D.C. leaders in neutral over Ford, GM woes

Both General Motors Corp. and Ford Motor Co. are experiencing serious financial hardship. But, in a sign of a changed political climate, nobody in Washington, D.C., is talking about bailing them out.

Indeed, the loudest voice speaking out for helping the nation’s top two automakers recently has come from, of all places, Japan. Last week, Toyota Motor Corp. Chairman Hiroshi Okuda told reporters that Japan’s auto industry needs to give Detroit “time and room to catch a breath.” He even suggested Toyota might raise prices on cars sold in the U.S. to ease pressures on GM and Ford.

But there’s no sign that the White House or Congress is seriously contemplating any government-led resuscitation of its own. Though Japan’s three leading car makers are thriving and claiming a bigger share of the U.S. auto market, industry analysts say neither GM nor Ford, despite their financial woes, is as troubled as Chrysler was when it received a bailout in the form of federal loan guarantees in 1979. Even so, Washington has sprung to action for less dire financial hardship than that, as when competition from imports in the 1980s led the U.S. government to jawbone Japan into auto-import limits.

By contrast, when President Bush was asked on CNBC about GM’s troubles recently, he said: “I think they’re going to have to learn how to compete.”

The changed attitude reflects the markedly reshaped political situation in the auto industry. For two decades, Japanese and European automakers have sprinkled job-producing auto-assembly plants across the U.S. Those have created a political constituency for foreign auto companies that didn’t exist before.

Many of those plants are situated in southern states such as Tennessee, Alabama, South Carolina and Texas, which make up the heart of the red-state region in which today’s dominant Republican party is strongest. As a result, politicians have less desire to penalize foreign automakers as a way of shielding traditional American auto manufacturers than they did in the past.

In addition, both ends of Pennsylvania Avenue today are controlled by a market-oriented Republican party, which is reluctant to dive into the marketplace to favor one company or industry over others.

“It’s tougher in this political environment,” says Thomas Boggs Jr., the prominent Washington lobbyist who played a key role in helping Chrysler win support from the White House and Congress in 1979. “I’m not sure you could get a bailout bill” anymore.

Says Republican Sen. Jim DeMint, a free-trade, market-oriented conservative: “For the federal government to try to pick winners and losers — the market would change before we made a decision. We just need to focus on empowering individuals.”

Democrats see other forces at work. The Detroit-based auto companies “are timid” about seeking help from a Republican-dominated Washington, says Democratic Sen. Carl Levin of Michigan. On issues of trade, technology, health care and manufacturing tax incentives, he says, “You need an active government. We don’t have that.”

The question of how to handle auto-industry woes is rising because of a spate of bad news coming out of Detroit. GM reported a loss of $1.1 billion for the first quarter. Ford made money in its latest quarter, but has warned that it likely will lose money for the full year in its North American auto business. Both have suffered steady erosion in their U.S. market shares, and both are fighting to keep their credit ratings from slipping below investment-grade status.

Besides changes in the auto industry and political philosophy, other shifts have weakened the impetus for action from Washington. In 1979, Boggs notes, auto-parts suppliers often were tethered to U.S. auto manufacturers by exclusive contracts. Today, suppliers have diversified and aren’t as dependent on a single manufacturer. The U.S. labor movement, which united behind the Chrysler bailout, is smaller and more divided and therefore less of a force for action. In the two decades that began in 1979, automobile assembly jobs dropped by 120,000 in the U.S., while the proportion of those jobs provided by foreign manufacturers increased dramatically.

Finally, the bankruptcies of major retailers, airlines and steel companies over the past two decades have tempered the anxiety that large-company struggles once engendered.

To be sure, GM and Ford aren’t requesting specific financial bailouts from Washington. But GM has signaled for some months that it would welcome some sort of government help with the enormous cost burden it faces in providing health care for its 1.1 million retirees, employees and dependents, estimated at $5.6 billion this year. The company has supported proposals to have the government shoulder so-called catastrophic health-care expenses. GM executives also have complained persistently that the yen is still too weak compared with the dollar, which they argue gives Japanese automakers an unwarranted advantage.