Friday, June 27, 2008

The Big 3: What can we do?

Not to get all Dean Baker here, but don't major newspapers have some responsibility to write articles with truth instead of carefully-worded pap that distorts the truth in some pretense of "journalism"? I refer to a story in the Chicago Tribune about the problems being experienced by the Big 3 automakers:
The Big Three are getting pummeled from all sides.

Their U.S. sales are down dramatically as gas prices devastate demand for pickups and sport-utility vehicles, their most profitable models. At the same time, they are being hit by rising costs for key commodities such as steel and plastic, and they and their customers are finding it harder to borrow money thanks to the credit crunch.

"It's a perfect storm, isn't it?" said Burnham Securities analyst David Healy. "If this situation goes on long enough, they could be forced to go after government-guaranteed loans."

Remarkable. All these passive-voice lamentations ignore the reality that much of the current situation is due to the mistakes and missteps of the automakers. Could they have jumped on more fuel-efficient cars earlier? Could they have pushed forward faster with hybrids or plug-ins? Could they have hedged against commodities costs? Of course, and successful companies are the ones who are prescient enough or lucky enough to foresee such events and plan for them, who don't eat their seed corn in a headlong rush to short-term, analyst-pleasing, stock-plumping profits.

Perhaps a little conservative discipline is in order. Maybe, rather than asking taxpayers to prop up these companies that cannot figure out how to get today's market to work in their favor, we let them find their place in the new economy.

But stories like this one don't help people see that as the choice. Instead, their problems are presented as mere circumstance, so we should rush to help these down-on-their-luck corporations. There may be reasons to prop up the Big 3, but they do not include the rationale that they are victims who need to be protected from the big bad world. If we do not extend sufficient help to individuals who find themselves buffeted by forces they cannot control, why would we extend help to large entities that have a lot more options?

3 comments:

Red Oak said...

Yeah, how can you not just roll your eyes reading this stuff? But, but, but, we're globo-American car makers! Surely you can't expect us to exhibit any more capacity for long-term financial planning than a drunken coke-head with a winning lottery ticket?!

This tidbit was interesting:

"Independent steel analyst Michelle Applebaum of Chicago points out the Big Three are partly to blame for their commodity woes because 'they squeezed U.S. steelmakers out of business.'"

Hey, Big 3, shouldn't you be hitting up your new best friend "the globe" for those guaranteed loans?

As you said, I have no idea if there are any good arguments for propping up these incompetents, but if there are, any loan agreements ought to come with some hard-core "clawback" clauses.

mcfnord said...

A fuel-efficient car sale requires raw materials and credit! Oh yeah so the automakers caused the credit crunch and the commodities boom! My mind boggles at how they could have mitigated these factors. Perhaps you can share your ideas.

Nobody asked taxpayers to help.

I just read the Wall Street Journal. I know well there's a credit crunch and a commodities boom, and I'm sympathetic to the impact. Changing consumer tastes... that's one piece here, not the whole picture. But this is your soapbox.

People who kvetch about second-rate news articles are like people who kvetch about television. Yet they keep on watching!

Androcass said...

Or people who kvetch about blogs with which they'll never agree.

red, you know the clawbacks will never happen, because that would prevent the risk from being shifted to the consumer/employee/taxpayer, and we could never have that.

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