I don’t think it’s about spending more or spending less, it’s about spending efficiently. What do you think?

—–

FIRST UP: Obama Wants To Be GM’s Friend.

Obama Pushes for $50 Billion for Automakers, Oversight Czar

By Matthew Benjamin and Julianna Goldman

Nov. 13th, 2008

“(Bloomberg) — President-elect Barack Obama is pushing Congress this year to approve as much as $50 billion to save cash-starved U.S. automakers and appoint a czar or board to oversee the companies, a move that would require President George W. Bush’s support, people familiar with the matter said.”

“Obama’s economic advisers are now convinced that if General Motors Corp. doesn’t get a financial lifeline soon, it will have to file for bankruptcy by the end of January. And if the companies don’t get almost $50 billion, Obama will be dealing with the issue again by next summer.”

“Any czar or board would be patterned after the bailout of Chrysler in 1979 and New York City in 1975. Advisers such as former Federal Reserve Chairman Paul Volcker and former Treasury Secretary Lawrence Summers are said to be telling Obama that the cash is urgently needed now.”

“Congress would have to act in a lame-duck session that begins next week. Obama would need Bush’s backing to pass such a sweeping and costly measure in part because Democrats don’t have enough votes to force a floor vote or override a veto. Obama also would need strong support from auto-producing states such as Michigan, Ohio, Indiana, Illinois and Wisconsin to pass such a sweeping and costly measure.”

“Yet to be determined is whether most of the money would be drawn from the $700 billion financial rescue package Congress passed last month or from newly allocated funds.”

“By injecting himself into the talks about how to save General Motors, Obama is making an exception to his decision to steer clear of policy-making until he takes office.

The president-elect also wants the Federal Reserve to extend emergency loans to General Motors, Ford Motor Co. and Chrysler LLC, according to Obama aides who spoke on condition of anonymity.”

“The failure of those companies would likely bring down parts-makers, dealerships and suppliers in addition to inflicting a deep psychological blow.”

“If the plan were to offer no strong guarantees against layoffs it would likely draw fire from unions. But Obama advisers have been persuaded that the impact on current workers and retirees would be staggering if the companies went into bankruptcy.”

“Any auto czar or committee would presumably have the job of overseeing a restructuring of the auto industry.”

“‘The auto industry is too big to fail,” said Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts. “‘While the Obama administration can wait until Jan. 20 to address other matters, on this one they need to move quickly.’”

“Obama, 47, has repeatedly insisted there can only be ‘one president at a time.’ He is sending two representatives, former Iowa Republican Rep. Jim Leach and former secretary of state Madeleine Albright to this weekend’s economic summit of leaders of the Group of 20 nations in Washington rather than attend himself.”

“GM risks going bust before year-end without help from Washington. Shares of the biggest U.S. automaker reached a more than six-decade low this week. The company said last week it may run out of operating cash by the end of this year.”

”We’ve not being prescriptive in what would be acceptable in terms of the loans,’ said GM spokesman Tony Cervone, who said he’s not aware of the government’s plans.”

“Chrysler spokesman Shawn Morgan said the company is in discussions with the Obama transition team and members of Congress.”

“‘We look forward to a discussion addressing the immediate liquidity crisis facing the industry, as well as the competitiveness of the auto industry,’ Morgan said.”

“‘We need to wait and see what comes from Congress,’ said Ford spokesman Mike Moran.”

“Ford and Chrysler both likely would be forced into bankruptcy eventually if GM were to fail, Mark Oline, a Fitch Inc. credit analyst, said in an interview.”

“Enthusiasm among Obama’s economic advisers for a concerted rescue for the auto industry was sparked at a Nov. 7 meeting in Chicago, according to person familiar with the meeting. Michigan Governor Jennifer Granholm also pressed for additional aid.”

“A GM bankruptcy could send the U.S. jobless rate as high as 9.5 percent, up from a 14 year high of 6.5 percent in October, and produce a recession comparable in length to that of 1980-82, according to Behravesh.”

“‘If it does collapse, it could make the recession deeper and longer,’” he said.

“Obama, an Illinois senator, pressed Bush on the urgency of an assistance package during their Nov. 10 meeting at the White House, Obama spokesman Robert Gibbs told reporters this week.”

“Still, the Bush administration so far has opposed bailing out the carmakers, and continues to resist the idea of using the Troubled Asset Relief Program, the bank rescue which Congress passed in early October, for any companies other than banks.”

“‘The intent of the TARP was to deal with the financial industry,” Treasury Secretary Henry Paulson, who is administering the program, said yesterday in a press conference. ‘My focus is on the financial sector, getting credit going, getting lending going.”’

“Congressional Democrats, meanwhile, are pushing for legislation to help the automakers. House Speaker Nancy Pelosi called for congressional action, saying failure by one or more of the big U.S. automakers would have a ‘devastating impact’ on the U.S. economy. Assistance must be conditioned on ‘rigorous independent oversight’ of carmakers and restrictions on executive compensation, she said in a statement.”

“‘A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened,’ Frank, a Massachusetts Democrat, said in an interview on Bloomberg Television”

(Full Story On Bloomberg.com)

Is Detroit Worth Saving?

“The U.S. is gung-ho on rescuing the automakers. But the bailout better have major strings attached.”

By Joseph Romm

Nov. 12, 2008 |”Why bail out the car companies when they bailed out on us?”

“General Motors and Ford burned through a stunning $14.6 billion in cash last quarter. G.M.’s stock has sunk so low that you could buy the entire company for $2 billion. Bankruptcy seems all but inevitable.”

“In September, Congress authorized $25 billion to U.S. automakers to retool their factories to build fuel-efficient cars. But that money is slow in coming and Detroit wants more, including some of the bucks from the $800 billion Wall Street bailout. Last week, Barack Obama said he’d like to speed up the $25 billion and pursue additional policy options to help the car companies ‘weather the financial crisis and succeed in producing fuel-efficient cars here in the United States.’”

“But remember, when you bail someone out of jail, there is no guarantee he won’t jump bail, and even less of a guarantee he won’t ultimately end up back in jail anyway. And when you bail out water from a leaky boat, everyone still sinks until you plug all of the leaks.”

“The management of the car companies formerly known as the Big Three - soon to be the Medium Two, if G.M. and Chrysler merge - brought this upon themselves. Yes, the economic and credit meltdown has hit them hard, but it has hit all American companies. The tragedy of Detroit is that for years it simply refused to listen to those of us who begged them to build fuel-efficient cars. Indeed, before we hand them more money, let’s reflect on a little history.”

“When I was at the Department of Energy in the 1990s, we partnered with G.M., Ford and Chrysler to speed the technological development of hybrid gasoline-electric cars, given that increased fuel efficiency and advanced hybrids vehicles were (and remain) clearly the best hope for cutting vehicle greenhouse gas emissions and ending our oil addiction. This partnership was an informal deal between the Clinton administration and the car companies. We did not pursue fuel economy standards and the car companies promised to develop a triple-efficiency car (80 miles per gallon) by 2004.”

“In one of the major blunders in automotive history, G.M. and Ford and Chyrsler walked away from hybrids as soon as they could when the Bush administration came in - and after taxpayers had spent over $1 billion on the program. Ironically, the main result of our government  - industry partnership (which had excluded foreign automakers) was to motivate the Japanese car companies to develop and introduce their own hybrids.”

“G.M., in particular, which had had a technological lead in electric drive trains, allowed its No. 1 competitor, Toyota, to achieve a stunning seven-year head start in what is certain to be this century’s primary drive train, that of the hybrid gas-electric Prius.”

“G.M. was publicly criticizing the future of hybrid technology as late as January 2004, and announced later in that year a halfhearted effort to catch up to Toyota.”

“Worse, in the past quarter-century, G.M. has spent millions of dollars lobbying to stop Congress from increasing fuel economy standards — standards that might have forced them to build the kind of cars people actually want when oil prices are high. And despite the recent temporary drop in oil prices, there’s little doubt we will be above $4 gasoline in a few years, headed for $6 and higher within the decade.”

“Also, reducing greenhouse gas emissions to avert catastrophic climate change requires cutting automobile oil consumption by a factor of five over the next three decades. Yet Detroit has been waging a four-year legal battle against efforts by California and other states to regulate tailpipe emissions of greenhouse gases.”

“In other words, Detroit has not only been suicidally lobbying against its own inescapable future, but it has been lobbying against the future of all Americans who want to end our oil addiction, and against the future of all humans who want to preserve the health and well-being of our planet for future generations.”

“And for this they are to be rewarded with billions in taxpayer money?”

“Not without major strings attached, they shouldn’t be rewarded. We know that even with a bailout, tens if not hundreds of thousands of jobs will be lost, as the industry downsizes to match the reality of its mistaken management decisions as to what kind of cars will sell.”

“So the question is not whether many more jobs are going to be lost in the short term. They are. The question is, Will we end up with a well-managed domestic auto industry that can prevent far larger job loss in the medium term and thrive in the long term? Will we end up with an industry that understands its only hope for the future is being part of the solution to peak oil and global warming?”

“We know what the car of the near-future is: the plug-in hybrid electric vehicle. Indeed, electricity is the only alternative fuel that can lead to energy independence. All other alternative fuels are inevitably linked to the price of oil or lack sufficient domestic resources. Electricity is the only alternative fuel that can easily be made from pollution-free sources and still be far cheaper per mile than gasoline even at current prices.

We need, as Obama promised, 1 million plug-in hybrids by 2015, and then S-curve growth after that. Moreover, Toyota and Honda believe hybrid production costs may drop two-thirds within 10 years, but obviously only for companies that are aggressively making the transition to hybrids.

“If we are going to bail out Detroit, the deal has to be based on meeting the new fuel economy standards of 35 mpg by 2020, and meeting them increasingly with hybrids. The deal has to be for multiple plug-in hybrid car models. And most important, the deal has to include a management team that is wholly committed to that inevitable transition, a team that will not waste a penny of the taxpayer-funded bailout lobbying against the even tougher standards and regulations that will be needed to avoid the harsh consequences of global warming and peak oil.”

“This isn’t socialism. And it isn’t nationalization of the auto industry. It is immunization of the auto industry against the seemingly fatal disease of mental decay. And it is immunization of the nation against far graver threats. Indeed, the potential risks the bankruptcy of Detroit poses pale in comparison with the all-but-certain risks of continuing on our path of ever greater oil consumption and ever greater greenhouse gas emissions.”

(Full Story On Salon.com Here.)