Big Three need to retool to get bailout money

Lame-duck sessions of Congress are not noted for blinding speed or meaningful legislation, so pardon our skepticism now that lawmakers are mulling a bailout package for the auto industry.

Early reports out of the nation's capital are that the legislation now being considered can't muster the 60 votes in the Senate to stave off a Republican filibuster. If that happens, the bailout proposal would be the latest hot potato dropped in the collective lap of a new Congress and President-elect Barack Obama in January.

Automakers want an early Christmas present in the form of $25 billion in public money to bail out General Motors, Ford and Chrysler. The money would come out of the $700 billion approved earlier for propping up financial institutions.

We gave reluctant support to that legislation, only because not doing so could result in even more financial chaos for a struggling economy. In a sense, the same rationale could be applied to the Big Three bailout -- that failure to do so would run the risk of any or all of them going into bankruptcy.

(Although, as an aside, bankruptcy is not always a death knell and can have positive results when companies are successfully reorganized.)

The Big Three are in a sense victims of their own reluctance to retool and be competitive in a global market and economy in which the gas guzzlers should have been replaced long ago with more fuel-efficient vehicles. And let's not forget affordability with some vehicles now costing what a consumer would have paid for a house in the not-too-distant past.

Any bailout proposal has to be accompanied by several conditions. Among them would be a new mission to produce vehicles that people want and can afford to buy and operate.

The United Auto Workers must also abandon its historic intransigence and be willing to make more concessions. A new contract with the industry will reduce average labor costs of $70 to $78 an hour, including benefits, and make it more competitive with foreign car makers.

The Detroit Free Press reported Monday that House Speaker Nancy Pelosi, D-Calif., said that the industry would have to accept the same rules on executive compensation that were established under the financial institution bailout. That includes limits on incentives; the prohibition of "golden parachutes," when executives are paid large sums of money if they lose their jobs.

The same report said others are pushing for Detroit to accelerate production of fuel-efficient cars, which have never been very profitable, and spend less attention on the gas-guzzling pickups, SUVs and other truck-based vehicles that have been Detroit's primary source of profits for decades.

We would add that any bailout package must include payback plans. There's precedent for that in a $1.5 billion in federally backed loans for Chrysler that was approved by Congress in 1979. There were several conditions attached to that deal, including a special oversight committee made up of the chairman of the Federal Reserve Board, the U.S. comptroller general and the secretaries of Treasury, Labor and Transportation.

The Detroit newspaper reported that in 1983, after Chrysler paid back its loan seven years early, it also bought back the $14.4 million in stock warrants that it had given the government, at a substantial profit to the U.S. Treasury of $311 million.

Taxpayers have every right to expect similar oversight and return on investment if this newest bailout plan is approved. But most important, any financial support this time has to be accompanied by a restructuring of product in the industry itself.

Chrysler was bailed out in 1979 and is back asking for government help again, obviously not having learned the lessons it should have. With any new bailout plan now extended to all of the Big Three, we don't want to see history repeating itself again.

* Members of the Yakima Herald-Republic editorial board are Michael Shepard, Sarah Jenkins, Bill Lee and Karen Troianello.

• The Classified Marketplace
• • Announcements
  • Public Notices
  • Legal Notices
  • Merchandise
  • Yard Sales
  • Animals
  • Finance

• Newspaper Ads
  View All