LETTING GM FAIL

The Secretary of Transportation’s report to Congress begins on a dark note. “Over the past year, the domestic aut industry has experienced sharply reduced sales and profitability, large indefinite layoffs, and increased marke penetration by imports,” it states. “The shift in consumer preferences towards smaller, more fuel-efficient passenge cars and light trucks . . . appears to be permanent, and the industry will spend massive amounts of money to retool t produce the motor vehicles that the public now wants.” The revenue to pay for this retooling, though, will have t come from sales of just the sort of cars that the public is no longer buying—a situation, the report observes, bound t produce “financial strain.
“To improve the overall future prospects for the domestic motor vehicle manufacturers, a quality and price competitive motor vehicle must be produced,” the report warns. “If this is not accomplished, the long term outlook for the industry is bleak.”
The Secretary’s report was delivered to Congress in 1980, a year after what may soon become known as the first Chrysler bailout. Depending on how you look at things, the report was either wrong—three years later, Chrysler returned to profitability—or prescient.
Last month, when the chief executives of the Big Three flew to Washington in their corporate jets to plead for public money, the result was embarrassing on almost every level. During two days of congressional hearings, the C.E.O.s were unable to answer the most basic questions, such as how they had arrived at the sum they were asking for—twenty-five billion dollars—or why it would be better to give it to them rather than to their customers, or whether, if they got it, it would be enough to keep them solvent. The three didn’t seem to think it necessary to present Congress with any documentation showing how they would spend the money, and they were sent back to Detroit like delinquent schoolboys. “Until they show us the plan, we cannot show them the money,” House Speaker Nancy Pelosi told reporters. That day, Ford’s stock price sank to a low of $1.01. “You want fries with that?” the Times’ Timothy Egan asked.
The challenge facing the Big Three as they return to Washington, presumably this week, is formidable. They have tried to cast themselves as victims, suffering from the mistakes of others, but this is a hard act to pull off.
“They are seeking treatment for wounds that, I believe, to a large extent were self-inflicted,” Senator Christopher Dodd, of Connecticut, the chairman of the banking committee and a proponent of a bailout, observed. Senator Carl Levin, of Michigan, one of the industry’s staunchest supporters, pointed to the companies’ habit of “paying their executives and their workers too much,” to their uneven quality record, and to their aversion to innovation. “Blame them if you want,” he said. By the end of the second day of hearings, lawmakers were openly taunting the C.E.O.s. Representative Peter Roskam, of Illinois, asked the three if, in return for federal assistance, they would be willing to reduce their salaries to a dollar a year.
“I don’t have a position on that today,” G.M.’s Rick Wagoner said.
“I think I’m O.K. where I am,” Ford’s Alan Mulally responded. (In 2007, Mulally’s compensation ran to nearly twenty-two million dollars.)
Barack Obama, thanks to his resignation from the Senate, will not have to vote on any bailout package that makes it to the floor. So far, at least, whenever he has been asked for his position, he has been noncommittal. On the one hand, he has called the carmakers “the backbone of American manufacturing” and said that “we need to provide assistance” to them; on the other, he has stated, “We can’t just write a blank check to the auto industry.”
But even though he’s between offices, the situation doesn’t leave Obama—the champion of “change we can believe in”—off the hook. If the automakers’ difficulties can be traced to a single, essential failure, it is their belief that they could avoid change. This is evident in their management structure, their labor contracts, and, most consequentially, their cars. For the past thirty years, the Big Three have been promising one hyper-efficient vehicle after another—the electric car, the “super car,” the hydrogen car—only to produce bigger and bigger gas guzzlers. (It was while the carmakers were supposedly working together, and with a billion dollars of federal money, to create a “new generation of vehicles” that G.M. purchased the rights to the Hummer.) The only compelling argument the companies can make at this late date—if a man strapped with explosives can be said to be making an argument—is that they will not suffer alone.
“What would it mean if the domestic industry were allowed to fail?” G.M.’s Wagoner asked last month. “The cost would be catastrophic. . . . That’s why this is all about a lot more than just Detroit.” Together, the Big Three employ some two hundred and fifty thousand people, and, as the automakers correctly point out, millions of other Americans—from the machinist at the tire factory to the waitress at the corner bar—indirectly depend on them for jobs. Were these jobs to be lost, the effect would ripple out through the economy, producing what Paul Krugman, on MSNBC, recently called “a huge anti-stimulus program at exactly the wrong moment.”
It would, of course, be foolish to allow the American economy to collapse in order to make a point. And it’s possible to conclude that the Big Three deserve on every front to fail and still decide to rescue them. But such a decision will itself be a form of temporizing, and will only pass the problems on to the next Administration. Real change—as opposed to the kind in slogans—is hard and, by definition, disruptive. If Obama has any intention of fulfilling his campaign promises, sooner or later he’s going to have to face up to that. ♦

ILLUSTRATION: Tom Bachtell
To get more of The New Yorker's signature mix of politics, culture and the arts: Subscribe Now