Michael Moore Discusses the Automaker Bailout
By Alan Stewart Carl | Related entries in Business, Cars
Last night, Michael Moore was on Larry King discussing the crisis facing American automakers. I thought it would be interesting to see what the man behind Roger & Me had to say about an industry that’s far worse off now than it was when the film was made 20 years ago.
Moore: I’m of mixed mind about this bailout, Larry, because I don’t think these companies, with these management people, should be given a dime, because that’s just going to be money going up in smoke or off to other countries.
GM is currently building a $300 million factory in Russia right now to build SUVs, right outside of St. Petersburg. That’s where your money’s going to go, no matter what they say.
King: Why (do you have) mixed feelings?
Moore: Well, because we can’t let all these people lose their jobs because of the bad decisions, the stupid decisions made by the management of these auto companies. I think what has to happen here is that Congress needs to pass some legislation, and our president-elect needs to do what Roosevelt did.
When Roosevelt came in and when World War II faced the country, Roosevelt said to General Motors and Ford, you’re not going to build cars anymore. You’re going to build airplanes and tanks and guns and the things that we need for this war because we have a national crisis. General Motors had to do what Roosevelt told them they had to do.
King: What do you want them to do now?
Moore: President-Elect Obama has to say to them, yes, we’re going to use this money to save these jobs, but we’re not going to build these gas-guzzling, unsafe vehicles any longer.
The fallacy in Moore’s argument is that those gas-guzzling vehicles (SUVs and large trucks) have been the only thing propping up the U.S. automakers. Until gas hit $4.00 this summer, American’s loved their gas guzzlers and GM and Ford were the companies meeting the market’s demand.
The problem is, the gas-guzzlers were the only market in which these companies were turning a solid profit. If buyers really have soured on these low-gas-mileage vehicles, a restructured GM would, through natural forces, turn to more fuel-efficient vehicles. What makes Moore think federal government mandates and industrial control could ever make GM more competitive than GM could make itself after a restructuring?
What Moore is suggesting is a step away from nationalization of industry. What’s really amazing is that he’s advocating that the government should do exactly what he says caused GM to fail in the first place. Read this quote from the interview:
Well, what really went wrong is that General Motors has had this philosophy from the beginning that what’s good for General Motors is good for the country. So, their attitude was we’ll build it and you buy it. We’ll tell you what to buy. You just buy it.
But I guess it’s different if the U.S. government is telling people what’s good for them.
Fortunately, Moore’s brave new world is an unlikely scenario. But his thoughts illustrate what I think is happening in American political thought: despite wide differences on remedies, both the left and the right are coming to a general consensus that an unconditional loan is a bad idea. The question now is: does the government mandate how GM (and possibly Ford and Chrysler) change OR do we let the companies go through the more dynamic restructuring possible in bankruptcy?
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November 20th, 2008 at 9:24 am
Hey, can we do an article on to what degree the following issues have had an influence on the current automaker troubles?
* Bad management/corporate culture
* Outcompeted due to poor foresight and R&D (the gas-guzzler argument)
* High tariffs in European markets
* Poorly structured labor contracts
* The economic recession
* Other issues?
All of these have clearly contributed to the current auto-industry woes. Can we do a post specifically on the degree to which each is to blame? I would be curious as to what people with more knowledge of all this think.
Points 1 and 2 are the ones being most commonly sited but if there is common consensus that they’re low on the list then perhaps we’re just scapegoating.
November 20th, 2008 at 9:27 am
Let there be the bankruptsy. We don’t need to keep throwing money at
gluttony! Maybe when we get that repair job on our vehicles the parts and labor wont break us. Maybe when we buy a new auto we can bargain a little and not pay the huge price so everyone gets their easy cut of the pie. We have become programed to just spend our money to make the other guy rich. Throw the money into transportation and infrastructor. We live in towns we can’t even get out of and are forced to buy cars we can’t afford in order to have transportation. If GM is building SUV’s in Russia maybe they ought to just move there completely and we get back to American made products. That’s how they got rich - cheap labor then sock it to us on price. Isn’t anyone else sick of it? In the 70’s I bought a brand new Chevy Malabu Sport for $5,000.00 V8. Try buying even a used car that is decent for that now! Get my point? We stood and let them gouge us year after year. Time we as citizens put our foot down and tell Washington to back us.
November 20th, 2008 at 9:28 am
When families get in a tight spot, parents redirect the resources towards the most essential things for the survival of the family and every one agrees. Now that we as a country are in a financial problem, what is so wrong about asking all Ceos to cut down on their expenses when we are footing the bill? Its only fair that the government should put restrictions on the hard earned tax payer money being doled out to these companies who have been taking jobs away from us in the first place. And on top of that, they have dished out the worst vehicles be it safety, quality or price. If it were not for the job loss, I would not give a penny to these people for making such bad decisions not once or twice but forever and ever.
November 20th, 2008 at 9:49 am
Seems to me that Michael is being somewhat disengenuous at best.
The big three were providing EXACTLY what the public wanted. The public wanted tank sized SUV’s such as the Escalade, Excursion, and Yukon, bought on easy credit. Yachts that never saw a dirt road or bad weather.
Unfortunately, they didn’t expend any effort on getting their cars on equal footing with Honda, Nissan, and Toyota. No-one wanted them. Most folks were buying imports if they were buying cars, and buying tanks built in America if they were buying big.
Bam, $4.00 gas hit the street and the American public, being much more nimble than the average corporation, almost instantly, and collectively, disowned the giant SUV that the big 3 had hung their profitability on.
I wonder if there was 1 economist among all of the corporate folks that was putting up a flag that there was a huge risk involved in these big vehicles if gas prices rose significantly.
I suspect not.
Their problem is that now they are saddled with plants, inventory, and people who are no longer needed.
I am terribly sympathetic to the plight of all the workers that are effected. The industry that I work in is under retreat in the USA and we just announced a closure of a facility last week.
The industry has done many things that are turning out to be huge mistakes in this environment but it seems that their desire to not put huge segments of their employees on the street is also a big driver in this issue. There are many things that they could do today, not the least of which is to shut some of their truck facilities today, that would push some issues out in to the future (and save some cash until a later date) that they seem to be loath to do because of the immediate impact on employees.
November 20th, 2008 at 10:24 am
“Well, what really went wrong is that General Motors has had this philosophy from the beginning that what’s good for General Motors is good for the country.”
I find this comment truly puzzling coming from Michael. I think he’s having trouble keeping up with his own rhetoric. This is EXACTLY the position of the pro-bailout arguments. I am even more puzzled as to why he get’s CNN coverage.
November 20th, 2008 at 10:44 am
Why is no one discussing the reason the Big 3 got to this place? Could it have anything at all to do with the labor unions that have BLED the auto industry dry over the last several decades? Is it any wonder the Big 3 have sent jobs to other countries? Maybe because they can get them made for a fraction of the cost?!
Labor Unions were good and necessary for a season…which ended in the late 19th and early 20th century during the days of the robber barons. The AFL-CIO is a worthless organization that should be shut down. I hope the auto workers who will lose their jobs will realize that they bit the hand that fed them one too many times.
The inherent hypocricy of the union concept is disgusting:
“When the employer does well we want a share of the profits.
When the employer suffers we will NOT share in the losses.”
You can’t have it both ways. How blind must you be to not see the insanity at work here?
Nathan
GA
November 20th, 2008 at 10:47 am
[...] centrist defender of the free market took objection to Moore’s central argument that the automakers had failed because they weren’t [...]
November 20th, 2008 at 10:53 am
OMG! This is the FIRST time I’ve agreed with Michael Moore about anything!
November 20th, 2008 at 11:09 am
The thing is… That demand for tank-like SUVs was created by the car companies, as well as the Mass Media. Driving a tank was as american as apple pie and it represented “freedom.” Driving those little efficient cars was too “european” and you could be seen as a pansy. Just look at the commercials. Metal and steel clanking together and people taking their SUVs out for a slog through the mud. I know there are many locales where this is possible but there are just as many where this is not even an option, yet people still bought into it.
Thankfully, hipster chic made the Bug and Mini and other small cars cool again, with the side effect of them being more fuel efficient.
November 20th, 2008 at 11:13 am
So far, I’ve only seen one argument against Chapter 11 for these folks which makes any sense: the inability, in the current financial environment, to get the DIP financing that Chapter 11 typically requires. Which would seem to suggest that, if we are going to do anything, having the Feds provide the DIP financing (including getting to be head of the queue for repayment) would be the only sensible thing to do.
The auto companies will never bring it up, since they don’t want to do Chapter 11. The unions, ditto. But some of our elected representatives really ought to push it anyway. Who knows, we might even get out of the constant cycle of “just one more time” bailouts for Detroit.
November 20th, 2008 at 11:24 am
I’d love to hear those Big 3 CEO talk about how much money they’ve sent overseas to build cars with cheap foreign labor instead of in the good ole’ USA. They should share about how many people have lost their jobs as a result of their practices, and how much damage to our planet has resulted from their inaction on fuel efficiency and green technology. We must remember that these companies are not in business to help us. They are in business to help themselves. If we get helped in the process, that’s practically a coincidence. I believe that if they could sell us someting useless for $15000 and we buy it, they’d be as happy as clams and feel no remorse whatsoever.
November 20th, 2008 at 11:38 am
Auto makers should turn around and produce renewable energy car, not natural gas like Pickens and somewhere else. We have technology to do it but these automaker just don’t want to do it. Look at Japan for instance, Honda nad Toyota can do it but our “Three Stooges” want our money to do it. Our govenment probably will stupid enough to give them.
November 20th, 2008 at 11:54 am
This man has a say in everything, and it seems to be very annoying. I work in the auto industry, and seem to be one of the only ones making any progress through these desperate times. All I can say is that when a problem occurs, Moore steps in to tell us all how things should be fixed. The only thing he will do is send the country into a shortage of food, because he probably could bail out the auto industry with his monthly food bill!
November 20th, 2008 at 11:58 am
Ha! Michael Moore now has “mixed emotions” about corporate welfare.
November 20th, 2008 at 12:15 pm
I ma Sorry! But
I won’t listen to Moore if my life depended on it! To me he has proven to have his own agenda and only his own!
His so call doumentaries are nothing more than justifying his point of view. He is no better the Swift group!
This whole situation is much more complex than a one sided view point. I am very tried of those in this country that are both from the right and left thinking that they are solution to all this countries woes.
President Obama is by far smarter than these individuals that are irresponsible and spread irresponsible rehoetic because they think they have forum to!
Moore, Limbaugh, Hanity, the Swift group and all those that are associate with those group need to learn how to really gather information without setting an agenda prior to gathering the information.
Mr. Moore, Mr. Limbaugh you are of my generations and unfortunately it shows! You act childish, you are irresponsible in your action! You are disrespectful to all that disagree with you and I will include Mr. Rove and Mr. Swift in that group.
The “Me” generation which I am part, but have never agreed with, I now are going to call you to account!
Mr. Moore shave! Don’t look like the idiot you act like, Mr Limbaugh face your drug/pain conviction with the responsible attitude as an adult, I did wrong and here are my records!
They is so much more to the Auto Industry and Mortgage issue that Shock jock journalist, so call investigative reporters are willing to explore.
It is disappointing that so many of you climb on to bandwagon without thinking and exploring the issue.
November 20th, 2008 at 12:27 pm
The big three were only seeing success from their gas guzzlers, yet they were still losing money over the past ten years. You know, back when the economy was fine, and SUV’s were selling like hotcakes? Yeah…they were losing money.
They’ve been losing money because when people DO buy cars (not trucks) they are not buying THEIR cars. They’ve been losing money because the unions were bleeding them dry.
Bail them out, but replace the current leadership. These guys wouldn’t know what to do with the bailout money, even if they got it. (and there’s mnore people to blame the those 3 idiots that went to congress to ask for money)
Things have to drastically change for this to get better. And if you can’t blame leadership for this mess, then who do you blame?
November 20th, 2008 at 12:45 pm
“Why is no one discussing the reason the Big 3 got to this place? Could it have anything at all to do with the labor unions that have BLED the auto industry dry over the last several decades? Is it any wonder the Big 3 have sent jobs to other countries? Maybe because they can get them made for a fraction of the cost?!”
Nobody’s talking about it because it isn’t their fault. You can’t can’t blame a welder with a mortgage and two kids in college for saying yes to a pension and health plan. You can blame a Harvard MBA making 7-figures for agreeing to a contract that bankrupts the company.
Besides, the Unions have been giving up their perks for years. They’re called “givebacks.” Before the latest set of givebacks UAW members had a 20% co-pay on every health cost. Now Union retirees are losing even that. The Big 3 put a bunch of money into a VEBA, which the Union runs, which is supposed to cover everything. Thing is it’s terribly underfunded. So it’ll probably run out of money just when a twenty or thirty thousand hard-working folks need it most. If it gets money at all — the VEBA has not been funded yet, and the Business-School types who run GM, swear up and down they don’t have any money left.
Besides European labor costs are higher than ours. When the Daimler — Chrysler merger went through the German unions were worried their jobs would move to Detroit.
The Big 3 have historically used the UAW to cover up their own incompetence. German car companies know they’re going to pay high labor costs. Their business strategy is to make really good cars that can cover those costs. In the late 90s and early 00s the Big Three’s strategy was to build trucks because the profit margin covered costs, and slowly let their automotive divisions die of benign neglect. That ain’t working too good right now because the economy sucks, and when the economy sucks nobody buys a new car. Gas prices have been insane lately, so even the few who are buying are reluctant to buy a truck.
They’ve been trying to change their strategy for a year or three (Ford even revived the Taurus), but car companies do not turn on a dime. Big 3 quality is fine. Gas mileage is not terrible. They don’t have super-high mileage hybrids, but their non-hybrid vehicles are as god as Toyota or Honda.
The problem is convincing people that’s true. And then surviving until people can actually afford to buy cars again.
November 20th, 2008 at 5:34 pm
I agree with Nick Benjamin’s post. I know that if it’s possible (wry grin as I write that) my preference for my next vehicle is either an Escape Hybrid or a Fusion.
November 23rd, 2008 at 8:48 pm
Yes, give the auto makers a LOAN. And that’s what it is, a loan. But give it with conditions, not like what Congress did with Wall Street—opening the wallets without knowing where the money was going. (What’s wrong with our Government officials???) Anyway, make sure the auto companies give a detailed plan on how they plan to spend the money! When they came to the government for the money in the first place, they couldn’t even say what their plan was! Duh. Hey, give me the money and I will at least come up with a convincing way to spend it.
November 24th, 2008 at 11:42 am
I also listened to Mr. Moore’s rant on the American auto industry. what
I found to be most interesting is Mr. Moore’s comment on how this should spell an end to capitalism in the United States. Wait a minute folks, you’re listening to a confessed communist describe what he thinks would help the American auto industry. This guy wants only one thing,for the auto makers to be totally controlled by Washington.
Listening to Mr. Moore is about the same as listening to Bill Ayers.
Larry King and CNN should place an “*” next to anything Mr. Moore
says, to alert the listener that a communist is talking !!!!!
November 24th, 2008 at 7:45 pm
Just how far can a service go with 250 million automobiles maybe more by 2025 which consumer’s own. Knowing that many may be destroyed in accidents, destroyed by junk yards etc. because the junk title would not sale?
If American’s had the opportunity to have their vehicle converted for $3,000-$5,000 with new tires would they approve of it?
How can a Tax Eempt Foundation Help Consumer’s obtain a Electric Vehicle from converting their own vehicle?
If all it takes is $1 million to get a small nuclear reactor would it be feasible to make rear-end replacements ourselves from recycled aluminum and give it as a replacement for their gasoline or diesel engine with two electric motors in it?
Why can’t Congress approve The Big Three Automakers to help the Foundation that converts Consumer vehicles? Their guidance could help to power them up by mass produced power pack units, converters, inverters, and the smelting of the rear-end part.
My Project Plan is The Electric Vehicle Free Conversion Foundation (EVFCF). It could be fashioned to function in many ways, one would be a direct purchase as before mentioned for $3,000-$5,000. As I see it that could seriously cause automakers not to have any sales at all but possible not. What’s your opinion on this?
http://jonalist.bravehost.com/articles/evfcf.html
Why can’t Congress approve their Supercomputer to come up with a Automaker Plan, us consumer’s need to participate.