by publius
As you may have seen, Henry Waxman is making a rather audacious move to oust John Dingell from the House Commerce Committee. The big concern with Dingell (who’s been a powerhouse for decades) is that his allegiance to the automakers makes him an enemy of energy reform. A few thoughts on this.
First, I’m skeptical Waxman can pull it off. Dingell has been playing this game for a very long time, and he’s extremely good and savvy about it. I personally would be shocked if Waxman can out-caucus Dingell. That said, it’s a different game if Pelosi decides to start twisting arms for Waxman. But right now, I’m skeptical Waxman will pull it off.
That said, a scare could do Dingell — and energy reform — some good. If Pelosi really wanted to play this right, she would get something in exchange for her neutrality. In other words, the powers-that-be should (gently) approach Dingell and basically get a promise that he won’t bottle up or otherwise jeopardize new versions of the Markey energy reform bill or other important energy legislation. I would love it if they could also wrestle some good telecom positions out of him too (e.g., pro-net neutrality) but I’m not holding my breath on that.
Finally, it’s possible Waxman might be looking to the future too. Dingell is 82 and presumably isn’t going to be Chair much longer. Maybe Waxman thinks, “If I win, great. If not, I’ve at least marked my territory for one of the most important chairmanships.”
UPDATE: In the comments, joel makes the perceptive point that Dingell has actually hurt the auto industry by shielding it from reality for so long. That’s an interesting thought experiment. If the industry got religion on energy efficiency earlier, it certainly seems like they would be a much better position to be competitive today.
publius, the headline dude. It’s 5:00 in the morning and I’m still waiting for the coffee to finish. Now I have this in my head all day…
i’ve heard mentioned dingle for labour department. i wonder how effective the two of them are at actually building consensus for a bill. Someone who has been there a long time might be better able to get something done, as long as he wants to get it done. The same things that make him able to out-caucus waxman are also what helps him get a bill to succeed.
I can’t believe these two are still fighting the same battle. There was a high school civics video that came out in the early 80s (maybe even the late 70s?) in which their battles over the environment vs. the auto industry were the primary focus. You know something is messed up when two people in the same party fight so much over one issue that they make a civics video out of it . . . and 30 years later, they’re still fighting the same battle.
I’ll admit that the headline drew my attention, but please don’t do that again. I have a very vivid imagination, and the images in my mind are disturbing, to say the least. And they won’t go away. That said, it’s time for Dingell to go.
May I suggest that Hot Waxman on Dingell Action might have been a notch better?
I would have been a lot better for the US auto industry had Dingell not been the chair of Commerce lo these many years and so successfully held off reality.
yes eric – that would be better. i still think this may be my best post title ever though
It was a master stroke!
Hey, I grew up in the Detroit area. My whole family worked for the auto companies. I watched them (gm, ford and chrysler) kick and scream about seat belts. About better CAFE standards, about airbags. I heard how they just COULDN’T be innovative….except for bigger fins. They are dinosaurs, they refused to evolve. My family in Michigan are really hurting, but for the companies? Meet reality.
In the comments, joel makes the perceptive point that Dingell has actually hurt the auto industry by shielding it from reality for so long. That’s an interesting thought experiment. If the industry got religion on energy efficiency earlier, it certainly seems like they would be a much better position to be competitive today.
While Dingell certainly shares the blame, the auto industry itself is the first cause here. Rather than invest in market research and innovation, they invested in lobbying Congress for $100,000 tax breaks on SUVs and against CAFE standards. Screw them.
OT- There is an interesting letter floating around regarding possible Treasury Secretary pick, Larry Summers:
“May 25, 1999
Mr. Kenneth L. Lay
Chairman and Chief Executive Officer
Enron
PO Box 1188
Houston, Texas 77251
Dear Ken:
Thanks very much for you kind letter of congratulations. I am grateful for your best wishes and deeply honored by the President’s choice. As I said in the Rose Garden, Secretary Rubin’s act is a tough one to follow and there are certainly plenty of challenges ahead. I am looking forward to the opportunity and to continuing on the course that has been set.
I hope our paths will cross again soon.
Sincerely,
Lawrence H. Summers
[Hand-written scrawl] PS – I’ll keep my eye on power deregulation and energy market infrastructure issues. ”
My perhaps not entirely well thought out take on this is that the Big Three’s biggest problems are their crippling legacy costs for pensions and healthcare that are killing their ability to make any money now (and require that their $20k car be a significantly worse car than the Japanese $20k car).
Now, they failed to pre-fund those obligations, preferring instead to divert the money to shareholders. So we can’t reward them for that. But we also don’t want to punish workers for what their employers did, or risk gigantic disruption to the rust-belt economies by shutting them down.
So we could bail them out. We could take those big obligations off their hands. But we’d be rewarding shareholders for their past bad behaviour.
I think what needs to happen is that shareholders should be wiped out. There is some justification for this in that the legacy costs for pensions probably exceed by a long way the cash value of the shares in these companies. (Their total market value right now is probably about $10bn, so the damage to share portfolios would be relatively small – the losses have already been taken.) They are already bankrupt, in effect, they just don’t know it yet. So seize the companies, wipe out the shareholders, transfer the legacy costs to the government, and then sell the resulting streamlined operations on the stock market.
The companies would remain private corporations, the government would get the task of taking over the legacy pension/healthcare obligations – which they’re going to get anyway – and would get some offset to those costs by selling the companies back to the market once they’ve done it. Shareholders wouldn’t be rewarded now for their past mismanagement of the companies.
I honestly don’t think there’s much wrong with the American car companies that a financial restructuring & some regulatory changes to the car market couldn’t take care of. If you compare an American car with a Japanese car costing $5,000 less, the quality is about the same. American cars are just too expensive, from what I can tell due to the need to cover those huge legacy operating expenses.
(I say “Japanese”, but since my Subaru was made in Lafayette, Indiana and my Tundra was made in San Antonio, Texas, it’s a little unclear what that really means.)
Of course there are a lot of big problems with this approach too – I am guessing that many Big 3 workers have much of their retirement investment in the stock of their employers, just to name one. And Wall St would throw a fit. But I can’t see how to get them out of this hole they’re in otherwise, at least without just throwing endless amounts of money at them so that shareholders can be bailed out.
If you compare an American car with a Japanese car costing $5,000 less, the quality is about the same. American cars are just too expensive, from what I can tell due to the need to cover those huge legacy operating expenses.
You hear this a lot, but I think it doesn’t really hold.
Legacy costs, essentially debts, may well be so large that the companies cannot survive without aid, but they shouldn’t, as a matter of theory and common sense, affect pricing.
The most popular class on the Internet, Econ 101, shows that pricing is not affected by fixed costs. The idea is to maximize the difference between what it costs you directly to make the cars – steel, rubber, labor, etc. – and what you sell them for. Legacy costs aren’t a part of that. Then you apply the difference to fixed costs. To let the fixed costs affect prices is a mistake. You will end up worse off.
The critical question is whether the auto companies can actually make and sell cars profitably, without considering things like interest and retiree costs. If not, it’s hopeless. If they can, then the question is how to restructure them financially so they can survive.
I’m dubious that they can in fact survive for long the way they have been run for the past few decades. These are not well-managed companies.
I think Bernard has the most perceptive point. Dingell has sheltered these companies from market forces so they have become among our worst managed companies. We almost have to let them fail in order to resurrect them with some engineering-centric management. The workers can obviously make quality cars and the engineers can design them. We just need to get rid of the chokehold of the bean counters…no offense to accountants implied.
Dingell has been a hidden cancer eating away at their survival skills during his tenure as chairman. No other American industry is as uncompetitive, bloated, and anachronistic. The UAW can share some of the blame, but Dingell has let this happen on his watch. He really should go.