Congress should deny automaker bailout

By the Journal Editorial Board | Friday, November 28, 2008

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Detroit’s Big Three automakers want a $25 billion cash infusion from the government to save them from bankruptcy. In making their pitch, management of the Big Three laid it on the line: Millions of jobs would be lost without the bailout, a massive rupturing of our workforce which would accelerate our economy’s   demise.

The bailout is opposed by the Bush administration. And the South Dakota delegation in Washington is skeptical of a plan to bailout the automakers. Rep. Stephanie Herseth Sandlin and Sen. Tim Johnson both voted against the $700 billion bailout and will likely look at this bailout with the same critical eye. Sen. John Thune said he opposes issuing a “blank check” in an effort to solve the long brewing problems surrounding the auto industry.

There is, however, an interesting complication for all of our delegation. Democrats are pushing for the $25 billion bailout, which will make it   difficult on Herseth Sandlin and Johnson, neither of whom voted for the last bailout — also pushed by   Democratic leadership. Can they remain independent of their party and vote on behalf of their constituents —again? That last vote was during their campaigns, but the election is over now. Will that affect their vote?

Thune is supporting the Republican initiative to redirect funding which was designed to encourage   automakers’ development of fuel-efficient vehicles. Republicans have long been reluctant to press the industry for better fuel economy, and diverting this funding would be a setback to what little progress seemed to be made during the Bush administration. Let’s be frank, the American auto industry’s inability to move quickly enough toward fuel-efficiency and  alternative power is one of the reasons it is facing the financial problems it is today.

We would ask Sen. Thune to   reconsider supporting diverting this funding. If automakers are to survive, they will need to produce more fuel-efficient vehicles and expand and fast-track its research of new power technologies. If they don’t, then any rescue plan will be the equivalent of throwing good money at bad. And if Thune is worried about writing a ‘blank check’, then he must be worried that the $750 billion bailout check he already supported has been written and rewritten, changed and reassessed repeatedly since its   approval.

At what point does our government stop rescuing failed businesses? Who is next? Today the auto manufacturing industry (which is quite separate from local auto dealers), tomorrow ...? Airlines were forced to declare  bankruptcy when their businesses suffered, and they don’t pay their employees anywhere near as much as the United Auto Workers unions.

Cal Thomas wrote recently that the industry needed $25 billion to bailout the pension and health programs for retired and current employees, not to simply cover operating expenses. The Wall Street Journal reported (2006) GM employees earned $81 an hour in wages and benefits. That, the newspaper reported, added about $1,600 to the cost of each vehicle.

Taxpayers should not have to bail out failing private companies. The  auto industry brought this upon themsleves, and smarter, more efficient companies making better vehicles like Toyota, Honda and Nissan have carved themselves out a large portion of the U.S. market.

This bailout will not help U.S.   automakers become better companies — it will help to pay for some of their woeful business practices. We urge our South Dakota delegation to reject this $25 billion bailout of the auto   industry.