U.S. needs car industry to work — all by itself

A peevish editorial in the Detroit News the day after General Motors and Chrysler were given ultimatums by the Obama administration concluded thusly, “Obama has been harshly critical of the way Detroit’s auto-makers run their businesses. We’ll see now if he can run GM any better.”
Detroit had better hope that the draconian re-gime the government is forcing upon the car makers in exchange for additional federal funding produces better re-sults than the com-panies achieved on their own. Otherwise there will be no General Motors or Chrysler and the rust belt will grow still rustier.
General Motors hasn’t made a profit since 2004. It lost billions in 2005, one of the best years for car sales in history. It first went to Congress for help months before Barack Obama was elected president. Without government bailouts — under Presidents George W. Bush and Barack Obama — the companies would have gone bust.
Because the car industry is emblematic of U.S. industrial prowess over the past century and because it has provided employment for so many hundreds of thousands of well-paid workers, the government, backed by the American people, has poured billions into it in an effort to keep it alive.
As President Obama has said repeatedly, he has no interest in running a car company and no intention to do so. What he and the task force he assembled to diagnose the problem and prescribe a remedy have said is you must demonstrate clearly that you can make money again before you get more federal money.
(This, by the way, isn’t an unprecedented interference with private industry. President Harry Truman won that honor when he threatened to nationalize the meat packers, the coal mines and the steel industry in the years just after World War II when constant strikes threatened to shut down the country.)
It is, rather, a cold-blooded, practical decision based on unpleasant facts.
The dreadful alternatives to forcing the car makers to restructure or be denied further government aid are two: (1) let them go broke and go away; (2) let them continue as they have and give them billions of dollars, which the government must borrow from tomorrow’s Americans as they stumble along indefinitely as wards of the state.
What should be clear to all is that neither Chrys-ler nor General Motors can stay afloat on their own. They owe too much and have too little. Neither could continue operations under a court-supervised bankruptcy without additional funding from somewhere — and the only somewhere available to them is Washington, D.C.
So it is reasonable to demand huge concessions from all involved before pouring still more borrowed dollars into Detroit. The car makers must produce cars the public will buy. The bond holders — the people who hold billions of GM debt — must agree to accept stock for most of the face value they hold. The UAW must agree to deep reductions in the health care and pensions owed to retired workers and accept wages and benefits for current workers that are competitive with those paid in U.S. plants operated by foreign companies.
Chrysler must team up with Fiat within 30 days to qualify for more aid; General Motors must have deals with its unions and its creditors done within 60 days and have a plan in place to make money.
The administration’s goal is to help the car industry thrive again so that it can back away from the federal trough. It is a hopeful strategy that will work only if the president holds firm to the 30- and 60-day deadlines he set.

— Emerson Lynn, jr.