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A Times Editorial

Help automakers, but attach strings

It is tempting to let General Motors slide into bankruptcy and force American automakers to fend for themselves without additional help from taxpayers. For decades, they have failed to innovate and fought government's efforts to force them to build more fuel-efficient cars. But in this economic crisis, the cost of looking the other way would be too high for middle-class families and communities already reeling from job losses, mortgage foreclosures and business failures.

Another $25-billion in federal loans would buy time for the overall economic mess to play out and for GM, which otherwise could collapse by the end of the year. But there have to be strings attached, and the industry and its unions must be willing to chart a new course. Otherwise, more federal aid only postpones the pain.

At the moment, though, the still-deteriorating economy can't easily absorb the loss of millions of additional jobs and the closing of auto dealers and suppliers across the country. Michigan's unemployment rate sits at 9 percent, and the national unemployment rate hit a seven-year high Thursday.

The automakers' latest push for help comes just months after Congress approved $25-billion in loans to help the industry retool factories to build more fuel-efficient vehicles. Treasury Secretary Henry Paulson said this week that he's not opposed to helping the industry but said the $700-billion bailout package designed to buy banks' distressed assets is not the way. It would be better to pass legislation specifically for the auto industry as some House Democrats are proposing.

So far, congressional Democrats have said the companies will have to meet the same conditions as others getting government handouts: The Big Three would have to agree to limits on executive compensation and severance packages. They couldn't use the money for dividends, and they would have to hand over a significant amount of stock to the federal government. Some Democrats, including President-elect Barack Obama, have suggested the help come only if the companies agree to focus on cleaner, fuel-efficient technology.

That would be a welcome sea change. Few industries are less sympathetic than the outmaneuvered American auto industry. While international competitors such as Honda and Toyota wisely planned for the inevitable escalation in fuel prices by pumping money into development of high-mileage models, America's automakers bet short again and again. For decades they have lobbied against higher fuel standards. They churned out gas-guzzling SUVs and trucks that provided enormous profit margins but whose appeal immediately faded as gas prices rose. What's more, the generous contracts enjoyed by United Auto Workers members are a relic of a mid 20th century economy, not the 21st century.

Comments this week from union leaders and GM chairman and chief executive Rick Wagoner raise questions as to whether the industry is ready or willing to change to save itself. Wagoner has said he sees no need for new management and has ruled out bankruptcy to restructure. Union leaders have suggested they'll reject concessions on contracts.

That thinking is shortsighted and exactly what has led the industry to the brink. If taxpayers are to invest more in saving one of the country's signature industries, Congress must demand nothing less than bold new leadership willing to retool an outdated business model. Anything less is merely buying time at the public's expense and delaying the inevitable job losses for 2.5-million Americans whose livelihoods depend on the industry.

Help automakers, but attach strings 11/13/08 [Last modified: Saturday, November 15, 2008 6:22pm]
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