Analysis: Automakers have tougher sell than banks

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(Agencies)
Updated: 2008-12-10 09:07

WASHINGTON – Those corporate jets were just the beginning.

The fight over a multibillion-dollar bailout for Detroit's Big Three automakers has exposed a deep and bitter disillusionment — in Washington and across the country — with car companies once considered icons of the nation's industrial prowess.

Richard Wagoner (L), CEO and chairman of General Motors speaks with Ron Gettelfinger, UAW President, before testifying at the Senate Banking Committee hearing on the financial assistance package for the big Detroit automakers on Capitol Hill, December 4, 2008. [Agencies]

Struggling for survival amid an economic maelstrom, once-mighty giants General Motors Corp., Ford Motor Co. and Chrysler LLC find themselves scapegoats for the misdeeds of huge banks that claimed chunks of a hastily enacted $700 billion bailout and hundreds of billions more with virtually no strings attached.

On top of that, they are battling a public perception that, rather than lions, they are lumbering dinosaurs whose coddled executives and well-paid workers are hanging on to a dying way of life.

The combination has sapped the political will for helping the auto industry. With the clock ticking down on the current Congress, Democratic leaders and the White House worked on a compromise providing some $15 billion in emergency loans to see the industry through the winter.

When the titans of the financial industry faced calamity this fall, Congress and the White House swooped in with unprecedented speed to pour $700 billion into the banks whose high-risk ventures nearly brought markets to their knees.

Auto company executives, who flew to Washington in private jets for their first, badly botched pleas for government help, are enduring a far longer wait, not to mention an extended public shaming after they visited Washington a second time — making the 500-plus-mile trip from Detroit in compact hybrid cars.

"We didn't ask that the CEOs of the banks drive to town in a Wells Fargo armored truck," Sen. Sherrod Brown, D-Ohio, said.

"I'm sure you all feel a little singled out," Rep. Spencer Bachus, R-Ala., told the CEOs at a contentious Capitol Hill hearing. "There seems to be a glaring double standard."

There's little question that the carmakers are paying a price for the Wall Street rescue, enacted over bitter public opposition by a politically fearful Congress just a month before a high-stakes election.

"What's at play as much as anything else is an embarrassed Congress that essentially wrote a blank check to (Treasury Secretary) Henry Paulson, and in doing so, enraged the public," said Democratic pollster Peter Hart, who's studied public opinion on the auto bailout.

"Along comes the automobile industry, and they decide, 'This is where we're going to lay down the markers, and now we can show that we're good stewards of your money and we're being diligent and tough.' It's an easy target," Hart said.

That's partly because of wounds the industry inflicted on itself, as it resisted a shift to smaller, more fuel-efficient cars in favor of gas-guzzling SUVs, and openly feuded with Congress over meeting stricter clean-air rules.

It's also born of public outrage over what's perceived as gold-plated contracts for autoworkers, with high hourly wages and rich retirement benefits. A commonly cited figure puts autoworkers' hourly pay at more than $70, although the estimate actually describes the carmakers' total pension, health care and other obligations to both employees and retirees, spread out among the number of workers currently on the job.

Still, like the CEOs' jets, the figure has soured the public on an industry that during World War II earned Detroit the moniker "arsenal of democracy."

The Big Three executives, their allies in Washington and Detroit and the powerful United Auto Workers have been scrambling to repair the auto industry's image as they press their case for federal aid. A major part of their pitch: A carmaker failure would deepen an already painful recession — and kill off an industry that's woven into the very fabric of America.

"A message to Washington: INVEST IN AMERICA," blared a front-page editorial in the Detroit Free Press on Friday.

In the halls of Congress, lawmakers weren't sure it would be money well-spent.

"I think you're skating on extremely thin ice," said Rep. Paul E. Kanjorski, D-Pa.

It's an attitude auto industry allies say they've seen before.

"I don't think there's any question there's a bias in favor of the financial services community and against manufacturing. I don't know whether it's an Eastern seaboard thing or an elitism thing," said former Michigan Gov. Jim Blanchard, who helped design the bailout of Chrysler as a congressman in 1979. "The public loves to beat up on the auto industry and they love to criticize the companies."

However unpopular the automakers are, though, policymakers in Washington are loath to be blamed for their demise, particularly given the potential impact on millions of their constituents' jobs and pay. Already, the actual entry-level hourly wage for an auto worker is now around $14 — and falling.

At this rate, "The occupation that symbolized the middle class for workers in the 20th century becomes the working poor — you can build Chevys and get food stamps," said Harley Shaiken, a University of California-Berkeley labor economist and Detroit native who has studied the automakers.

"All of a sudden," Shaiken said, "to be an autoworker in America is not to be in the middle class, and that upends the story of economic success in the United States."