The Conservative Edge

Winston Churchill once said that “The farther backwards you can look, the farther forward you are likely to see.” He meant, of course, that history is a great teacher. Even the Old Testament philosopher said that there is nothing new under the sun; everything we see now has happened before.

And so it is with the American auto industry. With GM’s bankruptcy now likely to occur, many people may be wondering if we will ever again have a vibrant auto manufacturing industry. There are thousands of people losing their jobs, not just with GM or Chrysler, but at the smaller factories where parts are made and then sent to the big auto plants. Everyone from machine operators to engineers, from electricians to toolmakers, are seeing their jobs disappear.

And now, here comes our government to the rescue. But it almost seems that the car companies are making deals with the devil. In exchange for government loans to continue operations, the companies are essentially giving up the right to make the kinds of cars to satisfy market demands. They are also being told that the government can fire their CEOs, and tell corporate officials how much money they can make. Maybe Nancy Pelosi and Barney Frank will start sketching prototype cars on the backside of bar napkins, and then send them to GM for manufacture.

Let’s look back a number of years to find a similar crisis facing a car company. In 1979 and 1980, there was much anxiety over the fate of Chrysler. Lots of experts were wondering how Chrysler could get in such sorry condition. There seemed to be some agreement that Chrysler’s problems stemmed from a combination of poor management and excessive government regulation. Lee Iaccoca came to Chrysler in 1979, and brought along some talented people from Ford, which resolved much of the management problems. But the company needed capital to stay in business long enough to revamp its product line. The federal government agreed to guarantee Chrysler up to $1.5 billion in loans.

In September, 1980, Ed Lapham wrote in Car and Driver that as part of the agreement, Chrysler had to get more than $450 million in wage and salary concessions from its employees. Chrysler then had to arrange $650 million in concessions from 400 banks; that was hard to do in times of high inflation and interest rates, especially with Chrysler’s credit rating. But the company eventually met all of the requirements for government loans. Iaccoca also worked hard to get everything in order. But his biggest challenge was holding his tongue while certain government officials inspected his company and then made public sport of it. Sound familiar?

In December, 1979, Tony Hogg said in Road and Track that “As far as government regulation is concerned, meeting a bunch of ill-conceived regulations…(is) absolutely devastating as soon as a business takes a turn for the worse…” Hogg also quoted then-Senator Carl Levin as saying “This situation was caused in part by the government…I think the government has an obligation to get Chrysler out of its problems. This is not a bail-out, but government help to solve a problem government has created.”

In 1980, a couple of months before the election, Iaccoca said “I suggested that we’ve had so much regulation in this country, how about declaring an economic crisis for 24 months and freezing all regulations in place. Everything. The air won’t get dirty. More people won’t get killed because side beams or bumpers aren’t meeting the new requirement.” Indeed, this whole realization that government was regulating the life out of American industry is what helped propel Ronald Reagan to the presidency.

But the Obama administration is set to add MORE regulation and legislation against American industry. How many millions of dollars will corporations have to spend to meet new piles of regulations, and to protect themselves against litigation? When you add these new costs to the higher taxes being imposed, it’s no wonder the American manufacturing industry is in such disarray. The auto industry revived in the 1980s because of a cooperative government (remember the repeal of the 55-mph speed limit). The auto industry will be crushed in the years ahead by an oppressive, anti-business government.

Churchill was right. History is a great teacher.