Archive: Opinions

Just because 'Car Czar' rhymes and sounds catchy doesn't make giving $14 billion to three companies with years of really bad business plans a good idea.  Congress has had a lot of bad ideas that seemed like good ones when they repeated them enough.  How about that great idea in the late 1990s to encourage Fannie Mae and Freddie Mac to promote questionable loans?  The idea was to promote affordable housing.  $700 billion later that was a great idea alright!

Now Congress is at it again.  Even though $14 billion is less than the auto executives asked for, it is a nice prize for companies that have plodded along for years making themselves uncompetitive in a field they dominated before they got fat and comfortable.  237 congressmen thought it is a great idea.  170 had their doubts.  Mercifully the Senate nixed it.  But when all is said and done Congress will give them something.  After all, it's the Idea du Jour.

The only good piece of this is that Congress is talking about more than the usual strings attached to the so-called 'Bridge Loan to Nowhere.'  In some ways it will be Chapter 11 without Chapter 11 -- the government will force the companies to restructure without calling it bankruptcy.  That is bad news for the unions, who have said things that sound good but have no substance in the context of the current crisis.  And it could be good news for the companies because they are worried that if the 'B' word is used people will be afraid to buy their cars.

In order to get the loans automakers will be required to give the government warrants for stock worth 20 percent of the value of the loans. They will also be required to submit to the authority of a car czar. That person's job would be to facilitate talks with the companies, their employees, unions, suppliers, creditors, dealers, retirees and shareholders to try to get a working plan to make the companies viable over the long term.  The auto companies also would have to stop paying shareholder dividends or bonuses to their top executives until the loans are paid off.

  No bonuses?  While it is true that these executives have abused the system shamelessly, I thnk some incentive to succeed would be a good idea.  After all these guys are rich enough to walk away and with all the tsoris why should they care whether they succeed?  I don't know what the incentive should be -- maybe getting to keep the bonuses they took as their companies flushed down the toilet, maybe staying out of jail... or maybe bonuses. 

The govenment also wants to require them to sell their corporate jets -- a stupid, emotional, knee-jerk populist political stunt, if you ask me.  Theoretically corporate jets make it easier for executives to do their business.  They should only be sold off if they don't, but because they are stereotypically luxurious the politicians say they've got to go.

I'm not saying they shouldn't be sold -- only that doing so because it's politically popular shows why governments shouldn't be running corporations.  And the 'Car Czar' idea... critics of the idea say a government car czar wouldn't have the experience or expertise to deal with these companies or productively come up with a long term plan.  Aside from the fact that it sounds cool with its pseudo-alliteration and the fact that it rhymes, how does the government think it can run auto companies well if actual auto executives can't do it?

I am sympathetic to the three million workers whose jobs are in jeopardy.  But I am highly suspicious of these companies that haven't tried to make better cars in years, have allegedly bought up green technologies to quash them in years past, and haven't actually shown any realistic intent to change after they get the money, except for the toadying and bowing to political pressure and the ridicule of using those jets.

I hope the Senate will think long and hard before giving a cent away to the car companies.  And if they do, who will be next?  I still think they should give a few billion to young upstart online newspapers.  That happens to be a great idea.  At least online newspapers actually look to the future!

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