Toyota and Obama

Remember when Toyota was the best car company on the planet? They made great cars, stylish automobiles that worked well, didn't have many problems, and got great gas mileage. It was just a better company than any American car company. When was that? Oh, yeah, a couple of months ago. How long had that idea been firmly planted in America's cultural consciousness? 25, 30 years? Something like that.

Amazing how a narrative can change overnight, isn't it? In a month or so, Toyota has gone from being a great company, one of those uniquely special companies that do almost everything right, to just another company, with its share of dysfunctionality, arrogance, and just plain stupidity.

Remember when Obama's presidency was in trouble? A Republican won a special election in Massachusetts, after a couple of Republicans won gubernatorial races in 2009, and suddenly Republicans had the momentum, and Democrats, particularly Obama, were in trouble.

I am so not worried about Obama. Really, really, really not worried about Obama. Tomorrow is the start of the health care summit. I don't know what's going to happen, but I am starting to get the sense that Obama and the Democrats are going to take advantage of the fact that, you know, they have massive majorities in Congress to pass legislation that they want. Great idea.

Obama is also taking advantage of the fact that, you know, he's president and all, and he has a lot of power to get what he wants through a Congress with both houses held by his party by those massive majorities.

But a couple of the reasons for my optimism about Obama stem from Toyota's current trials and tribulations. First, Toyota's fall from the pedestal reminds us of how fickle media/cultural narratives can be. Toyota isn't a very different company from what it was 3, 4, 5, or even 10 years ago. Most of the problems that have been cropping up have been happening for years. But something clicked, and suddenly the narrative changed. There were some stories about problems with Toyotas and sudden acceleration (the LA Times, to its great credit, was working on this story for months before it hit the rest of the national media). The suddenly there were stories about other problems with Toyotas. Then suddenly there were stories about how Toyota has serious structural problems, or how the management team has its share of incompetence and arrogance. All of those things were true for years. But something changed, and now people are willing to listen to those stories. Comedians crack jokes about Toyota, and politicians call them on the carpet. Someday the narrative will change again, and Toyota will have recovered from these episodes, and come out swinging, or they will be back on top again, or something.

The same thing has happened, and will happen, to Obama. His campaign, election, and inauguration were historical, and very hyped. The letdown was inevitable. The narrative has changed, but it will change again, just like it has for Toyota. The Democrats lost two governor's races, in Virginia and New Jersey. But neither of these were surprising, and neither really points to a national trend for or away from Dems. Virginia is a fairly conservative place, and, in New Jersey, the Democrat incumbent, Jon Corzine, was a former chairman of Goldman Sachs, rather substantial baggage right now. Scott Brown won a special election, but my impression is that Martha Coakley didn't run a great campaign, and Democrats took victory for granted.

There's also a specific reason why Toyota's stretch of bad news has implications for Obama. What's bad for Toyota is good for GM, Ford, and Chrysler. GM and Ford will pick up sales from disillusioned Toyota customers.

More importantly, but less substantive, GM, Ford, and Chrysler's reputations will start to recover. For years many people made a clear national distinction among car companies: American car companies were arrogant and incompetent; they couldn't make cars the way the Japanese companies could. There was, of course, an element of truth to that myth - the Big Three made most of their money on their big trucks, while the Japanese made solid, if not very exciting, small cars and sedans.

One detail that got lost in that mythologizing is that each of the Big Three has at least one iconic car in its stable. GM has the Corvette, Ford has the Mustang and the Lincoln Town Car, and Chrysler has Jeep. Each of those has been around for decades, and each has many, many hardcore, devoted followers.

I don't think the Japanese have some genetic predisposition for making better cars; I think the Big Three had each reached the point of being so bureaucratic that they were not very capable of being particularly innovative, while the Japanese companies were still smaller, more nimble, and more entrepreneurial.

Note my use of the word "were" referring to the Japanese. Toyota clearly has some problems with arrogance and failing to acknowledge voices of dissent.

All of this is significant for Obama, because Obama made the decision to save GM and Chrysler, and spent billions of dollars on doing so. People in Detroit had known for years about the problems afflicting GM: too many brands, too many models, too many dealerships. The problem was that no one at GM had the power to solve the problems. Even the chairmen couldn't close the brands they needed to get rid of, or close the excess dealerships. It took the power of the President of the United States to make that happen.

But Obama did it. He saved GM, and he saved - for now, at least - Chrysler. As Toyota's sales fall with its reputation, the reputation of the Big Three will start to improve. GM still has a lot of issues to deal with, and a lot of detritus to purge from its system. It will take some time for it to close down Pontiac and Saturn, and to sell Hummer and Saab. Those old dealerships will eventually be transformed into new buildings, but that will take time, as well.

Once all of those things happen, however, GM will be a leaner machine. Same with Chrysler. They will start once again making good cars that customers want to buy, and they will start making money. And many, many people will be working at them. Most of those people will be Americans.

And Barack Obama will be able to claim that he saved General Motors and Chrysler, and, with them, hundreds of thousands of American jobs. To say nothing of pride in American manufacturing.

And he will have done it with virtually no Republican help, and in the face of strong opposition from Republicans.

Really, really, really not worried about Obama.

Cautiously Optimistic About Detroit

The Washington Post surveyed residents of Detroit about how they feel about the future of Motown. There's general agreement that the place is in ruins now, but most have not given up completely. Which is good, because I'm from there, and I still have family there (Hi Mom!).

I'm of the opinion that there is a silver lining to the bankruptcy of GM and Chrysler: it clarifies the status of manufacturing in Detroit and places like it. I've been hearing about the decline of American car manufacturing for years. GM has been losing market share for years. Chrysler already flirted with bankruptcy once.

I've also been seeing the Big Three perpetuate delusions about their status, and make strategic decisions that, in retrospect, were just not right. GM and Ford both bought European car companies, and are both now getting rid of them.

Beyond the specifics of what failed - like Saturn - what failed generally was strategic, theoretical thinking that had no connection to the basic raison d'etre of the car business. There is one way to make money in the car business: make good cars that people want to buy. It's like the movie business. There is one way to make money in the movie business: make good movies that people want to watch. What GM, Ford, and Chrysler failed to do was consistently execute on the details.

But now we know that those experiments failed. We have clarity courtesy of President Obama.

Conservatives complain that politicians should not interfere with business decisions. Except that a key part of the problem at GM and Chrysler was politics, specifically, the internal kind. Imagine office politics wherever you work. Now multiply that by 1,000. Or 10,000. That's what office politics are like at the Big Three. Many people have known for years that GM was making too many different models of cars. But each division had its advocates, and even the chairman of GM did not have the power to lay down the law and cut divisions.

The office politics at GM and Chrysler were literally so bad that it took the intervention of the most powerful man in the world, the president of the United States, to cut the Gordian knot.

So now we have clarity about the future of American car manufacturing. It's not dead. I have faith that the Big Three can build good cars. I have faith that they now understand that their experiments have failed. There are lots of people in Detroit who know a lot about designing and selling good cars. Those people will still have good jobs. And there will still be people wielding rivet guns and paint sprayers. Just not as many of them.

What's ironic for me is that there are some people who saw this coming years ago, and one of them is a guy named Bill Clinton. An essential part of Clinton's message was this: The jobs that created a blue collar middle class in the 1950's are going, many of them are gone, and they will not be coming back. So we have to deal with it. This is why he focused on health care reform early in his first term - because he knew that the model of employer-based health care was changing, and not for the better. It's also why he focused on job training and empowering people to go to community colleges for retraining.

It's not clear what is going to replace manufacturing as a source of jobs. But transitions like this one have always been problematic. There have always been winners and losers as industries and companies change.

We don't know where we will go from here. But we know we can't stay where we are.

Cash For Clunkers Wildly Successful!

The Cash for Clunkers program has proven to be so successful that the money is already gone, in just a week. Ooops! And yet - voila! - Congress is already appropriating more. Funny how that was ready to go. Funny how, even though the House was about to go in recess, they managed to squeeze that in.

I like how the Democrats played this. Apparently Republicans didn't like the original amount, $4 billion, so it was reduced to $1 billion. But that money disappeared in the blink of an eye! Guess what!?!? It's a government program that has worked extremely well. Who woulda thunk it?

One great thing about this program is that no one has mentioned what it really is: welfare for white people. This is the government finding an excuse to shovel money to middle class people, the ones who are buying the cars, and people in the auto industry, from the manufacturers to the dealers. Many of those folks, particularly the ones making the cars, are middle-aged white guys. How many Latina lesbians do you think work on the line at Chevy? Not a whole lot, I'm guessing.

This is important because a subtext of much of our political debate is white resentment towards the government, based on a feeling that Democrats have been using government to redistribute wealth away from white people, particularly older white men, and towards undeserving minorities. This is one reason the "birther" movement is so bizarrely popular - people think Obama is not one of them, and that he is going to use his power as president to take things away from them, and give it to people who look like him - African Americans. That's why there is resistance to health care reform - same thing. When conservatives hear the word "government," they hear "someone who is going to take away my money, and give it to people who don't deserve it."

So this Cash for Clunkers program is a great idea as part of the battle against that idea. When someone gets a check from the government for a new car, it's a little harder for them to argue that the government isn't doing anything for them. The fact that it's wildly popular, and that Congress had to add more money, is icing on the cake, politically - it generates more publicity, and shows Congress actually doing something for the middle class in a very direct way.

One other unmentioned side benefit of this program is that it will be good for health care costs in this country. Newer cars are both more energy efficient and safer. Just about any new car has airbags all over the place, as well as better steering, handling, and braking. Someone in a crash is far more likely to survive with minimal injuries, or even to just survive, in a new car than in a car made 10 or 15 years ago. I have no idea how to calculate the benefits from fewer injuries, but, again, it's icing on the cake - a benefit that we get from this program on top of the benefits we are already getting.

And it's a great example of bipartisanship! According to the NY Times, "Over all, 239 Democrats and 77 Republicans voted in favor, while 14 Democrats and 95 Republicans voted against the measure."

All these great benefits! And only $1 billion! Of course, as Everett Dirksen may or may not have said, "A billion here, a billion there, and pretty soon you're talking about real money." I would amend to add, a successful government program here, a successful government program there, and pretty soon you're talking about making the government work for the American people!

GM, bankruptcy, the self-referential problem, the Red Wings, and brains vs. brawn

General Motors has declared bankruptcy. I'm not going to link to any of the zillion of articles on it, because it's too depressing to have to read about it yet again.

Except for Dan Neil's article. He has a great take on it, recounting GM's glorious couple of decades, the '50's and 60's. He has an intriguing idea as to what was the turning point for GM:

I have my own theory. In 1999-2000, GM had a golden opportunity to right its ship by backing Democratic presidential candidate Al Gore. This might seem counter-intuitive. . .

Yes and no. It is counterintuitive in the immediate sense, because Al Gore wasn't really a Detroit kind of guy. He is quite the egghead, very cerebral and sensitive. The quintessential liberal intellectual type. But he was in favor of universal healthcare, which, as Neil points out, could have saved GM a bundle.

I think Neil is capturing something here, although he doesn't quite put his finger on it.

Something else happened in Detroit over the weekend, much more trivial, but a reason for celebration: the Detroit Red Wings won the first game of the Stanley Cup playoffs. Neil's colleague on the sports pages, Helene Elliott, put it this way:

the Red Wings on Saturday withstood the young Pittsburgh Penguins' energetic middle period by using their brains as much as their brawn.

Brains vs. brawn. The classic human dilemma. Whether to conquer with brute force or win through better planning and strategy. Hands vs. head. Football players vs. computer geeks. White collar vs. blue collar.

Pickup truck vs. sedan. Gas-guzzling but macho vs. small but efficient.

The Big Three have spent the last few years making oodles of money off of pickup trucks and big cars. I think the reason for this may be found in the ranks of their employees. GM, Ford and Chrysler have something like a million retirees. They have several hundred thousand current employees. Their dealers and parts suppliers employ another several hundred thousand. Throw in their retirees, and you easily have at least another million. Most of those employees and retirees have families, spouses, wives, kids, parents, brothers, sisters, etc.

Almost all of those people get a discount when they buy a new American car.

Then there are people who have other reasons to buy American cars, like politicians. If you are an elected official in Michigan, and you want to keep your job, you drive an American car.

I'm guesstimating here, but let's say that there are somewhere between 6 and 7 million people in this country with a direct economic interest in buying an American car. At least two million employees and retirees of the Big Three, their dealers and suppliers. Each of those has an average of two family members who buy a car. That's another four million, for six million. Then another million miscellaneous. 6 to 7 million. Most of them with some kind of discount. Let's say each one buys a new car every three years (Big Three executives used to be famous for getting a new car every year). That's two million cars a year going to this customer base. Until recently, cars were sellling at an annual rate of about 16 million a year in the US. If the Big Three were selling half of that, they were selling 8 million cars a year. 2 million of those would be a quarter. So a quarter of the Big Three's cars were being sold to people with a direct economic interest in buying American cars. People, in other words, who were already sold on them, and needed very little convincing.

Talk about insular. Most of those cars were being sold to blue collar workers, or retired blue collar workers. In other words, old white guys with little education beyond high school. How many black lesbians with advanced degrees do you think there are among the Big Three retirees? Not a whole lot.

Sound familiar? Big Three employees, retirees, and, effectively, customers, were and are the same constituency as the Republican party. It is no coincidence that the GOP and the Big Three are collapsing at the same time. It is, on the other hand, intensely ironic that Obama is the instrument of destruction of the one, and yet the savior of the other. Irony is 9/10th of the law.

Brawn vs. brains. The GOP and the Big Three represent brawn. Muscles. It is also no coincidence that Dick Cheney has emerged as the face of the Republican party these days, after being so invisible during the Bush administration. It is also no accident that Bush, his father, and Cheney were all in the oil business. They represent the "brute force" school of capitalism (although maybe "school" in the wrong word). Men (and it's almost always men) make money by the application of brute force - drilling for oil, mining, making steel, or, as (I think) Alfred Sloan put it, "bending metal and thereby adding value to it."

It is no coincidence that Cheney is the most forceful advocate of torture, the ultimate application of brute force to try to get something done, and that he is spending so much time attacking Obama. Obama represents brains. Obama represents the triumph of the intellectual, the egghead, the geek. But at this moment in history, he also represents a repudiation of the "brute force school," essentially because he has already begun to expose the flaws of that approach to life.

GM has failed in part because its employees believed their own hype, that there was something special about American cars. There are special American cars, sure - the Corvette, the Mustang, the Jeep. Those are arguably the three most iconic American cars ever - each has been made for decades. And each is a very macho car.

My family history is deeply intertwined with that of Detroit and the automotive industry. One of my great-grandfathers was the construction foreman on Henry Ford's mansion. My paternal grandfather started out life as a coal miner, moved up to the assembly line at Ford, went to trade school at Ford, and became an engineer. He only finished eighth grade, but all four of his kids went to college, and three of them have Master's degrees. I was going to be the first one in the family to earn a Ph.d.

My grandfather worked hard on the assembly line. But he also worked hard to make sure that that was exactly the kind of job that I would never have to have. I disagreed with my grandfather on just about every topic in politics, but I am forever grateful to him.

The old white guys whose world is disappearing are scared and angry because they don't understand this new world, and they don't feel like they have a place in it. What many of them don't appreciate, and what the rest of us should be grateful for, is their role in creating it.

Brains has triumphed over brawn because that is what brawn has been working towards. Not just in America, but all over the world, and not just in the last few years, but forever.

History always marches on, but sometimes it tramples. Conservatives celebrate capitalism because it holds people accountable. But they don't like the process of being held accountable any more than the rest of us.

Chrysler declares bankruptcy

Chrysler has declared bankruptcy. Not unexpected, but kind of a bummer. Megan McArdle takes a look at it; she thinks the unions won a Pyrrhic victory, sort of. She thinks that they got a better deal than the hedge funds, which will work out for the unions in the short term, but not in the long term, as it will make it very difficult for Chrysler to raise capital. The logic is that if you have a lot of money to invest, but you run the risk of losing your money to unions, then you don't have much incentive to invest your money, unless you get a really high rate of interest. Good point. I'm not sure how much I agree with it, but I think she has something there.

Dan Neil is not terribly optimistic. He doesn't see a lot of synchronicity between Chrysler, which makes a lot of money - or did make a lot of money - selling big trucks, and Fiat, which makes small, fuel-efficient cars. The one bright spot might be California's greenhouse gas regulations, which would benefit Fiat and, therefore, Chrysler.

Ironically, California's pending waiver request to the U.S. Environmental Protection Agency that would allow the state to regulate greenhouse-gas auto emissions would actually play in the new company's favor.

The state's request would in effect raise fuel efficiency for new cars by 30% by 2016. A dozen other states and the District of Columbia have said they would hew to the new California standards.

If California succeeds in imposing its own auto emissions/fuel economy rules, the Chrysler-Fiat alliance would be well positioned to quickly deliver smaller, more fuel-efficient vehicles to market.

After years of fighting California's clean-air rules, Chrysler may in the end depend on them for its survival.

I have a cousin who does PR for Chrysler in the western United States. He has an interesting job these days.

My thots are that if Chrysler does survive this, it will be in diminished form. One long-standing problem that Chrysler has had is that of finding and retaining top talent. I don't know any of this in detail, and I don't have any facts to back this up - it's pure speculation on my part. There are, I'm sure, lots of great people at Chrysler, like my cousin. But there are far more people at Chrysler who are, I suspect, merely good at their jobs, or maybe even not that good. Anyone who is essential to a car company and who is very good at their job - engineers, car designers, manufacturing experts - has a strong incentive to work for another car company. Traditionally, that would have meant Ford or GM. In the last twenty or thirty years in this country, it has also meant the Japanese companies. If you have skills that are not industry-specific, you have even less incentive to work for Chrysler. If you're a crackerjack software designer, and your options are working for Google or Chrysler, you're going to work for Google. If you have a Harvard MBA in finance, chances are somewhere between slim and none that you are going to choose Chrysler over, say, JPMorgan. The same could very well be true to a lesser extent in dealerships around the country.

Speaking of whom, the LA Times interviewed some Chrysler dealers around LA. These guys are masters of spin, but I am not encouraged by some of their comments. Some of them actually seemed to suggest that bankruptcy was a good thing, because it ends the speculation.

"It's all for the better to get the mysteries and question marks behind us."

I've got news for you, dude: the mysteries and question marks are not behind you. They are in front of you. One question has been answered: will Chrysler declare bankruptcy? Answer: yes. Two far more important questions have not been answered: one, can Chrysler make enough cars that Americans want to buy? and two, will Chrysler emerge from bankruptcy as a stable, flourishing company? Those questions have not been answered, and the first one in particular is going to take a long time to answer. Chrysler did not get into this situation overnight. It will take a long time for Chrysler to convince lots of the American people that it's a good idea to buy a Chrysler. This is particularly unhelpful:

"We've all been zigging and zagging these last few months, but now we're talking about facts," Gray said. "Everybody has a bounce in their step now. It's a good day to be a Chrysler dealer."

No, it's not. Chrysler has a huge, some would say impossible, task ahead of it. It's not just about negotiating between the UAW and hedge funds. It's not about negotiating the minefields in Washington, DC.

It's about regaining the faith of customers. The Big Three having been losing mindshare for at least a couple of decades. Chrysler has made some interesting cars lately - the PT Cruiser, the Viper, the Crossfire. But it has to make beautifully ordinary cars. It has to make cars that fit the average American like a great pair of jeans - utterly comfortable. It has to make them really, really well. And dealers have to provide world-class service on a constant basis and as if their jobs depend on it - because they do.

The one thing the UAW can do to help the process is stop whining. The whole "Buy American" argument is, at this point, an albatross. The idea that Americans should buy American cars puts the interests of the American car worker ahead of the interests of the American car consumer. I should buy a car because a guy in Flint made it? Great, is that guy going to read my blog, just because I'm an American? If I make a movie, is he going to watch it just because I'm an American? No, he's not. He's going to read my blog or watch my movie because he finds my blog interesting or my movie funny. You want me to buy a car because I should be proud to be an American? Fine, then make a car that makes me proud of American cars.

UAW workers get a great deal. They work hard, but they also have the "30 and out" thing going - they can retire after 30 years. Imagine this: a guy starts working for GM in 1930 at the age of 20, and retires at 50 in 1960. He could be alive and well, 49 years later, at the age of 99. He has been retired for almost half his life. Most Americans do not get anywhere nearly that good of a deal from their employers, and they feel no special affinity for people who do. And don't get me started on the jobs bank.

I would like to see Chrysler succeed, but my hope is fading. Many people - several hundred thousand - would suffer if Chrysler went under. But many more people - many, many more people, like tens of millions - wouldn't miss it.

Just in case you were wondering why Detroit is in trouble

Yahoo (with US News and World Report) has a rundown of 10 cars that helped sink Detroit. It's a good reminder of just how arrogant car executives have been.

I have been wondering lately if the Federal bailout of Chrysler back in 1979 was a good idea. The Heritage Foundation didn't think so in 1983. This is one of the few times I find myself intrigued by an argument coming from Heritage; normally I don't even bother listening to them. I'm not in a position to verify the arguments laid out in this article, but it sure is interesting.

One thing I learned from the Heritage article was that Chrysler was actually the second largest car company in the country, ahead of Ford, until after WWII. Then they started making management mistakes.

OK, hold on. Chrysler management has been making bad decisions for fifty years? Now I am really not sure if saving it was a good idea.

I know some good people who work for Chrysler. Of course, with family in Detroit, I pretty much have to know people at all of the Big Three. My cousin does PR for Chrysler. I have lots of nostalgic reasons to like Chrysler.

But I'm not sure I have any rational reasons to support Chrysler anymore. If Fiat doesn't buy it, I think it's time to bid adieu. Maybe Ford will buy Jeep. Other than that, tho, I don't see much reason for optimism.

Bailing out GM and Chrysler

So GM and Chrysler need more money. Not surprising, somehow. I'm mostly supportive. I don't know whether or not the worst is over; I doubt it. But the arguments in favor of the original bailout still apply.

We are not bailing out GM and Chrysler. We are bailing out a generation of old white guys. Consider someone a GM retiree who turns 90 this year. He would have been born in 1919, just after WWI, when Woodrow Wilson was president, and before Marilyn Monroe was born. Let's say he started working at GM at the age of 20, in 1939, and worked there for 30 years, until 1969.

This guy survived the Depression, helped America win WWII, then survived the Cold War and Vietnam War. He's proud of the sacrifices that he made, he's proud of the fact that he worked hard, he's proud of his kids and grandkids.

If he retired in 1969, he's been retired for 40 years, which is longer than he worked. He might live another ten years. He grew up believing that working hard early in life would guarantee an easy life in retirement. That was the deal that he made.

Somewhere along the way, the deal changed. Now we can't afford to pay people to be retired for longer than they worked. And that idea - that you could live off of your pension for decades - was a historical anomaly.

In retrospect, it wasn't a great deal, because now the Big Three are burdened with huge legacy costs.

But hindsight is 20/20. None of us can know whether or not we would have made a different deal. We cannot perform a real cost/benefit analysis. We cannot calculate the benefits of white guys who spent more time with their families, who volunteered more in their communities, who started other businesses, because they retired early. We also don't know how many of them were white guys. We don't know how many of them are women, or minorities. We have no idea how many African American men pulled themselves up by their bootstraps because in the 1940's they could stand up for long periods of time. We can assume that there are more white men in this group than black women, but we don't know what the ratio is.

What we do know is that we are living in the world that those white guys created. We are dealing with the legacies of their health care costs, their incredibly generous pensions, the pollution of the industries they worked in, some dysfunctional corporate cultures, some laws that inhibit change.

But we are also living in the world of the interstate highway system, the Internet, an unparalleled system of higher education, increasingly clean air and water, an ever-more diverse society, and (relative) peace.

We are living in a world created by white guys in the 1950's. We have inherited their legacies, both good and bad. We are changing the world in ways that they do not always understand or appreciate, and which they occasionally resist. Those guys still have an inordinate degree of influence, because they have money, and they hold positions of influence in their communities.

We have very little choice but to support these old white guys. But to do that, we are going to have to change things that they grew up with. We should be grateful to them. But they are going to have to let us do our own thing.

Obama's gives California a waiver for emissions

President Obama (damn do I like writing that) plans to a directive to grant California and several other states waivers to set standards for tailpipe emissions fuel efficiency that are higher than those of the federal government. This is not unusual; California gets these waivers all the time.

Or at least it used to get these waivers all the time. Not so much under the Bush administration. This is just one more example of Obama overturning an idiotic Bush administration policy. Of course, since most Bush administration policies were idiotic, Obama still has a lot of work to do.

The car companies, of course, are not happy about this waiver. They would like more time to develop these fuel efficient cars. They also don't want to build cars to two different standards in the US. The states involved represent about half the cars sold in the US, which effectively makes it a national standard.

I can see the car companies' perspective; it would be a logistical nightmare to build cars to two different standards.

But I have no sympathy for the car companies. None. They have known that this day would be coming for years, if not decades. They've been in denial for years, too.

The auto companies could challenge them in court, but they have been unsuccessful in previous lawsuits.

So I doubt that they will be successful in any lawsuit brought against this waiver. But more important than any legal courtroom, they would lose decisively in the court of public opinion. After asking for a massive bailout, it would take a spectacular act of hubris to fight the Obama administration on this one. Of course, this is the Big Three, so it's possible that they could be that stupid.

And how do environmentalists feel about this turn of events? I like this comment from someone at the Center for American Progress:

“This is a complete reversal of President Bush’s policy of censoring or ignoring global warming science,” Mr. Weiss said. “With the fuel economy measures and clean energy investments in the recovery package, President Obama has done more in one week to reduce oil dependence and global warming than George Bush did in eight years.”

So just think what Obama can do in eight years!

UAW vs. GOP

So the Senate Republicans killed the bailout of the Big Three. It's not quite mind-boggling, for a couple of reason. First, I can understand free-market ideologues being opposed to the government helping out companies in trouble - it's a direct challenge to their beliefs. Second, I can understand that the Big Three are about the least sympathetic basket cases out there. They have known that the Japanese were serious competitors for decades. They haven't done enough to build better cars or repair their reputation. At this point, some people think a rescue of Detroit would be a waste of money - what guarantee is there that they will actually return to profitability. And a number of the Senate Republicans are from Southern states with foreign car plants, but not American car company plants. They aren't hearing from American car company employees among their constituents.

But from a political perspective, this strikes me as incredibly stupid on the part of the Senate Republicans. The UAW folks are the original Reagan Democrats - blue collar workers who are culturally conservative. Does the GOP have any idea how many UAW guys are also hunters? For the last two or three or decades, a lot of heartland working class people voted Republican because of cultural issues. Democrats usually found this frustrating, because this meant that these blue-collar workers were also usually voting against their own economic self-interest. Bill Clinton got that and managed to connect with them, in part because his background was working poor. But many blue collar workers were also comfortably middle class, so the economic issues weren't as important. The UAW had done its job of fighting for its members extremely well.

In this case, however, the GOP is voting against the economic best interests of blue collar people in the heartland in about the strongest way imaginable. This isn't an esoteric debate about economic theories or future debt obligations. If GM goes down, there will be massive trauma across the Midwest. Even if Bush provides assistance, as he just about has to do, the political damage has been done. There are many people who oppose the bailout for legitimate reasons. They'll be happy that it went down.

But they will also forget. My guess is that most of the people opposed to the bailout of the Big Three also don't have a lot invested in it; they don't drive American cars, they don't know anyone who works for an American car company in any capacity. They've heard the reports about billions, and they don't want to see their tax dollars going to companies that have failed. Give them a couple of months, and something else will grab their attention. Vote on this issue? I doubt it.

People who are staring into the abyss of seeing themselves and many of the people they know lose their jobs are not, however, going to forget. For the UAW, this will be a defining issue for years. Of course, the UAW itself has been very much a stalwart of the Democratic party. Now, more than a few members who have strayed from the fold are going to return. This is a "you are with us or you are against us" moment.

It won't just be the UAW. The LA Times reported that, as anyone would expect, the Big Three gave a lot more campaign contributions to Republicans than to Democrats. And how did that $100 million investment in free market ideology/cocktail party invitations work out for you guys? Not so well. Ooops. So much for money buying influence.

I know car company executives. I know of some who are good liberals, but there are far more who are conservative Republicans. The same is true, of course, of the executives at their suppliers. They've seen a Republican administration trash the economy, run up massive debt, get us into a horrible war, and ignore the rule of law. For many people, the rejection of the bailout will be a tipping point. They will not forget. Nor will they forgive.

A smidgen of good news for the Big Three

There's a little bit of good news for the Big Three. Well, at least for one of them. Dan Neil loves the new Ford F-150 pickup. Rarely is he so effusive.

Yes, Dearborn has its troubles but this is the best pickup truck on God's little acre. Yes, the Japanese have beaten up on the domestics, but Toyota and Nissan only wish they knew how to build a full-sizer as tight, as tough, as well-sorted, as keen and mean as the thing behind the Blue Oval. I mean, people, it isn't even close.

My Car of the Year is a truck.

He also makes the obvious political point:

Pickup trucks have an ideology and that ideology is conservative, Red State Republicanism.

Pickups just lost the White House.

Once again, I'm conflicted. I am fine with pickups losing the White House - maybe now the Big Three will remember that they should be making cars for the rest of the country as well as their macho customers in the heartland. But I have some connection with Ford: my grandfather started working there in the late 1920's, and didn't buy a different brand of car until he was in his '80's (when one of his sons-in-law got him a deal on a GM car).

I actually think Ford is in a better position to ride out this recession better than GM or Chrysler; they're bigger than Chrysler, with a better selection of cars, and they don't have the dysfunctionality of GM's excess brands. I'm expecting Ford to close the Mercury division. That would be a good sign of permanent change, the kind of sign that Democrats in Congress are looking for. Right now, tho, I'll take my good news for the American car industry from wherever I can find it.

Big Three lose a battle in Rhode Island

A Federal judge in Rhode Island threw out a lawsuit brought by the Big Three challenging Rhode Island's attempt to impose strict clean-air regulations.

I can't believe that the Big Three are still fighting this fight. It's absurd. Don't they realize what a PR disaster these kinds of lawsuits are? I can appreciate that they don't want a patchwork of differeing state regulations, but one reason that California has higher standards than the rest of the country is that the Big Three have fought higher federal standards for years! The Big Three are going to need help from Democrats, and they sure aren't helping their cause by keeping up the fight against tighter clean air regulations.

They have basically no leverage. Democrats are holding all the cards. The not-so-Big-Three-these-days have to demonstrate that they are changing their ways. John Dingell is no longer in a position to protect them.

Stopping whatever lawsuits like this one are left would be a great way for them to start showing the world that they understand that they are in a new world. It would also be an admission of failure. But that's necessary because they did fail. They lost this fight. Time to throw in the towel.

Dingell out at Energy and Commerce

Henry Waxman defeated John Dingell for chairman of the House Energy and Commerce Committee. Good for Waxman. I am not sorry to see Dingell go. Waxman has done yeoman's work for the last couple of years as chairman of the Oversight committee, going through the malfeasance of the Bush administration with one hell of a fine-toothed comb. He's my favorite New York Jewish politician from California.


One reason I'm not sorry to see Dingell go is that he has been blocking the imposition of tougher mileage standards for cars. Dingell is the Big Three's man in Congress, and has been for decades. But I actually think his departure from the chairmanship could be a blessing in disguise for GMFordChrylser.

They need to start clearing out deadwood. That's an apt description of Dingell. He's old-school, old guard, and very set in his ways. We need some radical change in southeastern Michigan, not more of the same complaints. Removing Dingell will hopefully put a little more pressure on Rick Wagoner et al. to make more substantive changes. GM still has far too much manufacturing capacity, and far too many models. All GMC does is take Chevy trucks, put a different name on them, and sell them as GMC. The only reason it exists is so that dealers who sell Pontiacs and Buicks (and, formerly, Oldsmobiles), but not Chevys, can also sell trucks. But it must cost GM at least several hundred million dollars a year to maintain an outdated brand.

This is not a time for "restructuring," tinkering with the org charts, waiting until the economy improves, and redesigning some models. This is a time for massive, revolutionary change. The Big Three have structures that are left over from the 1950's. GM could survive perfectly well with Cadillac, Buick, Chevy, and Saturn. Does Ford really need Mercury?

That is the message that the Democratic leaders were sending when they refused to provide a bailout. The American people need some serious change.

On the union side, the UAW still has its 30-year contracts. When people complain about high union costs, this is what they are talking about. It's possible for someone to start working at LincolnDodgeChevy at the age 18, work 30 years, and then retire at 48. My mother has a cousin who retired at 49. Do some simple math: suppose someone actually does retire at 48, and then lives until they are 98. They would work for 30 years, and then receive a pension and health care for 50 years. It is possible that the Big Three are currently supporting retirees who started working in the 1920's and stopped working before Kennedy was elected. Of course, some kind of national health care would solve a great deal of that problem, and the union took over retiree health care a couple of years ago. But there are still many, many union members drawing pensions.

I don't want to deny someone the right to a good retirement. My grandmother drew a pension from AT&T for many years. But I also don't want to pay a higher price for a car because of those pensions. Unless I get very lucky very fast, I'm sure not going to be retiring in my early 50's. There are a lot of people who retired and based their financial planning on having a Big Three pension. I think all of those contracts should be honored. And there are many current employees who have been planning their lives around being able to retire after working for 30 years. Those people really, really don't want to give up those pensions.

But I have no incentive to buy a car with those pensions built into the price.

Bill Clinton talked about building a bridge to the 21st century. Guess where we are. This ain't the 1950's any more. The idea of job security that the UAW holds so dear has turned out to be a brittle one. There is no such thing as total job security. There's only good luck, and that only lasts so long. At some point, we're all on our own. The only way to really deal with change is to be prepared for it.

John Dingell didn't recognize change coming until it was too late. He won't be the first to lose his apparently very secure job.

I've been hearing about layoffs and problems at ChryslerMercuryPontiac for decades. I am a firm believer in the American car industry; I think it can survive and thrive. I think there is still a great deal of potential there. But I also think there are some bad habits that are going to die a very painful death before rebirth can begin.

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.