White house agrees to use TARP $ for auto bailout

Photo Courtesy of Quality Digest

So it appears the Bush administration has agreed to use some of the $700 billion set aside for the financial sector bailout for the auto industry. More specifically, the government will loan G.M and Chrysler $13.4 billion dollars immediately and another $4 billion in February if necessary. All in all, I'm not viscerally repulsed by this move. I'm glad the Bush administration came to its senses and used some of the TARP money for Detroit, particularly after Senate Republicans voted against bailing out the auto industry last week, in a rather transparent display of their hatred for organized labor. It would have been disastrous if we just did nothing; the collapse of the industry would have led to millions of lost jobs in the most economically depressed region of the country while we're in the midst of a recession.

That being said, the conditions of the agreement are downright awful. According to the Times, in order to qualify for government assistance GM and Chrysler must

reach an agreement with the United Automobile Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers in the United States

Further, if the car companies cannot show they are on the path to profitability within three months, the government (at that point under the Obama administration) has the option of "calling" the loans for "immediate repayment". Thus,

In effect, the White House has required the auto companies to cut the equivalent of $13.5 billion in costs within three months, in order to repay the federal money and receive another infusion of capital

I just can't see how trimming over $13 billion in three much is even possible, though I'm relatively certain where those cuts will come from: plant closures and lost jobs, in addition to the aforementioned wage and benefit cuts. On the bright side, Ron Gettlefinger, president of the UAW is not taking these proposed cuts sitting down. Rather, he is hopeful that the anti-worker terms of the agreement can be adjusted when Obama is in office.

As am I. I know times are tough and I agree that the workers should probably accept some sacrifices in exchange for taxpayer assistance. The terms of this agreement, however, are just plain heartless, particularly since the "overpaid auto workers as source of Detroit's troubles" thesis is basically bogus. I really hope the Obama administration changes the terms of the agreement and takes this as an opportunity to be a little more creative. Chrysler is shutting down all of its plants today and they will remain idle for the foreseeable future. Under the terms of this agreement, in all likelihood, some of these factories will never open again. That sounds like quite a waste to me. Americans may not want cars right now, but we still need things like windmills, solar panels, buses, and trains to get our economy going, as well as modernize and "green" our infrastructure. Instead of leaving these factories idle, couldn't we use them to build some of these things? As many have pointed out before and recently, GM transitioned from building cars to tanks in no time during World War II. I don't see why they can't transition again in the face of a different kind of national crisis. If Detroit's management and investors doesn't like the idea, who cares? We are bailing them out! An auto industry bailout should be about saving jobs and good paying blue collar jobs in particular, not protecting GM/Ford/Chrysler's investors or busting the UAW. Here's to hoping that Obama can turn this bailout into something that actually helps working people. That, of course, would be change we can believe in.