DETROIT-It’s a case of the Midwest vs. the rest of the world, and the Midwest is losing.
After the Senate vote against a $14 billion bailout plan for General Motors and Chrysler Thursday night, the nation now waits to see if Pres. George W. Bush will enact a lifeline by using the TARP bailout fund, something that was initially off the table.
Regardless of what happens, however, people in Michigan and heavy auto states like Ohio and Illinois will not long forget that walk out by Senate Republicans; these Midwesterners know they will bear the brunt of the millions of jobs lost if one or more of the auto companies declare bankruptcy. Chrysler is based in Auburn Hills, MI and GM is based in Detroit. Ford, based in Dearborn, MI, has said it will not need assistance at this time.
The Republican leadership who have opposed the auto bailouts aren’t shy about admitting they would rather have bankrupt auto companies, including US Sen. Bob Corker (R-TN). “We have a lot of Republicans that…would like to see Chapter 11 occur, and to see them go through the laws that exist here in our country for reorganization in a way that’s clean, and allow them to move ahead in a financially stable way,” he said in a statement Thursday afternoon. He proposed three concessions that needed to be made to pass the Senate, including the fateful requirement that the United Auto Workers match their salaries to US-based Japanese automaker employees.
Readers of GlobeSt.com seem to agree with Corker. In a poll on GlobeSt.com this week, we asked readers to choose their solution to the auto crisis. About 80% of the more than 430 responders said bankruptcy is the best choice. The world markets also didn’t respond as doom-and-gloom as people like Senate Majority Leader Harry Reid predicted; as of noon, the Dow Jones Industrial Average was only down 76 points, not bad in comparison to previous days – though there may be more of a fall if other bailout methods also fail.
Regardless of the argument that it’s difficult to imagine people buying cars from a bankrupt company, Steve Chaben, regional manager of the Detroit office of Marcus & Millichap, is one of many commercial real estate executives who say they just can’t really even think about what auto bankruptcies would do to Michigan, Ohio and the auto-and-supplier-heavy Midwest states. “It wouldn’t be good, a devastating number of people would lose their jobs, with a much larger proportionate of the number being people in Michigan and the Midwest.”
Chaben echoed many leaders in Detroit in decrying the double-standard of helping banks and white-collar workers, and leaving industry and blue-collar workers to flap in the wind. “Also, it’s astounding how much politics is being played, you can’t help but wonder if the southern Senators are giving one farewell smack to the unions,” says Chaben, talking about how the UAW has supported Democrats and has fought to remove many Republicans from office.
People also are still following the myth that Detroit automakers don’t make a good product. “The Big Three are more ready to compete in the world stage than they’ve ever been, it’s not like we’re in the 1970s anymore. They’ve had a bad year, but with some help they can come back,” Chaben says.
White House press secretary Dana Perino said today in a statement that under normal conditions, the administration would prefer that the markets determine the ultimate fate of private firms. “However, given the current weakened state of the US economy, we will consider other options if necessary, including the use of the TARP program, to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time,” she said.
US Sen. Carl Levin, (D-MI), said in a statement today that he’s hopeful the president will act soon to prevent a collapse of the auto industry. “Use of TARP fund is the fastest, most feasible, most immediate and most certain approach to provide the emergency bridge loans needed by the auto companies,” he said. ” It was always the intent of the TARP program to assist industries whose collapse would have a major impact on the economy, including the financial sector.”