Chundles

John Stewart made a good point last week about Wall Street's reaction to the first details on the bank bailout: who gives a sh*t what Wall Street thinks!?!?!

I agree. While it's overly simplistic to say Wall Street caused all the problems we're in the middle of, they certainly were a big part of it. If they don't want our money to help their businesses survive, than someone should have the courage to tell them to go F themselves. Put them in the unemployment queue and see what they think then.

The Obama Administration has been granted, by the American people, a chance to fix the giant mess we're in, so let's all shut up and give them a chance. Take some solace in the fact that decisions are being made based on fact and with input from a broad swath of experts. That's what the American people deserve, and that is oodles more than we got from the Cheney/Bush administration.

I read this morning that Caterpillar Corp. agreed to rescind some of the 22k layoffs they recently announced if the stimulus bill passes. This is bad.

Our economy needs a recalibration. Businesses that grew too quickly need to slow down; banks that lent money to the wrong people need to be more conservative; home buyers need to buy houses they can afford, US automakers need to learn how to innovate, etc.

What we don't need is to give these large, multinational, multibillion dollar organizations a reason to continue the status quo. If that's all the stimulus bill does, we'll be right back where we started whenever the money runs out. And next time, it'll be more expensive than it is today.

I'm not opposed to the US Government stepping in to prevent the collapse of the auto industry, but like I've said before, it must be under preconditions that will enable them to emerge with the long-term viability they lack today. Unfortunately for the American Taxpayers, and those whose livelihood depends on a strong US auto industry, the loans announced by President Bush today will not do anything to ensure that the endemic problems of the industry are solved. It's a bandaid when major surgery is needed. Here are the preconditions reported by the New York Times:

The loan deal requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers in the United States.

and

To gain access to the loans, G.M. and Chrysler must agree to a range of concessions, including limits on executive pay and the elimination of private corporate jets.

That's it! Nothing about innovation, nothing about cooperation and collaboration with the stronger Japanese auto-makers, nothing about cars with high fuel efficiency, nothing about forced retirements for veterans past their prime. Nothing. Just some financial rejiggering.

All these preconditions do is extend the financial runways of the borrowers (likely to be GM and Chrysler). They do nothing to force this industry to change and adapt to the modern, global, marketplace. That means they're still going to fail, so we shouldn't waste our money.

To get access to these funds, Treasury Secretary Henry Paulson must submit a request to Congress, who can then reject or approve such request. Congress should show some foresight and courage by rejecting the request from Paulson, and responding with a list of acceptable preconditions that will result in a US auto industry that's viable for the long-term. If they won't agree to those terms, let them fail.

Update: According to this story, a bi-partisan agreement has been reached on a bailout bill for the auto industry. Let's hope it's filled with preconditions.*****

With apologies for resurrecting one of the Presidential campaign buzzwords, the only way the US Government should consider bailing out the ailing auto industry is if there are serious preconditions to such a bailout.

As of this writing, it doesn't look like the bailout is going to happen, but in the event it does, the stalwarts of Detroit need to have some change forced on them since it's seems they're incapable of doing it themselves:

--Backbreaking union contracts must be renegotiated. If the union doesn't like that, then they can start lightening their coffers by paying unemployment benefits to their members.
--Fuel efficiency standards must be upped dramatically. If that means no more obnoxious, gigantic gas guzzling trucks and SUVs, then so be it. Tough.
--They must allocate a significant portion of their operating budget to clean tech. I read recently that Toyota spends more than the entire US government on hydrogen research. Let's force that on the Big 3. That's the only way they'll survive.
--Aging workers who do not have the technical skills to help make these companies in the modern world must be let go. Yes, pay them off for their service, but they need to be replaced with people who have the skills to innovate.
--Close factories abroad. That will mean decreased revenue, but we need to focus whatever resources the industry will have on our own country. These companies want the government to save them? Then they need to work for us, the American people.
--Kill all executive bonus programs and perks, unless X% profit margins are met.
--New Board Members, elected jointly by shareholders and congress, should take control of at least 51% of the Board of each company.
--In exchange for some tax credits, we need to figure out a way to get Toyota to retrain American auto workers. Perhaps all factories could be co-operated (like NUMMI in Northern California is) by one Japanese company and its American counterpart.

It's enough already. The US Auto Industry has been producing subpar products for years. Sure, they're cheap. But you get what you pay for, and it's no wonder their businesses are in shambles. Their cars are ugly, not designed well, many aren't fuel efficient, and they're not durable. The taxpayers should not foot the bill for their fumbles. If they want our money, we get some control over how it's spent. While some of my ideas might not be feasible, if they don't agree to a comprehensive and measurable list of changes they must make, they should go out of business.