Nationalize auto

The drive is on to bail out General Motors. With US sales down 33% this year and the automaker hinting that it may face bankruptcy before the end of the year, Nancy Pelosi and Harry Reid are proposing a $25 billion bailout of the Big Three automakers, GM, Ford, and Chrysler, and the Obama team has signaled its support.

The Big Three and their suppliers, dealers, and related industries employ as many as three million workers, many unionized and located in the heartland states around Michigan and Ohio. The United Auto Workers supports the bailout, arguing that the wage and benefit concessions in the 2007 labor contract make the automakers competitive, but for the current economic slump. Non-union Honda, Toyota and VW auto factories in the South also account for a significant share of U.S. vehicle production.

Everyone claims they do not want to see the auto industry liquidated. The right proposes to let GM file for Chapter 11 bankruptcy, and Chris Dodd said this afternoon that the Senate doesn't have the votes to pass the bailout in the lame-duck session due to Republican opposition. Rightists reason that it would then drive for further concessions from the UAW, disciplining labor and shrinking the unionized share of the industry. However, many commentators are saying that customers would not buy cars from a manufacturer in bankruptcy, fearing that the warranty may not be honored or parts and service would not be available. Unfortunately, the same is likely to be true of the Democrats' plan, giving life support to preserve the current failing companies a little longer.

To keep the industry moving and preserve jobs, I propose nationalization as an alternative to bankruptcy and bailout. For its $25 billion, the government would acquire all the equity in GM and Ford, which together are worth a mere $6.1 billion, plus a negotiated price for the privately owned Chrysler, and still have most of the money left over to invest in retooling their operations. The government's commitment to run the auto companies will eliminate any doubts that they are going concerns.

This move is also smart politics for the Democrats. With a "Buy Green - Buy American" sticker on every car and a PR message on the importance of preserving union jobs, working class voters will support the move, and the Democrats will buy themselves a lock on the heartland vote for a generation, picking a great issue to rebut the right's free enterprise fury.

The national auto company will be a formidable enterprise. The UAW will participate in managing the business. The government would merge the three companies into one to eliminate waste, then shift the industry strongly towards green, fuel efficient designs. Partnerships will be set up with the national research labs and NSF to move innovative products quickly to market. The government would use its stake in the banks to ensure that credit is available to auto purchasers.

There is nothing far-fetched about this plan, except to American free market fundamentalists and their Democratic lap dogs. Renault was a state enterprise for 50 years from 1946 to 1996 and the French government still owns a 15% share of it; it is the leading brand in Europe and in alliance with Nissan it is now the world's fourth largest automaker. Nationalization of industries that their capitalist owners have run into the ground is in the interests of the workers, the taxpayers, the economy, and the environment. Nationalization is not socialism, but it is a step towards economic stability and away from the free market extremism that has created the current crisis.