Editorial: Don't rush bailout for automakers

But Congress needs to act in the short term to save jobs.

Last update: November 17, 2008 - 7:17 PM

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MINNESOTA IMPACT

Minnesota is home to only one motor vehicle manufacturing plant -- the Twin Cities Assembly Plant in St. Paul, which makes Ford Ranger pickup trucks. According to the Minnesota Department of Employment and Economic Development's most recent estimate, there are 1,860 jobs in the state directly tied to motor vehicle manufacturing. An additional 31,700 people are employed in retail sales of cars and car parts. Nationally, carmakers and their suppliers account for 2.3 percent of the U.S. economic output, according to the New York Times.

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Throughout this century the United States has lent a helping hand at home and around the world. From the Marshall Plan that sped post-World War II recovery to the billions spent since on foreign aid to the social programs that help poor and elderly Americans, our national instinct is to reach out when there's a need.

That's why federal aid for the moribund Big Three Detroit automakers -- under congressional consideration this week -- is such a controversial and emotional issue. The shortsighted management and labor leadership at General Motors, Ford and Chrysler inspires a tough-love reaction: Let 'em go through bankruptcy like the airlines and other troubled industries.

At the same time, it's impossible to sit across from grizzled factory veterans like Roger Terveen, president of UAW Local 879 in St. Paul, and not be struck by what's really at stake here: the livelihoods of several hundred thousand Big Three employees and the 2.3 million others who work in the vast network of suppliers, dealers and other companies dependent on Detroit.

Unlike the government's financial industry bailout, which was about getting credit flowing again for Wall Street and Main Street, federal aid for Detroit is about saving jobs in one industry. And while that crosses a troubling line -- opening the door for other struggling firms to lay claim to taxpayer dollars -- today's economic reality dictates a limited, stop-gap government intervention at this point to keep the firms operating and at least delay what could be a devastating shock to an already fragile U.S. economy.

The nation and the rest of the world are grappling with what appears to be a deep and protracted recession. U.S. Chamber of Commerce Executive Vice President Bruce Josten, whose organization strongly supports helping carmakers, asks: "Do you want to add 3 million more people to unemployment rolls? Do you want to kill off suppliers? Is this really the time you want to do this?" While bankruptcy likely would mean restructuring rather than shuttering the companies, Josten's point is valid. The timing could not be worse to lose good-paying jobs -- some projections call for unemployment to hit 7.5 percent in 2009 -- and have an industry still critical to the nation's economic health mired in bankruptcy. Another concern: whether the carmakers would be able to access the credit they'd need to reemerge from bankruptcy.

To be absolutely clear, stop-gap aid does not mean providing a blank check to an industry whose leadership long ignored the smoke billowing from under the hood. What is needed is emergency funding, preferably through loans, to buy the carmakers and lawmakers some time while the credit crunch eases, the economy strengthens and Big Three management and union leadership come up with realistic and detailed survival strategies -- plans that need to include reorganization in bankruptcy as a legitimate option. The industry's problems are years in the making. Hasty, sweeping legislation isn't going to undo its problems. The financial bailout passed by Congress earlier serves as a reminder of what happens when big, complex legislation is rushed; it may not have worked as hoped because its fundamental design has kept shifting.

The debate underway in Congress is not about whether to help carmakers, but over how much and how best to help them. A Bush White House proposal seems sensible. It would let carmakers take $25 billion in loans already approved for the industry and allow them to use the money to keep operating vs. the intended use -- retooling for smaller cars. That would get carmakers through the current crunch and limit taxpayers' financial risk. If the industry needs more federal help down the road, its leadership can then make its case to a new Congress and administration with reason, facts and care for the taxpayers footing the bill.

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