If Chrysler gets U.S. Aid, Where does Bail-Out Line End?
The Chrysler Corp. has applied to Washington for welfare. With $17 billion in sales last year, Chrysler believes that both its mounting losses ($207 million in the second quarter of 1979) and its bigness leave the government no choice but to give the company the equivalent of $1 billion.
In the past few months, Chrysler representatives have been meeting behind closed doors with officials of the Treasury, Commerce and Transportation departments as well as with White House aides and key members of Congress. All meetings, all information submitted by Chrysler and all related government memoranda are secret. The Carter administration’s response is, so far, not known in full.
This environment of secrecy to date has suited Chrysler’s strategy of getting the aid package through Congress quickly in September or October, before there is time for public opposition to organize.
This strategy may not work. Extensive public hearings will be held in the House and Senate and, inevitably, the matter of Chrysler’s mismanagement will be explored.
Why Such Failures?
Why, for example, was Chrysler so slow in anticipating the public’s growing demand for more fuel-efficient vehicles? Its bloated inventory of large cars and vans is selling slowly. Why couldn’t Chrysler supply its dealers with enough of the Omnis and Horizons, the latest, more fuel-efficient cars, to keep up with demand? How did Chrysler’s quality control fail badly enough to cause the recall of almost 6 million automobiles in 1977 and 1978 and the resulting massive customer dissatisfaction that is yet to dissipate?
Chrysler produces a little more than 1 million cars a year. Volvo sells around 50,000 cars a year in the United States. Yet Volvo met the government’s pollution control standards ahead of deadline, while Chrysler, notwithstanding several years’
postponement of the standards’ compliance date, wants the 1981 emissions standards delayed another two years.
Why? Because Chrysler, which is four times larger than Volvo, has spent its efforts opposing pollution control, as well as fuel efficiency and safety standards, instead of freeing its engineers to comply with them on time.
All this suggests that Chrysler’s longstanding management problems continue to receive infusions of incompetence and intransigence. Over and over, Chrysler has weakened or delayed consumer protection measures by telling Washington it would have to close a plant or go bankrupt. Now this approach is being used to make the taxpayer pay for Chrysler’s mismanagement.
A company shareholder group, led by two retired Chrysler executives, sent a letter to President Carter recently disagreeing “with Chrysler management that government regulations are responsible for Chrysler’s excessive losses.” They laid the responsibility squarely on the shoulders of present and past chief executive officers.
Neither President Lee Iacocca nor other top Chrysler officials have offered to cut their own huge remunerations. But they want the auto workers to agree to a two-year freeze on wages and benefits.
Douglas Fraser of the United Auto Workers wants any federal aid to Chrysler to be equity investment by the government with representation on the Board of Directors. Recognizing the company’s poor management, Fraser would like some prospect that taxpayers will share in Chrysler’s gains if they are to share in the losses.
The overriding issue before Congress is whether the federal government should bail out large corporations which cannot sell enough of their products to avoid bankruptcy or a corporate reorganization under the bankruptcy laws.
Plainly, Americans will buy as many cars, with or without Chrysler. Workers will build the same number of cars, with or without Chrysler. Other auto manufacturers will either expand their production in this country, buy up Chrysler’s factories or go into joint ventures with the troubled company. Dislocated workers can be assisted during a transition period under a variety of existing and expandable programs.
The issue, then, is the Chrysler Corporation’s special claim on the taxpayer. For if Chrysler receives this sizable subsidy, what about other big companies in similar straits? What about the thousands of small businesses which can’t make it in the marketplace? Will they also be able to go to Washington for cash? What about the hypocrisy of businessmen who preach free enterprise and practice bail-out enterprise?
These are questions which will lead to unique alliances on Capitol Hill in the coming weeks. Some legislators who call themselves liberals will join with those who call themselves conservatives to oppose the Chrysler subsidy. And there will be other liberals and conservatives supporting the company.
The congressional debate surely will provide heightened visibility for federal subsidies to business generally. These total tens of billions of dollars every year. Win or lose, the American taxpayer will learn more about where his or her tax money is going in the booming corporate welfare system. Such public awareness can lead to action regarding business subsidies–action that can save taxpayers’ money. Maybe the upcoming Chrysler drama will have a second, unintended act to play out.