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Bread and Circuses: Ruminations from Ground Zero of the Auto Bailout

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Bread and Circuses: Ruminations from Ground Zero of the Auto Bailout

This week I did something that I rarely ever do: I took the bus into work.

The mass transit infrastructure for the Detroit area is relatively lean compared to that available in other large U.S. municipalities. One reason for this is because the population has spread away from the city in an organic, rather than linear pattern, designing a logical system is all but impossible. The other more obvious reason is that Detroit is, after all, the “Motor City.” The idea of personal car ownership is baked into our DNA. Per usual, my bus carried no more than fifteen other passengers.

Outside, knocked over by high winds from the day before, holiday decorations adorning the front of people’s homes were left tossed about. Given the hard knocks Michigan has endured in the last few years that shows no signs of letting up as 2008 closes, there was something particularly apropos about the sight of dozens of Santas laying face down in the snow. One could call the regional dread that has resulted from the uncertain fate of the U.S. automotive industry palpable. But, at this point, a more apt description of it would be ubiquitous.

The Jefferson leg of my commute took me past the headquarters of the United Auto Workers, then, a few minutes later, that of General Motors. The exteriors of the respective buildings hide what I assume to be an inferno of frantic activity taking place within. The two camps, which usually find themselves at odds, seem to have formed a definite, if uneasy, alliance in the face of a dire financial outlook.

I’d find the political and economic wrangling that has gone on over this issue entertaining if it didn’t hit so close to home. My emotions have ranged from irritation to outrage over the hypocrisy displayed by just about everyone with an opinion on this. At times, I have to grudgingly include myself on that list as I vacillate between opposing and supporting the bridge loans, often out of pure self interest.

After Senate Republicans effectively blocked a vote on the proposed fourteen billion dollar bridge loan (I refuse to say “bailout”) for General Motors and Chrysler, President Bush indicated that he’d tap into existing monies set aside to save the banking industry. A few days later, White House Press Secretary Dana Perino, still sporting a black eye she got in the melee following an Iraqi reporter’s assault on Bush with a shoe, the original transportation device, indicated that the president hadn’t ruled out letting the Big Three go into an “orderly bankruptcy.”

I was disappointed by this in spite of myself. My viscerally conservative reaction to the idea of using government funds to prop up ANY business is decidedly negative and summed up by an unambiguous entry in Andrew Sullivan’s blog titled “Let The Big Three Die”:

“The point of capitalism is that actions have consequences. Once that market discipline is removed for a few of the worst, ill-managed, union-crippled companies in America, the stage is set for endless mediocrity, government-run industry (i.e. even more endless mediocrity), and a free-for-all at the government trough. A clear majority of Americans agree, in the new WaPo poll. If this intensifies the recession, so be it. Recessions are sometimes necessary for long-term economic health. And the bigger and sharper it is now, the more time Obama has to recover from it. Let them die.”

Or, as Clemenza said in The Godfather, you have to “go to the mattresses” every ten or fifteen years “to weed out the bad blood.”

Contrasting that view is Catch 22’s Lieutenant Milo Minderbinder, an Army Air Corp mess officer, who profits in the service from various schemes under the banner of his “M&M Enterprises.” When Milo’s plan to corner the market on Egyptian cotton proves to be a failure, he endeavors to unload his surplus on the government because, as he rationalizes, “the business of government is ’business’.”

From a state built on cotton production, Senator Richard Shelby of Alabama was the point man in the charge against the automotive bridge loans, decrying them as counter to the aforementioned free market principles. Spencer Bachus, a House Republican also from Alabama, chided Big Three auto executives when they appeared on Capital Hill.

“The vast majority of my constituents,” Bachus said, “are not making anywhere near what GM, Ford and Chrysler are paying their employees. My constituents do not understand why their taxpayer dollars should go to support less-efficient business.”

The irony in all of this was the apparent silence of Shelby and Bachus when Alabama offered a $253 million incentive package to lure German car company Mercedes-Benz to locate there. That netted out in the range of about $150,000 to $200,000 per new job created. It’s almost as if Southern legislators are still fighting the Civil War with non-union autoworkers cast as the new contraband. Because of Shelby and those who loudly applaud him, I don’t expect the GOP to perform very well in Michigan for a while. There’s even a group on Facebook called “Michiganders Against Alabama Tourism.”

As with my anomalous bus ride, I found myself in the rare position of mostly agreeing with a hyperbolic statement by Michael Moore posted after the defeat of the loan bill.

”...the Senate said, we’ll give you the loan only if the factory workers take a $20 an hour cut in wages, pension and health care. That’s right. After giving BILLIONS to Wall Street hucksters and criminal investment bankers—billions with no strings attached and, as we have since learned, no oversight whatsoever—the Senate decided it is more important to break a union, more important to throw middle class wage earners into the ranks of the working poor than to prevent the total collapse of industrial America.”

Moore, the self anointed voice of the working man, made his bones in 1989 by slamming GM’s then CEO Roger Smith with the documentary Roger and Me, after the automaker closed a factory in Moore’s “home town” of Flint, Michigan. I put “home town” in quotes because Moore actually grew up in Davidson, Michigan. A more affluent suburb, Davidson doesn’t convey nearly the same level of blue-collar street cred as Flint. Think of “Papa Doc,” Eminem’s rival in 8 Mile, whose real name was Clarence and studied music at Cranbrook, an exclusive private school.

But Moore is right. Those citing $73 an hour UAW wages as the reason for Detroit’s lack of competitiveness when compared with the $45 an hour earned by their non-union counterparts are being deceptive. All but lost during this debate is last year’s landmark new contract negotiated between the Big Three and the UAW in which the latter did indeed make a lot of concessions. As David Leonhardt points out in a New York Times piece, the $73/hour figure, which would amount to about $150,000 a year (or the low-end cost of an automotive job in the state of Alabama) is inflated to include benefits paid to retirees. Factoring that out does bring the union wage down to a more competitive $55 an hour.

However, I do part company with Moore and those who engage in the predictable demonization of domestic auto company executives.

It started when their first appearance before Congress was overshadowed by the fact that they each flew to D.C. in separate private jets. Sure, they probably should have thought that through. That they didn’t, indicates a certain level of tone deafness on their part to the choices “normal” people have at their disposal. Anecdotally, most of the blue-collar types I spoke with questioned the jet rides, but thought that the amount of attention it received was a bit overblown. In response, the Big Three honchos decided to travel to their next Congressional hearing by a convoy of domestic cars. Proving that you can’t win for losing, the executives at that session were questioned as to whether it was a wise decision for such high powered management to waste their valuable time in an eighteen hour (round trip) car pool between Detroit and Washington.

Their poor public relations choices not withstanding, other, more substantive criticisms of the Big Three seemed to focus on the idea that they aren’t making the “cars that people wanted.” Such as:

1. “Green” cars that will reduce global warming

2. More fuel efficient cars that lessen our dependence on foreign oil

3. Better quality cars

I separate the first two because “green cars” and cars that use less petroleum products are not synonymous. In the interest of full disclosure, I’m one of those “climate change” agnostics who thinks that the jabbering about “saving the planet” overstates the capacity of humans to be the primary cause of any global dynamic either positive or negative. Talk of “solving” the problem, complete with a disaster countdown clock, reminds me of a Star Trek: The Next Generation episode where Geordi figures out in the last act how to adjust the polarity of the deflector array to fix whatever malady threatens that week’s planet. Of course, I realize that for many this tags me as one of those flat earther, creationist, home schooling types (I’m NOT).

That said, a hybrid or even a completely electric car wouldn’t necessarily produce a significantly smaller carbon footprint from the perspective of averting climate change. The juice to power the vehicles has to be generated somehow. And unless more nuclear plants go up, that means burning coal. Clean coal technology sounds a little like cold fusion to me. Meaning it doesn’t really exist yet. Furthermore, practical and affordable hydrogen powered vehicles are still decades away. So, like it or not, the old fashioned internal combustion engine is still the best game in town (for a while, anyway). But, as the Journey song says, “Don’t Stop Believing.” Of course, most of the Detroiters I know chuckle a bit over that number because there’s no such place for that “city boy” to have been “born and raised in” called “South Detroit.” That’s actually Windsor, Ontario. Yes, Canada is technically south of Detroit.

Which, since Canada is our number one source of imported oil, makes for a nice segue to the second item: the need for the U.S. to lessen it’s reliance on foreign petroleum (notice how I resisted the temptation to make a bad pun out of “Segway,” the two-wheeled, energy efficient scooter). I find this is an important goal that is a bit more feasible. However, there are still a number of challenges involved in producing a commercially viable vehicle that burns less gasoline (or none at all). Not the least of which is getting people to buy them.

Sure, laws could be passed to force automakers to accelerate their plans to get such a product to market. But one need only look back at how a major legacy of the 1970’s CAFE standards was the death of the station wagon and the birth of the SUV. American consumers didn’t want smaller cars. Families like mine, with more than three kids (which I realize tags me to many as one of those flat earther, creationist, home schooling types), just couldn’t fit into a five passenger vehicle AND comply with seat belt laws. Enter the minivan. It didn’t fall into the same vehicle category under CAFE regulations as station wagons and allowed automakers to comply with the laws of both the land AND supply and demand.

One of the first lectures I give to my Intro-Marketing students outlines how the bromide “build a better mousetrap, and the world will beat a path to your door,” is wrong. Just because an offering is somehow considered “superior,” doesn’t ensure market success. If it did, Betamax videotapes would have handily beaten VHS as the format of choice in the 1980s. For a simpler example, glance down at your computer’s keyboard. More than likely you’re looking at a QWERTY design, named for the characters appearing in the first row of letters and introduced in the 1870s. It had ergonomic shortcomings DELIBERATELY built into it so that users wouldn’t break the early, more fragile typewriters. This factor lost its significance once electric typewriters came on the market. However, “better” designs such as Dr. August Dvorak’s more efficient keyboard never caught on because the original design was so well entrenched.

In The Hustler, Bert Gordon (George C. Scott) describes success in their chosen profession to “Fast” Eddie Felson (Paul Newman) using words that could easily be applied to mass marketing:

“This game isn’t like football. Nobody pays you for yardage. When you hustle, you keep score real simple. At the end of the game, you count up your money. That’s how you find out who’s best. It’s the only way.”

That aspect of the free market is a two-edged sword and brings me to the third criticism of American automakers: the quality gap.

Regardless of a number of studies that show an ever-increasing level of quality for domestically produced automobiles, the “country of origin effect” on the average consumer still strongly favors foreign offerings. As the saying goes, “perception is reality” and, outside of Michigan, the patriotic appeal to “Buy American” only resonates so much.

Of course, as Ashley Fantz points out in “What makes a car American?,” determining the exact country of origin for an automobile is more complicated than it seems:

Fewer than half of the parts on some Big Three vehicles are made in the U.S.

Looking at a Ford Fusion? It is assembled in Mexico. The Chrysler 300C is assembled in Canada, but its transmission is from Indiana; the brand’s V-8 engine is made in Mexico. Engines in the Chevrolet Equinox sport utility vehicle are from China.

On the other hand, Toyota’s Camry is comprised 80 percent of parts made in the United States, and 56 percent of Toyota’s vehicles sold in the U.S. also are made here, according to Toyota spokeswoman Sona Iliffe-Moon.

The Toyota Sienna and Tundra also have 80 percent of their parts manufactured in the U.S.”

Nonetheless, while there haven’t been any reports in Michigan of auto plant supervisors, mad about Japanese imports, beating Asian Americans death, as Ronald Ebens did to Vincent Chin in 1982, “keying” foreign cars in saloon parking lots seems to be making a comeback.

Speaking of comebacks, many here in Michigan (both white and blue collar alike), are somewhat amused by the rising star of Governor Jennifer Granholm. By all accounts, she made a strong impression nationwide while stumping on various Sunday morning news shows for the auto loan.

However, those who watched the seemingly endless parade of companies pack up and leave Michigan under her watch realize that she was being unintentionally prophetic when, in her 2006 State of the State, she said that we’d be “blown away by the strength and diversity of Michigan’s transformed economy.” She won reelection handily against Republican Dick DeVos. Son of the founder of AmWay, DeVos was a horrible candidate who could apparently talk people into signing up for a questionable pyramid scheme, but was unable to convince the state electorate that he could talk businesses into moving to Michigan.

The only new industry Granholm has been able to attract to the state is filmmaking. She offered forty percent tax breaks for movie companies who decide to shoot in Michigan. So, ironically, we have the likes of Clint Eastwood filming the story of a disgruntled autoworker in Gran Torino ten minutes from my house, but no real autoworkers because Toyota, who didn’t get such a sweet deal, decided to locate their new plant in another state.

When, after hemming and hawing for a few days, President Bush finally did announce his decision to provide the loans, it was somewhat anticlimactic. I’m not sure which of the spirits of Christmas past, present or future finally convinced him. But, based on the raspy, beaten down tenor in Bush’s voice during his Saturday radio speech, he wasn’t nearly as happy as EbenezerScrooge was the morning after the rehabilitated miser had his epiphany.

Of course, the auto bridge loan doesn’t promise success. Hopefully, the financial institutions that received government bailouts in the hundreds of billions (without anything approaching the same level of scrutiny) will actually LEND out some of that money so consumers can buy things like, maybe, cars. We’ll see.

In the meantime, the holiday lawn decorations in my neighborhood are standing once again. For a while anyway as the weather report doesn’t sound too promising.

God bless us, everyone.

Matt Maul is author of the blog Maul of America.