4.12.08

BIPARTISANSHIP. That's the political class working to fleece the rest of us in such a way to enhance their chances of election. The dynamic is at work in the hearings on bailing out the legacy car companies.

Detroit automakers' best hope for Washington aid is a bipartisan plan to speed the release of $25 billion in already-approved loans under the Energy Independence and Security Act (EISA). But long-simmering hostilities between the California and Michigan delegations on auto issues threaten the deal. California legislators want that money to subsidize their own Silicon Valley-based auto industry, which they argue is the future of American transportation.

The Detroit Three automakers have driven the perception that the $25 billion package to help pay for "retooling" factories to make more fuel-efficient cars under increased gas mileage standards and a possible additional $25 billion bridge loan are rescue packages meant for Detroit alone. But a letter from U.S. Sen. Diane Feinstein, D-Calif., on Thanksgiving Eve makes clear what few taxpayers know: The billions in auto loans are a giant honey pot intended for any auto manufacturer in the nation.

In fact, Tesla Motors, a struggling San Jose start-up manufacturer of electric cars in Feinstein's back yard, has already applied for $400 million in EISA loans to build a new plant for making a luxury $60,000, battery-powered family sedan.

So while some members of Congress tut-tut Detroit executives for wasting money on private jets, Washington is entertaining taxpayer-financed loans for an automaker that caters to Silicon Valley millionaires.

Perhaps Lexus is onto something: the new trinket to appease the trophy (which I learn is now the toxic) wife will be an electric sports car.

I'll return to the substance. Automobile manufacturing is not equivalent to the North Central States.

Once synonymous with Detroit, the "American auto industry" now depends on your geographical perspective. To Southerners, it's foreign transplants like BMW and Hyundai. To Midwesterners, it's General Motors, Ford and Chrysler but also Honda and Toyota. And to the West Coast, it's alternate-fuel startups like Tesla Motors and Fisker Automotive.

That is why Feinstein wrote Senate Majority Leader Harry Reid: "I do not support disadvantaging the next generation of American automobile companies in an effort to save the first generation."

Another columnist suggests the legacy car companies' difficulties are self-inflicted.

Those outside the Detroit bubble also know that Japanese, Korean and German automakers are opening plants in more states, are keeping more workers on payrolls that generally have been expanding, are losing fewer sales in harsh times and claim, altogether, a larger chunk of the American auto market than Detroit does.

Detroit's retreat into Fortress Midwest and its deep financial problems, made dire by this fall's credit crisis and plunging consumer confidence, have sent a message to those left behind, on the outside, and it's probably more negative than positive. That may not fully explain what's actually changing inside these companies -- and I don't think it does -- but it shaped a perception based in some measure of reality.

To use a tale from higher education, the 1980 Chrysler bailout is analogous to a professor inventing an extra credit assignment in response to a sob story from a weak student. The same student then goes on to miss the final examination and returns with another sob story. The consequences of preserving unproductive automobile companies, however, are more serious than the consequences of loosing on the world a corner-cutting graduate, who will be sorted into something commensurate with his or her talents in finite time.

No comments: