Bailing out the Big Three

The topic of the week is whether or not the federal government should bail out the Big Three American car companies. If it doesn't, there are a number of foreign car companies poised to step in. Megan McArdle tries really hard not to be a heartless libertarian. Turning whimsical (complete with Tom Lehrer videos!), she proposes bailing out journalism, of which group she is one. She also proposes an analogy with the film industry (she's from upstate New York, home of Eastman Kodak). The problem with this analogy is that film was rendered irrelevant by a new technology - digital cameras - that didn't use film. Nothing is going to be replacing cars any time soon.

Thomas Friedman takes a few blasts, not only at the management of the Big Three, but at the entire Michigan Congressional delegation, for their mistakes. Then he admits that he's terrified of what would happen if GM actually declared bankruptcy. As are most people.

I have a complicated view of this. As a Democrat, I would normally be defending the union, but I've heard enough to know that the UAW made sure that they were taken care of really well when times were good, and unwinding that legacy has been, and will be, a big part of the problem.

But can you blame the union for making sure they got theirs? They got what they could out of their negotiating partners. They demanded, and got, great pay and benefits because that's what the companies could afford to pay them. There's a reason some Detroiters refer to as GM "Generous Mother." Friedman grudgingly admits that something is going to have to be done, but demands conditions. Which I think the Big Three are going to have to agree to. The UAW is not quite as agreeable, as they feel that they have been paying the price for a long time. They're right. The Big Three have been downsizing for years.

In a sense, that's a good thing. A lot of the hardest work has already been done.
That's one of the reasons I support a bailout (with conditions). The Big Three have already offered a chunk of people buyouts. They've already written massive losses. They've done some of the necessary restructuring - GM killed Oldsmobile a few years ago. Ford sold Jaguar. Chrysler killed off Plymouth. The current recession will force the closure of some unnecessary dealerships. There will be a great deal of pain. There already has been a great deal of pain.

Politically, I can't believe the Republicans are opposing this. I understand that most of them opposed the Wall Street bailout as well, but it ain't going to play well in Peoria to write a check for $700 billion to white guys in suits, but deny a fraction of that amount to blue collar workers in the Midwest. Obama did very well in the Rust Belt this year. If the Republicans really oppose this bailout, they can pretty much write off Michigan and her neighbors for a long time.

I'm not a fan of nostalgia in politics, but this is, in some respects, deeply personal for me. My family history is deeply intertwined with that of the American car industry, going way, way back. On my mother's side, one of my great-grandfathers was the construction foreman on Henry Ford's mansion. My paternal grandfather only finished eighth grade, but went to trade school at Ford, became an engineer, and eventually ran his own tool and die shop. His roommate in the 20's was a man named Walter Reuther, who was president of the UAW for 24 years, and one of the most important labor leaders of the 20th century. My grandfather hated unions, but he always told us that Walter Reuther was the most honest man he had ever known (and one of the cheapest - Walter didn't like paying for gas, so they would double-date, and my grandfather would always drive).

Someone in my extended family has worked either directly for one of the Big Three, or for a supplier, for decades. My father got his undergraduate degree in mechanical engineering from General Motors Institute (now Kettering University). I have a cousin who currently does PR for Chrysler. I have an uncle who tried to change GM from the inside for many years. So I'm not a fan of nostalgia in politics, but I can't help but be nostalgic about the American car industry.

Economically, it would be a catastrophe of the first order to let the Big Three go under. I hope and pray that no one demands that they declare Chapter 11, because that could very easily lead to Chapter 7. Ron Gettelfinger, president of the UAW, explained the problem this morning on NPR: would you buy a car from a bankrupt car company? Many people wouldn't, so Chapter 11 could very easily be the beginning of a death spiral. The people affected wouldn't just be the workers and their families - the ancillary effects would be felt by their suppliers, and many other companies who serve the populations of Michigan, Ohio, Indiana, etc.

Apart from the hardheaded economics, I think the most important reason to save the Big Three (or Big Two, if GM takes over Chrysler) is one that I have to admit borders on nostalgia: to let the Big Three go under would be an admission of failure on the part of this country as a whole. We have already seen many industries leave for other shores, and each loss has a certain poignancy, but nothing compares to the importance of the car industry, on many levels. Sure, we've all had "Kodak moments" shot on Kodak film, but I don't notice a much of a difference when it's captured by a CCD instead of 35mm (motion picture film excepted, for all my DP friends).

In purely romantic terms, there is a sizable piece of American history carried in the icons known as the Corvette, the Mustang, and the Jeep, among others.

I'm not advocating spending billions of dollars on preserving sheet metal memories. I'm a romantic, but I don't like using nostalgia to save doomed projects.

What I am advocating spending billions of dollars on preserving is the incredible insfrastructure - physical, corporate, industrial, cultural, intellectual, and even artistic - that the Big Three represent. Unwinding the Big Three would cost billions, just for dealing with car dealerships. The psychic cost would be staggering. But I'm not advocating a $25 billion Xanax.

Millions of people have put incalculable amounts of blood sweat and tears into the Big Three. There is still an incredible amount of brainpower and willpower in those companies. I'm not sure whether or not current management is up to the task of saving these companies. I'm perfectly willing to see the boards all tossed. In fact, I have a suggestion for someone who should be on the GM board: Dan Neil, the car critic for the LA Times. As a critic, he has intimate knowledge of pretty much the entire range of the automotive market. He's the only automotive critic to win the Pulitzer Prize for criticism. He knows the issues backwards and forwards, and he can explain them extraordinarily well, and usually with a fair amount of humor. He could rally the troops inside GM, and set for them the standards they know they are capable of meeting.

I don't know who else I would nominate for any of these boards, besides my uncle, Len Allgaier. I spent many a Thanksgiving listening to him explain to me what exactly was wrong with GM. He's been retired for a few years, and I'm not sure how my Aunt Gwenne would feel about it, but I think he would jump at the chance.

There are many people like my Uncle Len. There are many people who have lots of ideas about how to fix the Big Three. And there are lots of people who are running the Big Three who have been ignoring those voices of dissent for years. There is a lot of deadwood in Detroit. There are a lot of people who are terrified of change, or in denial, or who still cling to that idiotic idea that Americans should buy American cars. I believe that Americans should buy American cars when Americans make great cars for Americans. But I also happen to believe that that is still possible.

Actually, I'm pretty sure my Aunt Gwenne, the daughter of a man who lived with Walter Reuther and started his own tool and die shop, would love to see her husband go back to work fixing GM. It would be the fulfillment of a dream; the culmination of a lifetime of work. It would give him something to fight for, something to believe in.

There are many people like my Uncle Len, and many people like my Aunt Gwenne, people who love solving big, huge, impossible problems. Problems like putting a man on the moon, or putting a black man in the Oval Office a very short time after the civil rights movement flourished.
This is why I believe we should try to save the American car industry. Not because we should. But because we can.