The Stimulus and the Auto Bailout: The Perils of Confusing American Companies With American Jobs

Do not confuse American companies with American jobs.

The new stimulus bill, for example, requires that the money be used for production in the United States. Foreign governments, along with large U.S. multinationals concerned about possible foreign retaliation, charge this favors American-based companies. That’s not quite true. Foreign companies are eligible to receive stimulus money for things they make here (as long as the nations where they’re headquartered have signed the WTO procurement agreement). For example, Alstom, the French engineering company, is eligible to receive stimulus funds for the power turbines it produces in Tennessee; Japan’s Sanyo, for the solar cell parts it makes in Oregon; and French-owned Lucent Technologies, for the high-speed internet components it produces here, as well as the research it does here through its research arm, Bell Labs. On the other hand, U.S. Steel may not be eligible for stimulus money for the steel slabs it casts in Ontario, Canada.

I’m not defending the “buy American” provisions of the stimulus bill. I’m just saying they’re not the same as “buy from American companies.” And although these provisions skate close to protectionism and risk foreign retaliation, at least a case can be made that if American taxpayers are footing the bill in order to create American jobs, the jobs should be created, well, here in America.

The same confusion haunts the debate over the auto bailout. Advocates of bailing out GM and Chrysler, and most likely Ford, say America can’t afford to lose “its” auto industry. But this argument leaves out the fact that foreign-owned automakers, already producing cars here in the United States, employ – directly or indirectly – hundreds of thousands of Americans. And at the rate the Big Three are shrinking, and plan to shrink even further — even if they get bailed out –foreign automakers may soon be employing more Americans than the Big Three.

Meanwhile, the Big Three themselves are global. A Pontiac G8 shipped by GM from Australia has less American content than a BMW X5 assembled in the United States. General Motors’ European subsidiaries include Opel and Saab; Ford’s include Volvo.

I’m not arguing against an auto bailout. But it ought to be focused on helping American auto workers rather than helping global auto companies headquartered in America. Why pay the Big Three billions of taxpayer dollars to stay afloat when, even after being bailed out, they cut tens of thousands of American jobs, slash wages, and shrink their American operations into small fractions of what they used to be?

That’s backwards. The auto bailout should help American autoworkers keep their jobs or get new ones that pay almost as well.

Whether it’s stimulus or bailout, policy makers must remember that American companies aren’t the same as American workers – and our first responsibility is to the latter.


Originally published at Robert Reich’s Blog and reproduced here with the author’s permission.

5 Responses to "The Stimulus and the Auto Bailout: The Perils of Confusing American Companies With American Jobs"

  1. Guest   February 17, 2009 at 5:38 pm

    No more on the auto bail out. If they have to file bankruptcy, then so be it, but no more money. We can’t keep throwing money at the problem. I’ll never buy another American car again, because they can’t manager their money, their companies and come asking the government for help time after time!

  2. wooden tower   February 17, 2009 at 5:39 pm

    good points. maybe its time to look at, from a national interest perspective, all aspects of MNC’s from the obvious like tax to the less well known like % of production for US sale that is made OS (Pontiacs made in Australia). Should we consider labelling (some?) manufactured goods as some countries do food? x% this country x% that country. or 96% of taxes paid into US? or 95% (by number, not salary or both) US staff.I’m sure most Americans would be surprised to hear that a BMW X5 employs more Americans than a Pontiac G8 and might go someway to halting the prejudice often held against European (and im my opinion better) auto engineering.

  3. Richard4691   February 17, 2009 at 6:20 pm

    Well, as regards the US automakers, I’d like to see bailout money go into a program that requires them to build a National Car (National Car by GM, National Car by Chrysler). A car that meets ideal, state of the art, safety and efficiency requirements, whose engine can be easily tweaked to run on any of the possible fuels available (gas, diesel, bio-diesel, compressed natural gas), low emissions, easily maintained repaired, cheap after market parts, a ten or even fifteen year operating life, etc.–a car for which usual excuses are not acceptable. In addition to bailout money, if it is really necessary, the government would agree in advance to purchase enough of these machines over a period of several years to make them worth producing. Tax incentives could be given to fleet buyers for bulk purchases. The automakers can do what they want with the rest of the line up. We are not talking about a luxury vehicle, after all. It’s a volkswagen. After a couple of years, they could offer it at retail outlets to the public, but without advertising, and at the moment the car is offered at retail, ongoing purchases by government agencies would be open to competition from any maker provided a certain percentage of core components were interchangeable, and likewise with tax incentives to fleets.

  4. Guest   February 17, 2009 at 9:18 pm

    I thought the Auto Bailout was all about jobs. When they had the first hearings we ended up being told that we had to give them the money or the job losses would be massive. Now we gave them the money, they want more money and GM is going to drop 47,000 jobs world wide, 20000 in the U.S. and close 5 plants. What are we paying for here? 20000 is a lot of jobs. It is over 1 billion dollars a year for sure.

  5. LA_Lady   February 18, 2009 at 8:36 am

    You make good points but I wonder if American taxpayer dollars will end up going to foreign workers anyway in the form of “aid” once they’re laid off or fired.Personally I don’t think we should be giving anyone “aid” when we just put our future generations in debt, but then people would scream that it’s too much protectionism. Well, our Government was instituted to do just that… protect us, not help every country that has their hand out.If your house is on fire and somebody else’s house down the street is on fire too which one are you going to try to save first? yours!