The Auto Writer

Automotive executives are making their big pitch before Congress this week. Let's hope that they quit clowning around and get down to some serious business!

I’ve received some flak lately for my opposition to the bailing out of the American auto industry, namely Chrysler, Ford and General Motors. Sure, few comments are posted to this site suggesting that there has been some disagreements, but I’ve gotten the occasional “instructive” email urging me to rethink my opposition and have sensed, I believe correctly, that some of my auto industry contacts are none too pleased with my viewpoint.

When I read on Wednesday the results of the CNN/Opinion Research Corp. poll that 61% of Americans are “dead set” against aiding the Big Three automakers with just 36% in favor and 53% believing that aiding these companies wouldn’t help the economy, I wasn’t terribly surprised.

What’s more is the following comment from the pollsters. “Only 15 percent say that they would be immediately affected if the auto companies went bankrupt,” CNN Polling Director Keating Holland said. “Seven in 10 say that a bailout would be unfair to American taxpayers.”

What may be surprising to many analysts, lawmakers, and to the leaders of the automakers themselves is that Americans simply do not want to be burdened with yet another bail out. In other words, poor timing may be the biggest reason why opposition to helping the Big Three is so strong.

Consider this: In September, we were told that the financial markets were in such bad shape that a $700 billion bail out was necessary to avoid catastrophe. The first vote on the bail out went down in flames, but the second one passed, albeit somewhat grudgingly.

Soon, billions of dollars in “aid money” which is a euphemism for taxpayer funds found its way to AIG with tens of billions more used to allow the federal government to gain an equity stake in nine big commercial banks. When news that AIG squandered some of its money on an employee junket while several brokerages announced that their bail out funds would be used to pay bonuses, Americans became livid.

Worse, was the announcement by the Bush Administration that the Treasury Secretary would only draw down about half of the funds, saving the remaining $350 billion for when Obama takes office. Okay, if it was such a big emergency in September, why is it no longer an emergency a few months later?

The poor timing for the automakers is that they are making their appeal after the big bail out passed. Citing Chrysler Corporation’s example in 1979 of securing a federal loan (and paying it back early with interest) isn’t enough – the damage has been done thanks to the folly of the earlier federal intervention in the financial markets.

Many Americans know that the Obama Administration (along with Congress) plans to throw hundreds of billions of dollars more at the sour economy, a prospect that doesn’t have too many people pleased. After all, one look at your retirement savings account reveals that you are a lot poorer today while federal debt has suddenly skyrocketed. No wonder consumer confidence has tanked or why people are not buying cars!

Sure, automotive executives can blame some of their troubles on the financial marketplace, but they aren’t doing a good job of selling it. Appearing before Congress in November via corporate jet was a callous and stupid move, one that the news media picked up on and ran with. Many Americans think that General Motors, Ford and Chrysler are out of touch as it is, falling behind foreign automakers in all areas. That isn’t entirely true, but perception is the name of the game in the world of business.

Will Congress give Detroit what they want? I think that this is entirely possible despite what voters are saying. Get a lame duck Congress and outgoing Bush Administration to approve aid and the next Congress and a new president can wash their hands of the dirty deed.

Of course, if the deal is bungled and our memories of the mishap are still fresh come November 2010, the Democrats will be handed a historic mid-term defeat, hamstringing the new president much like the Republicans did to Bill Clinton in 1994 when Congress switched to Republican control.  Mr. Obama isn’t stupid — he understands history as well as political expediency — aid to the automakers isn’t a slam dunk.

We Americans can be a fickle lot, but we’ve also tired of all kinds of corporate welfare checks being dispensed no matter which industry comes flying in to Washington, D.C. with their hands out. This could be the last gasp for the U.S. auto industry as we know it — they’re running on fumes but do they really get it?

Photo Credit: Florin Florea