Jeffrey Sachs believes the Big Three should be saved.

Yet the struggle to preserve and resurrect these companies is as vital as ever to the U.S. economy, and even to our environmental future. The Big 3 are not just another industry segment. They are world-leading organizations that can reassume that role in technology and markets with an appropriate public-private partnership over the coming decade.

If the Big-3 challenge were as depicted in the press, their failure would not only be foreordained, but without much societal loss. They are widely depicted as thickheaded dinosaurs who clung to outmoded and outsized SUVs, caved to absurd union demands, denied climate change – and thereby lost, big time. Every blast has some truth, but this one is more misleading than accurate.

Sachs maintains that the decision to focus on SUVs was a “societal decision” due to a belief that low gas prices would continue indefinitely. Sachs believes that America chose not to create higher gas mileage mandates which led to low gas mileage vehicles: “The high-mileage breakthroughs of Toyota and others emanated from national policies in Japan and Europe that pushed high-mileage vehicles with stiff gasoline taxes for decades. And indeed abroad, GM and Ford sell their own fuel-efficient compact automobiles and do so very competitively. Their downfall was in the home market.”

Sachs also blames the American healthcare system and compares it to publicly financed systems:

The burdens of health care that cripple the Big 3 are similarly societal decisions as much as collective-bargaining outcomes. The idea of saddling our firms with soaring and uncontrolled health-care costs is a policy failure, not a company mistake. Our global competitors have public financing of health care, and get much more care per buck of health care than does the bloated, inefficient, private-insurance system of the United States. One can continue down the list, and include state laws that protect auto dealers and virtually block the elimination of unwanted brands, another example of misguided policies that have contributed to the Big 3 crisis.

Sachs goes on to explain that GM can be as well-placed, in his opinion, as Toyota if it has a “public partner” going forward.

However, a separate CNN commentator disagrees with Sachs’s analysis. The dissenting analyst says that unlike what Sachs argues, electric cars will not sell in huge amounts and will also be unprofitable for both GM and Chrysler. While Sachs argues that legislating higher gas mileage will create a demand for small cars, CNN argues that there is no real demand or profit in small cars; they can, however, function as loss leaders that bring young people into showrooms and gain a customer base for later in life, and they can also improve fuel efficiency of the fleet to meet regulations. CNN further argues that winning back customers who have been burned by unreliable American-made cars is not impossible, but difficult, for GM and Chrysler as well as Ford, which is now ranked on Toyota and Honda’s reliability level according to Consumer Reports.

2008 North Carolina congressional candidate BJ Lawson writes on United Liberty about lobbying’s heavy return on investment for the car companies seeking a federal bailout.

Lawson links to The Wall Street Journal, which details how the Big Three of Detroit have continued budgeting for federal lobbying expenditures while accepting federal bailout funds. As one example, General Motors (GM) spent $3.3 million on lobbying in the final quarter of 2008, a time when they also received over $13 billion in low-interest loans from the federal government in a bailout. GM spent $13.1 million total on lobbying Congress in 2008. That was less than they had spent in 2007 on federal lobbying, $14.3 million. GM spent a bit less on lobbying than Ford and Chrysler combined for the year.

The WSJ writes:

“‘Lobbying is the transparent and effective way that GM has its voice heard on critical policy issues…that companies should not be required to forfeit if they receive federal funding,’ said GM spokesman Greg A. Martin, who added that no funds lent from the Treasury would be used for lobbying.”

Lawson writes:

“Last year’s climactic payouts resulted from years of lobbying investment — considering the balance of funds received over the past several decades, annualized return is likely much less. However, in a year when traditional investments available to most Americans (including their shareholders) were severely damaged, lobbying as an investment strategy demonstrates excellent uncorrelated performance from the overall market.

Perhaps institutions who have diligently positioned themselves as ‘too big to fail’ could open up new hedge funds that would let sophisticated Americans invest in lobbying efforts for a direct claim on the funds received? Forget about even using those funds to run a business, let’s just set up alternative investments to see who can turn their lobbying prowess into cash as adroitly as possible. Come to think of it, perhaps that’s a better way to describe bondholders in these storied institutions.”

In addition to the problems they’ve had getting consumers to buy new cars, automakers are having to deal with the fact that fewer people are traveling and renting cars.

As tourists stay home, rental car companies are cutting back on their fleets and not making bulk purchases of new cars, as they used to. “Fleet sales” to rental companies and cities make up 20% of typical auto sales during a year. In January, Chrysler’s fleet sales fell a drastic 81%, followed by GM with an 80% drop and Ford’s dropped 65%.

Hertz and Enterprise are following through on promises to cut the size of their fleets, selling vehicles and not replacing older ones. They’re selling the cars into a weak market, but the used car market has lately rebounded.

Since cars are often sold as part of fleet sales at deeply discounted bulk prices or to unload unwanted inventory, lack of fleet sales reflects a drop in raw numbers of cars sold but not necessarily on profits. Thrifty/Dollar has an allegiance with Chrysler, Avis with GM, and Hertz with Ford. All these domestic auto companies are more likely to buy cars from domestic automakers than from foreign companies.

Enterprise announced plans this week to purchase 5,000 gas/electric hybrid sedans and SUVs to meet growing demand for hybrids among customers. Most of the hybrids purchased are Toyota Priuses, but some are Ford Escapes and Toyota Camry and Nissan Altima hybrids.

Yesterday, the Senate passed a new car tax credit, hoping to spur sales in the wake of the federal government’s bailout of GM and Chrysler. The bipartisan, 71-26 vote passed amid debate over President Barack Obama’s economic stimulus package.

The bill, giving an income tax credit to those who purchase new autos, was shepherded by Senator Barbara Mikulski, whose office estimated the cost at $11 billion over the next decade. The bill applies retroactively to those who bought cars between November 12 and December 31, to the first $49,500 of the new car’s price tag. Even those who don’t itemize their tax returns for deductions can qualify, up to income of $125,000 for individuals and $250,000 for married couples. For a $25,000 car, the savings would be $1,553.

Senator Charles Grassley of Iowa attempted to block the bill, criticizing it for encouraging consumer debt during a recession and mentioning other aspects of the stimulus bill which help the auto industry.

The New York Times asks: could a revitalized Big Three create a new American auto industry?

Ford says that it has enough cash on hand to not need a bailout from the federal government as GM and Chrysler have said they do, but it has urged lawmakers to bail out its two Detroit-based American competitors and to bail out the auto supply industry.

Ford urged the federal government to take a more proactive role in “incentivizing” new car sales, moves other countries have already done (France, for example, is paying cash to consumers who trade in old cars for new ones, and Brazil has lifted taxes on new vehicles).

What is Ford’s reasoning in asking for money for its competitors?

“It certainly helps Ford indirectly if the consumer can get some help and suppliers can get some help and, to some extent, it helps Ford if the industry as a whole starts doing better. It’s an interesting strategy, because we’re not 100 percent convinced that they won’t need money at some point in time.” –Auto analyst Rebecca Lindland of IHS Global Insight

Ford cut 1,200 jobs at Ford Credit and negotiated an end to the United Auto Workers’ “Jobs Bank” program, which provided laid-off workers whose plants have closed with 90% of their previous salary for life. The move affected 1,500 union workers. GM and Chrysler, which were mandated by the federal government as part of their bailout conditions to seek significant concessions from UAW (including the end of the Jobs Bank program), had already ended their own such programs. Ford, while not bound by the federal bailout terms like GM and Chrysler, said it still hopes to gain the same concessions from the UAW.

Make that an affordable, plug-in electric car that achieves 100 miles per gallon “that a schoolteacher can afford.” That’s the claim, anyway, of Simon Hauger, a former West Philadelphia High School teacher who has worked over many years with his science students to develop and build 100-mpg cars and appared on NPR’s Talk of the Nation: Science Friday today.

This year, the West Philly Hybrid team is participating in the Progressive Auto X-Prize and say they can compete with the world’s largest automakers on that front.

NPR’s host Ira Flatow asks, “Why isn’t the government giving you that bailout money?… What would you do if you could get a million dollars?” Hauger says that his team has partnered with MBA students from Drexel University and created a viable business plan, with a car that can be built for $20,000.

The Detroit News editorializes about President Obama allowing “the most environmentally goofy states– such as California and Vermont” to implement regulations governing mileage per gallon above those required by the EPA.

The newspaper writes:

“Meeting the whims of California’s regulators will cost Detroit’s Big Three more than $100 billion, according to David Cole of the Center for Automotive Research, money they don’t now have and aren’t likely to get, unless the federal government intends to write more checks.”

“Automakers are faced with reinventing themselves on an extremely short timetable and in a way that no one is sure that consumers will embrace. That doesn’t make any kind of sense.

It’s no surprise the Detroit newspaper is worried about the loss of jobs in the automobile industry, and they’re tough on Obama for the position he’s taken on this issue:

“The early operating philosophy of the Obama administration is that if former President George W. Bush did it, it must be undone.

The technology required to meet the standards Obama and California are imposing will add another $5,000 to $15,000 to the sticker price of a vehicle. That will make owning a new car a very elite experience.

Average Americans, who will also see the price of nearly everything else they purchase soar as regulatory extremism spreads to other areas of the economy, will be priced out of the new car market. And American auto workers will lose jobs.

Although Obama promises his tougher environmental stance will create green technology jobs, those jobs are still a future concept.

The jobs he is risking today in the auto industry are very real.”

The Progressive Auto X-Prize, a competition which will award $10 million to a team that can drive a car cross-country in a fuel-efficient vehicle that gets 100 miles to the gallon, has asked the Big Three automakers to participate in its fuel efficiency prize. As an incentive for participation from Chrysler, GM, and Ford, the X-Prize will create a special division just for large automakers.

However, so far only Tata Motors, the Indian automaker that now owns Jaguar and Land Rover, is participating in the large automaker division. Since companies can enter a car that is in production or pre-production, GM would be able to enter the Chevy Volt, a plug-in hybrid GM has promised will get 40 miles of battery power.

Will the Big Three let someone else develop 100-mile-per-gallon vehicles before they can? Stay tuned…

The Richmond Times-Dispatch of Virginia eulogizes Detroit and its auto industry:

“Once one of the nation’s biggest and most vibrant cities, Detroit has become a shell. Vast stretches of urban desolation break the heart. Industrial cities have declined generally. Detroit displays its wounds most vividly.

How different things were when the automobile industry fueled American prosperity. Efficient factories and sleek designs symbolized sexy ingenuity. Owning a car — two or more, eventually — signalled arrival in the middle class. Assembly lines provided steady work with decent wages and good benefits. The production of autos helped to create communities with clubs and social halls, with churches and schools. Executives and workers rooted for the Lions and cheered for the Tigers and Al Kaline.

And the rust came.

Erosion occurred.

Many now sneer at Detroit. Autos stand not for economic supremacy but for overreach and excess, some assert; the car culture even has been denounced as an assault against nature. During the debate regarding a bailout, for instance, the industry’s management and labor have taken some hard hits — many of them jarring but fair, some of them late and unsportsmanlike.

Yes, management frequently erred, and contracts with the United Auto Workers imposed costs and conditions that could not be sustained. Certain arguments, particularly in tone, also seemingly condemn management and labor as virtual villains who almost deserve their doom. Many made mistakes and continue to make them; yet few of the participants were evil, or are. Detroit was not a sullen beast in our midst but a communion of human beings for the most part good, albeit flawed and sometimes testy, but eager to do the best.

Those directly involved in the struggle, including those unintentionally responsible for some of the difficulties, deserve comfort, not scorn. For although the Lions — even they — might return to championship form, Detroit never again will be what it was.”