10 December 2008

A bailout here, a bailout there, pretty soon you’re talking real money

There’s a US car industry you don’t hear much about. Over 100,000 Camry hybrids have been manufactured in Kentucky. The State of Ohio has cited Toyota Motor Sales for environmental excellence. Over a billion dollars has gone into building a state of the art Tundra manufacturing plant in Texas. There are over 36,000 people working in the USA for Toyota. Yet somehow, there’s a perception that US vehicle manufacturing means Detroit.

True, General Motors employs a lot more people. In fact, they laid off 34,000 people between 2006 and mid 2008. During the same period of downturn, Toyota laid off… zero workers. Even while production has been halted, they’ve kept workers on payroll and used the time to train them. Ford, meanwhile, continues to shift production to Mexico.

True also, Toyota is non-union labor. All Toyota employees get medical coverage from day 1, plus tuition assistance, 401(k), paid vacation days, flextime, short-term and long-term disability insurance, life insurance, and an on-site medical center with $5 co-pays and free generic drug prescriptions. With all that and no layoffs, I wonder why Toyota workers aren’t rushing to join the UAW?

For years, GM and Ford ignored the oil markets and the growth of environmental concerns, and filled dealer lots with huge gas-guzzling trucks and SUVs. They lobbied for fuel economy standards to be relaxed. Chrysler actually opted to pay fines rather than comply with the standards, and classified the PT Cruiser as a truck so they could get away with 20MPG fuel economy that requires premium gasoline.

GM killed their EV1 electric car program. Ford pushed ethanol fuel, which was economically unworkable, and fuel cells, which require a hydrogen infrastructure that won’t work with current technology. Yet here we are, with GM and Ford angling for billions of dollars of taxpayer funds as a reward for their stellar work over the last decade or two, and Toyota to get nothing. If I were Toyota–or one of their employees–I’d feel a little aggrieved.

As with the $700 billion banking bailout, I don’t believe for a moment that the proposed auto industry bailout will actually solve the problem. I’ve seen what happens when government props up a motor car manufacturer; we called it British Leyland, and it was a running joke for a decade–albeit not a very funny joke for people like my dad who bought one of their cars and several of their gearboxes.

I think GM and Ford need to be allowed to file for bankruptcy. Maybe they can be restructured, the idiots in management can be removed, and a workable business can be salvaged. If not, then we should just let them shut down; there’s no point artificially propping up a business that makes cars nobody wants to buy. Shut it down and use the proposed bailout money to pay unemployment benefits to the workers while they find other jobs.

© mathew 2017