Special Report

Big Three Weekend at Bernie’s

Washington is not bailing out the Big Three automakers. It is nationalizing them. So who do you think will be running them?

By 12.10.08

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Washington is not bailing out the Big Three automakers. It is nationalizing them.

Wake up and smell the coffee. Who do you think is going to be designing the next generation of auto products from these companies? The corporate leadership or the Congressional leadership?

In Partnership With Big Brother

After being rescued by billions and billions in government handouts, will the car companies be able to deny Congressional bigwigs anything they want in the design of their cars? Fuel economy standards, hybrid technology, electric cars, cars that run on ethanol, natural gas, switch grass, Bermuda grass, fine Colombian weed. Whatever Congressional poobahs want, they will surely now get, or easily pass legislative requirements forcing it on any corporate officials who remain insufficiently grateful and cooperative.

But you can rest assured that any potential ingrate will soon be gone, replaced by completely malleable gumbies with good Democrat party connections. Already we see Washington calling for the ouster of General Motors Chairman and Chief Executive Officer Rick Wagoner. The point is not that deposing Wagoner would be any real loss to GM. Under his leadership, GM's stock price has collapsed from $70 in June 2006 to $2.78 last month. The point is that the corporate leadership of the new auto welfare queens will now be chosen by Congress and the Obama Administration, not by the corporate boards of directors, or the stockholders (read "quaint anachronisms" or "barbarous relics").

Indeed, anyone on the boards of directors of the Big Three that says anything publicly, or privately within hearing, that offends any Democrat kingpin will soon be gone as well. Lord Obama himself said over the weekend regarding auto company managements, "If this management team that's currently in place doesn't understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go." That's called laying down a marker. "Tough choices" means the choices Obama and Democrat Congressional leaders will now make for them. That is what Obama means by "adapt to these new circumstances."

Jerome B. York, advisor to former GM Director Kirk Kerkorian, piled on, saying in Monday's Wall Street Journal, "GM has five long-serving directors who have been on the board 10 years or more. They have approved of and overseen many of the moves that have contributed to the company's troubles. They should also resign."

For anyone who still doesn't get the point, the bailout plan is said to include appointment of a new "car czar" to oversee the auto companies. Czar is a Russian word defined at Dictionary.com as "an autocratic ruler," with synonyms of "despot, baron, emperor, monarch." Interestingly, the first item that pops up at Dictionary.com under "czar" is "GM Car-Official Site." For those who are paying attention, the handwriting is already on the wall.

Congressional Democrats want an oversight board including the Secretaries of Treasury and Transportation, tasked as the Wall Street Journal reports "with developing broader, general restructuring goals for the companies," and with helping to develop plans to achieve these goals, "which the companies would be required to submit to the government by the end of March." Also, "the companies would be required to notify the board of transactions of over $25 million." In other words, the government would be running the finances of these companies as well, where they raise capital, from whom, when and how. Moreover, the General Accounting Office (GAO), and the special Inspector General for the financial market rescue, would also have oversight authority over the auto companies.

So the government will soon be firmly in charge of these companies. That, in turn, will mean a lot of costly, small time parochialism. The head of one Congressional Committee will want the companies to use steel produced in his district, another Congressional shaman will want the companies to use glass from his district, a senior Senator will want a big contract for an auto supplier in his state.


Any Color You Want, as Long as It's Green

But the real senior partners of the automakers are now going to be the environmentalists. The Environmental Defense Fund, the National Resources Defense Council, Greenpeace, Friends of the Earth, the Sierra Club, this is where the Democrats are going to get their bright ideas on how to run the auto companies, this is who is going to be really designing the new cars from the "Big" 3.

After getting $75 billion in taxpayer funds, and probably more to come, how are the car companies going to continue to produce SUVs, Hummers, high performance cars, and any other politically incorrect vehicles? Forget about it. They are done.

What they will produce is the little Matchbox cars the Europeans drive. And that is what the environmentalists expect Americans now to drive as well. The American public has shown it won't buy these cars, you say? Think again. You are behind the curve of our Brave New World. The environmentalists plan to force Americans to buy these cars. Ever hear of cap and trade? The carbon tax? Global warming? The environmentalists plan to slap fines of thousands of dollars a year on politically incorrect cars. By contrast, the auto bailout will enable them to sell the politically correct favored cars with thousands of dollars in taxpayer subsidies. Indeed, this will be defended as not just environmentally correct, but as protecting the taxpayer "investment" in the auto companies.

This reveals what is really involved in the auto "bailout." It is more even than the government taking over the car companies from management and stockholders. It is the environmentalists taking over the car companies from consumers. In the current market system, it is consumers and their preferences that really run the car companies. That is the market the car companies currently produce for. But under the bailout nationalization, the car companies will be producing for their new masters, the government, which means politically the environmentalists.

This will be Obama's first big blow against the living standards of America's middle class. Obama campaigned on rebuilding the middle class. But he really believes along with the rest of the Left, including especially the environmentalists, that Americans overconsume the world's resources, and that overconsumption must be brought down. That is what Obama said when he let out during the campaign:

"We can't just keep driving our SUVs, eating whatever we want, keeping our homes at 72 degrees at all times regardless of whether we live in the tundra or the desert, and keep consuming 25 percent of the world's resources with just 4 percent of the world's population, and expect the rest of the world to say you just go ahead. We'll be fine. That's not leadership. That's not going to happen."

Today, Americans drive big, beautiful, spacious, powerful cars, actually chariots of the Gods, beyond anything ancient mythologists could have ever dreamed of. But the plan is now to take that away from us. Our standard of living here is to be radically dumbed down, as we are forced into weak, little, politically correct vehicles, that we can drive 40 miles before we have to plug them in again -- at least on days when there is no blackout because environmentalists have also shut down the coal fired plants that produce half our nation's electricity.

Wake up, the nationalization of the car companies is an environmentalist dream. The enviros are not ever going to want to give that up. They don't care if that requires permanent taxpayer subsidies. No cost is too great to bring about social justice. That is why this nationalization will not be temporary.


Union Vampires

Auto management is getting an unfair rap today. The car companies are not failing because of bad management practices, or excessive bureaucracy, dealerships, or product lines, or production of the big, beautiful, powerful cars Americans want, rather than the cramped, weak, little toys they don't want. GM produces and sells three fourths of its cars overseas, serving markets where smaller, cheaper cars are preferred, and makes good profits doing it. Ford at least is heading in the same direction.

But they can't do the same in the U.S., in part because the market for such cars is not there, but also because with the fixed costs imposed on them by the United Auto Workers (UAW), they can't produce and sell such cars at a profit. Where auto management did blunder was in not standing up to outrageous UAW demands years ago, which have now added up to average costs in wages and benefits of $75 dollars an hour, or $150,000 a year, per worker.

This is what has now driven these companies effectively out of business. The Union vampires have sucked the blood out of the auto industry, as they did the steel industry, and so much of American manufacturing. Given the brain dead, long outdated, leftist ideology that dominates old union thinking, this is the effect of American unions today on company after company.

Don't blame the workers. They naturally want to make as much money as they can, as everyone else does, and I only want as much prosperity for them as possible. But when overgrasping union demands cause a loss of jobs, and eventually drive the companies out of business, the workers are not benefited. They are the victims of bad, shortsighted union leaders, just as the shareholders are the victims when shortsighted management fails to look out for their long-term interests.

But with the auto companies now effectively nationalized, don't look for union givebacks. The union vampire leadership will now just look to suck the blood out of taxpayers. The Democrat party owned by these unions is not going to make demands on them. It is going to kowtow to union demands instead, and just pass the cost on to taxpayers. This is another reason why the auto nationalization bill for taxpayers is going to be perpetual, not temporary.

Just as the companies under the nationalization bailout will have lost control over their product design and production, their management personnel, and their financing, they will also have lost control over their labor relations and policies. The response to union demands will no longer be decided by management. The unions will take their demands to their Democrat allies in Congress, who will just get their auto czars and czarinas on the phone, and insist on social justice.

Weekend at Bernie's

In the 1989 movie Weekend at Bernie's, two young corporate execs inform their company's boss Bernie Lomax that they have discovered a serious financial error on the company's books. Bernie responds as if he is delighted, and invites them to a weekend of hot parties and hotter babes at his beach house, where he secretly plans to kill them to keep the error from being revealed. But Bernie is also having an affair with the girlfriend of his mafia partner, who has Bernie killed at the beach house before the young execs get there. When the young execs arrive and discover Bernie is dead, they don't want to be deprived of their partying. So they carry the dead body around for the weekend holding him up and waving his arms around in greetings to make him appear to still be alive.

This is what the federal government is now going to try to do with the automakers in their nationalization bailout. The automakers were already in extremis, and unlikely to survive. But now as their business is turned into a political football, and they lose control over it to political special interests, economic survival is a hopeless lost cause. The environmentalists and the unions are going to try to carry Bernie around for a while to fool the taxpayers, so that they can party on. But Bernie will be dead.

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About the Author
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.