Why It's Essential for Congress to Provide Financial Stimulus to the U.S. Auto Industry

• The Fate of the Industrialized World Hangs In the Balance

• This Is Not Merely an Issue of Protecting a Segment of the Work Force; it's an Issue of Societal Progress

By Marc J. Rauch
Exec. Vice President/Co-Publisher

<Originally published November 26, 2008

Innovation has almost always been the stimulus to advance human civilization. Sometimes the innovations were originally intended for military use and then adapted for everyday life; sometimes they were specifically meant to improve the human condition. But as far back as the controlled use of fire and the first application of the wheel, to gunpowder, sails, moveable type, steam engines, telegraph, radio, and the electric light, innovations took our primitive species and turned us into relatively sophisticated creatures on the verge of serious interplanetary exploration.

Along the way the innovations resulted in sky-rocketing economic bubbles; and then the inevitable financial busts when the booms petered out or failed to meet the over-hyped goals. The last world-wide bubble, the Internet bubble, sent all economies to new heights and the innovation will undoubtedly change mankind forever. Unfortunately, the excesses of this unprecedented boom and its subsequent effects left us with the worst global economy ever experienced. In time, as politicians and economists come out from under the covers of denial, they will admit that this bust period was more devastating than even the Great Depression started in 1929.

That the world will eventually recover is indisputable. But the questions that must be answered are what will be the stimulus to recovery and how long it will take?

As we have long stated on TheAutoChannel.com, it’s our belief that the next stimulus to economic well-being is what we all refer to today as “alternative-energy” and “alternative-fuel vehicles.” When we are finally able to take the giant step for mankind that allows us to exchange the word “alternative” for “modern-day” or “present” when describing energy and fuel and transportation propulsion systems, we will advance to better financial health and wealth. And we believe that this new boom period won’t last for just three or four years, but for decades.

Furthermore, we believe that American economic success from the adoption of new fuels and energy technology will spillover to the rest of the world and alleviate their economic malaise, as well.

To go down the path that leads to the new boom America must shake off the gasoline yoke now, not in ten or fifteen or twenty-five years. Not only does this mean that American carmakers have to get out of the gasoline-engine making business, they have to reign in their attack-dog lobbyists and political henchmen from hindering change on both national and local levels.

By themselves, the three U.S. car companies are incapable of making the necessary transformation. Bogged down by constipated corporate philosophies and worker encumbrances they lack the resolve, and they clearly lack the financial resources.

(It’s interesting to note that the heads of the Big Three car companies didn’t go before the British Parliament to beg for billions of dollars and save the American auto industry, nor to the European Union’s Council, nor the Russian Federation Assembly, nor China’s National People’s Congress. They didn’t even appear before an OPEC meeting to ask for the $50 billion loan (although this group is the most likely to benefit from the Big Three’s continuance of gasoline-powered vehicles). They went to the United States Congress in Washington, DC. So regardless of how international GM and Ford and Chrysler pretend to be; they are still just American companies, not global companies. And because they are seeking a bailout from all the American people, not from American union pension funds, it’s the American people (all the people, not just auto workers) that they must serve. They have a responsibility to do what is right for America, not what is expedient for the oil producers or unions.)

This is where the congressional intervention comes in: The United States Congress can provide the financial stimulus and enact laws that mandate the necessary changes, and in the process possibly redefine what “American auto industry” means in the 21st Century (a financially viable American auto industry doesn’t necessarily have to include American brands, or American brands as we know them today.)

If Congress is willing to bailout a mismanaged insurance company and banking group, whose significance to our national well-being pales by comparison to the energy-fuel-transportation issue, then they can and should put the American auto industry back on track.

But Congress’ own resolve must match the level of the financial commitment that Detroit requires and the importance of the intended result. For Congressmen to truly be helpful they must overcome their own personal real-world incompetence, selfish pork-barrel entanglements, and addiction to oil company inducements.

The specific dollar amount(s) provided to the auto industry is less important than the stipulations that must be put in place to insure that the funds are used appropriately; and the dollar amount and the stipulations are less important than the clear laws that must be swiftly enacted to insure that there is no misinterpretation of what the goal is. For example:

No loop-hole laws that permit the continued production of grossly inefficient gasoline-guzzling vehicles under a deceptive fuel-efficiency averaging formula. Each vehicle must stand on its own as being fuel-efficient, and operate without gasoline.

If any vehicle manufacturer wants to sell their products in the U.S., then the vehicles must be manufactured or assembled in the U.S., with the requirement that a “reasonable” portion of the parts required for domestic assembly be manufactured in the U.S.

If an automaker accepts financial assistance from public funds, executive compensation (including benefit package) should be severely restricted, and employee compensation (including benefit package) should not exceed their local community private-sector standards.

If Congress can take the bold steps necessary to protect whatever bailout is ultimately decided upon, then we have the chance to pull out of this depression in the next two to four years.