ONE HUNDRED BILLION REASONS WHY CONGRESS SHOULD GUARANTEE LOANS TO THE U.S. AUTOMAKERS

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The Detroit 3 are asking the United States Congress for $50 Billion in loan guarantees.

Some purist free-marketers question why should the government “bail out” America’s car companies.

Why not let them die the same kind of natural death as other American consumer product industries, such as electronics, apparel and toys?

Isn’t the free market the most efficient at picking the winners and losers?

WAIT A SECOND! WHAT FREE MARKET?

Decades of unfunded U.S. government meddling in the U.S. light vehicle market have nearly killed Detroit from thousands of cuts.

While the Japanese invaders have been able to take advantage of “right to work” state laws which dramatically lower their labor and “legacy” costs, the Detroit 3 are saddled with expensive labor unions imposed upon them through 1930s Federal labor policies.

And in the 1970s, when it came time to “reinvent” the car because of the unfunded mandates of the Clean Air Act and Corporate Average Fuel Economy standards, Detroit bore the lion’s share of the development costs.

(Because the original standards weren’t attribute based, the Japanese invaders were able to sell technologically crude small cars until Detroit had perfected the large vehicle compliance technology)

Unfunded U.S. Government mandates over the past two decades forced Detroit into a short-term shift into trucks, vans and SUVs to maintain some profitability and respond to market effects. Just because Washington D.C. forced smaller cars in the 1980s didn’t change the fact that Americans needed and wanted larger and more capable vehicles. But Washington's policies dictated that these vehicles simply couldn't be automobiles.

The current fuel price spike is the result of a “perfect storm” of short-sighted Federal policies.

Liberal U.S. government trade policy with China, and other far Eastern nations has resulted in a huge increase in petroleum consumption outside of the U.S. The U.S. Environmental Protection Agency alterations of the formulas for gasoline and diesel have drastically increased the costs of refining transportation fuels. Expansion of commercial air travel has also increased the pressure on fuel prices. Meanwhile, the Feds have blocked construction of new refineries for the past two decades. Congress has refused to allow meaningful development of new off-shore and Alaskan petroleum sources. America has also lagged in development of natural gas, coal and oil shale alternatives. Moreover, the War in Iraq has undoubtedly increased instability and speculation in the world oil markets.

As a result, Ford Motor Company has LOST “$23.9 billion in the past 2 1/2 years and has had to mortgage its assets to stay in business as the U.S. auto market has shifted away from profitable trucks and sport utility vehicles to more fuel-efficient models.”

On top of that, the Federal Government has now imposed ONE HUNDRED BILLION DOLLARS ($100,000,000,000.00) or more of new, unfunded fuel economy and greenhouse gas emissions mandates in the latest round of regulatory revisions. These new standards will kill off all of the sorts of vehicles that Detroit is best at building and will force the entire light vehicle market onto the playing field of the Japanese invaders.

ONE IN TWELVE U.S. JOBS STILL DEPENDS ON AMERICA’S AUTO INDUSTRY.

Certainly the Detroit 3 have done a pitiful job at pointing out the effect that buying American has on American job retention and creation. Back during the Great Depression, General Motors published brochures detailing the “multiplier” effects that the sale of one GM car had on the struggling U.S. economy.

Yet nowadays, the lazy and hapless wonks in the Glass House apparently cannot explain to the public how much better buying an American-designed, American-engineered and American-built Ford is for the American taxpayer than sending more and more of our American Dollars to Japan (even if the Japanese cars are ultimately bolted together in some low-wage Southern state).

Mark Fields, Ford's president of the Americas, said "This is not about benefiting Wall Street like maybe some of the other actions that have been taken. This is benefiting Main Street, the working men and women. The auto industry is part of the backbone of the U.S. economy."

The Detroit 3 haters are correct that some of the problem is of Detroit’s own making.

Greedy, bean-counting chumps like Lee Iacocca, Red Poling, Jac-the-Knife Nassar, and the apparently clueless William Clay Ford, Jr. left Ford without a contingency plan for the current “storm.”

Ford sullied its brands with too many daily rental car sales, too many panache-less and overly conservative products (i.e. Five Hundred/New Taurus) and a few high-profile safety lapses.

Ford’s laudable desire for union peace has often lead to collective bargaining agreements that were too lucrative in the short term and unsustainable in the long term (of course those 1930s Federal labor laws make it nearly impossible for Ford to shed its expensive and selfish unions).

Ford has neglected variety and sporting fun in its small car lines for most of the past thirty years.

Too often, cost cutting, not quality has been “Job One.”

Ford also neglected in the quest for mass market profits, several important, image-building niches, such as high-performance “muscle cars”, sports sedans, sports cars, luxury vehicles and high-technology fuel savers.

Ford's greedy dealers have often failed to recruit new customers, failed to match the aggressive advertising and promotions of the import stores, alienated the youth market, and have ripped off old customers with unreasonable mark-ups, shady deal practices, unethical service practices and other "profit center" gimmicks.

Ford let the Japanese gain a beachhead which is now an invasion.

Consequently, Ford has lost a couple of generations to the Japanese automakers. The other members of the Detroit 3 have similar stories of missteps and squandered opportunities.

But the Japanese haven’t competed under a strictly free market model. Japan’s automakers incubated under a harsh protectionist policy. Japan’s government has encouraged the development of an auto industry that relies predominantly on exports for profits. Japan’s labor costs have often undercut Detroit. And Japan’s social policies spread much of their industry’s “legacy” costs across the economy. Japan’s government has bankrolled numerous technological fixes, such as Toyota’s trendy hybrid electric system.

Thus, while the U.S. government was doing its dead-level best to kill the American auto industry, Japan’s government was sponsoring its American invasion.

Something’s wrong with that picture.

It is past time for Washington’s politicians to recognize and admit that a huge part of Detroit’s problems are the fault of the federal government. The relatively puny loan guarantees requested by the Detroit 3 are merely a “drop in the bucket” compared to the Katrina-sized damage that Washington’s ham-fisted regulators and politicians have done to America’s auto industry.

Loan guarantees are the least they can do.