquer says:

      You want to help the auto makers? Then, get the government out of the auto making business. Let the auto makers do what they do best, and that is making vehicles that the people want to buy. Without the government's hand on it. The auto makers had better start standing up to their unions also. The unions are going to make their demands, not for the benefit of the product they make, but for the benefit of their union. Should the company collapse, why, it's not their fault. The hell it's not.

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    13. David Black, Sr. says:

      As a nation we find ourselves upside down in regards to global energy policies, putting the auto industry in the direct line of fire. Over the last century, America has developed a practice of consumption based on limitless energy resources. Our competition, who had very limited energy resources, were forced to compete by developing technologies, creating smaller, more economical methods of transportation, if they wanted to compete at all. We scoffed at the idea of compact cars.

      Over a period of time, under the guise of "Environmental Protection", Congress has continued to pass laws, for more than three decades, limiting the harvestation of our natural resources. These practices have created a false shortage of supplies, driving the price of commodities upward, directly affecting our free market and forcing us into a circumstance of dependency on foreign resources; an astonishing result for a country founded on "Independence".

      Meanwhile, the auto industry, keeping up production of non-economical vehicles, continued to sell the public on "luxury", and the idea that "Bigger is better". Today, due to the self imposed energy crisis, American companies are scrambling to meet standards imposed by Government Policies, and develop more competitive, more economical products. Due to our competitors being forced to start small, they have little to do in the way of adjusting to energy limitations.

      The lessons to be learned were provided by the failed GM bail out fiasco. By providing loan guarantees, the government did not solve the problems GM faced, they only prolonged the inevitable. The cause and effect remained similar, if not the same, except the taxpayers were left with the financial burden.

      The proposed bail outs of the auto industry, along with those of the financial and housing industries, should be appalling to all Americans. Understand, the Government generates zero wealth. Therefore, when Congress commits to a bail out of any industry, its you and I, Joe Taxpayer, that bears the financial responsibility of paying for it.

      Understanding that the financially fatal circumstances each of these major industries faces, are inter-related, or tied together by a common thread, is crucial. Amazingly, the causation of the bulk of the crisis we face, as a nation, result from overactive government policy, mandating the actions and practices of the private sector. However, Congress refuses to admit responsibility for their actions and continues to mislead the, mostly uninformed populace, pointing their finger at "Big Business", blaming "greediness and mismanagement" in the private sector for the woes of the country.

      As for the Housing Industry, it was Congress that passed laws, claiming incorrectly, that everyone has the right to own a home. Their enactments forced banks to fund "Bad Loans" with individuals who could not pay them back, and instituting "Creative Financing", allowing for "Nontraditional Property Flipping" and ownership by people who could not otherwise afford to do so; thus, creating falsely inflated property values, diminishing the accessibility of the "American Dream" of home ownership for upcoming generations.

      The basis of the claims of Congress, that everyone has a right to own a home, were misconstrued, as The Declaration of Independence states a right to the pursuit of happiness. There are no guarantees of equal wealth or property ownership. As a result today, approximately five percent of homeowners, the majority of which are non-traditionally qualified buyers, are in default. Thanks to failed policies, the taxpayers will be left holding the bag, allowing the failed loans to hurt everybody, instead of limiting the effects to those who took the risks.

      In order to maintain a free capitalist market, there can be no entity, process, or industry deemed by the government as "Too Big To Fail". Because "Too Big To Fail" eventually becomes "Too Big To Manage" and in reality means "Too Big To Succeed".

      In a free market, the failure of a large corporation creates opportunities for smaller businesses, which will break down the process of the complex corporate structure into smaller, more manageable steps. In doing so, the overall process is made more efficient, thus rejuvenating and strengthening the economy and creating more benefits to society. This is a natural phenomenon of the "Business Ecosystem" under the structure of a free market society.

      What other industries will step up, with their hands held out, begging for another bail out, claiming they are "To Big To Fail"? Maybe we should consider bailing out the Health Industry. Hospitals and Medical Professionals are an absolute necessity in our society and have been negatively affected by bad Government Policies.

      However, by providing the proposed financial bail outs, the government has taken possession of approximately one fourteenth of the American economy. That is an unprecedented, unacceptable responsibility leveled upon the American people. Bail outs are not the function of a Representative Republic form of government. Rather, the function of the government, in this regard, is to maintain balance, enacting laws to protect the people from unscrupulous, scandalous business practice, yet allowing businesses to obtain their ultimate objective, make profits. The government must however, allow businesses, large and small, to succeed or fail of their own volition.

      Be very careful America. Government bail outs will almost assuredly lead to a very slippery slope, possibly steering us into a form of socialism. The avoidance of such is something so many of our finest Americans have died for.

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