Big Three Bailout: A Data Drive-Through
EmailThis week’s attention on government loans for the Big Three automakers makes a drive-through of available data worthwhile. Buckle up: There are some road hazards.
The data point I like best – don’t be surprised – is from our own ABC News poll Nov. 23, in which we found 57 percent of Americans opposed to $25 billion in loans for the Big Three, just 35 percent in favor. Strong opponents outnumbered strong supporters by 2-1.
We got there with a pro/con question that summarized arguments for and against the loan. It’s an approach I favor for issues that are new, complex, carry innate positive attribute bias, or in which the arguments and/or counterarguments may not be apparent. Here’s what we asked:
ABC News, 11/23: The big three automakers in the United States have asked for a 25 billion dollar loan from the government. Some people say (it's a bailout those companies don't deserve, and that they'd be better off reorganizing under bankruptcy laws). Other people say (it's necessary to protect auto workers and save a key part of the U.S. economy). On balance, do you support or oppose this plan? Do you feel that way strongly or somewhat?
The only other independent data we've seen on this is from a Gallup poll Nov. 16, with a different, more evenly divided, result – 47 percent in favor, 49 percent opposed. This question was simpler, did not name the loan amount, used the positive word “assistance” and, to my ear, gave a reason for the loan but not a reason against. Take a look:
Gallup, 11/16: Would you favor or oppose the federal government giving major financial assistance to the big three U.S. automotive companies if they are close to going broke or declaring bankruptcy?
Lastly there was a General Motors-sponsored poll from Hart Research, Nov. 12, that found 55 percent support for the loan. If the news release didn’t say that G.M. had nothing to do with the questionnaire I’d be inclined to suggest it’s at least as good at manufacturing data as it is at manufacturing vehicles.
This effort primed respondents by asking an unbalanced question on the importance of the auto industry to the U.S. economy (three chances to call it important, two otherwise) and then asking how much harm would be done (to jobs, the economy, America's world standing and consumer choice) if the auto industry went broke, before getting to the loan question – which itself, in my reading, had a little positive attribute bias thrown in.
Hart Research for G.M., 11/12 (After questions on importance of auto industry and potential harm of its failure): Do you believe the government should or should not provide loans to America's automakers so they have the money to manufacture vehicles?
I’ve written about this kind of thing before, noting how poll results on providing government funds for failing financial firms depended quite a bit on the question wording – “bail out” or “investing,” for instance. These results aren’t contradictory; they’re simply different, and in their differences they give us a useful understanding of the language that may be used on both sides to try to steer public opinion in their favor.
Afternoon update:
CNN today released another poll result on this, very similar to our own, with Americans opposing Big Three assistance by 61-36 percent. (Ours, per above, was 57-35.)
I should note that if you put three pollsters in a room you'll get four ways to ask a question; quibbling about wording is half the job. Here's CNN's:
CNN, 12/2: The major U.S. auto companies have asked the government for a program that would provide them with several billion dollars in assistance. The auto companies say they may go into bankruptcy without that assistance. Based on what you have read or heard, do you favor or oppose this program?
My observations: On one hand, possibly imparting a negative attribute, this doesn't specify that we're talking about a loan; on the other, possibly imparting positives to the proposal, it lowballs the amount and doesn't make clear that bankruptcy can be non-fatal. (And then there's the question of both CNN and Gallup's "favor"/oppose, vs. my own strong preference, "support"/oppose – fodder for a full-day colloquium in and of itself.) These may make no difference, or may cancel each other out. The result does underscore the reassuring fact that different ways of getting at an issue, if balanced, more often than not yield similar answers.
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I don’t think the 3 auto companies should get the bailout. Actually, I think the 3 heads of the company should first be fired for their greed and incompetence. The mail street should not be responsible for everyones mistakes in managing their businesses. Therefor, NO assistance from us.
Posted by: Karol | December 3, 2008, 1:21 pm 1:21 pm
The win/win situation would be to remit to all homeowners with a mortgage the amount to pay it off. The mortgage companies will benefit and get out of the hole and the homeowners will reep the benefit of the payoff and be able to borrow against their home, increase their purchasing which will help the economy. For everyone else, renters, homeowners without a mortgage, they should receive a designated amount, maybe the lowest payoff of a mortgage in the average of the mortgages. However this would be calculated, it would probably cost the government less money and the money would go toward paying off the loan that brought the mortgage companies down.
Posted by: Karol | December 3, 2008, 1:30 pm 1:30 pm
No more bailouts unless the government will loan money to those who lost jobs that were sent to India! No loans to those who loan money for cars who have no heart. We paid on our Dodge for 6 years, made arrangements to pay half a payment every two weeks, they then had the truck picked up! That company made more than double what the original price was! To top it off, the manager of the collections admitted they lied! Unless the government will help us, let those big businesses cut the salaries of the ones making millions and put it back into their own company!
Posted by: Shirley | December 3, 2008, 4:00 pm 4:00 pm
No bailouts for incompetance! The US auto makers were short sighted, the overseas car makers saw that fuel efficient cars were going to be needed but we continued to make cars like Hummers. If they were not smart enough to be able to look 10 years down the road then they are not smart enough to run a car company. Let somebody else do it.
Posted by: Paul Vasquez | December 3, 2008, 5:32 pm 5:32 pm
No Bailouts for Anyone. If you’re irresponsible you should suffer the consequences. The best thing for the companies is to file chapter 11 and get a major financial overhaul.
Posted by: No Bailouts | December 3, 2008, 6:45 pm 6:45 pm
I really liked this blog post; analyzing specific examples of how asking the same question in different ways can give different results is both interesting and informative.
And, by the way, I like the way ABC asked the question best; nice and neutral, presenting both sides of the argument fairly…
Posted by: Gavin Andresen | December 3, 2008, 11:29 pm 11:29 pm
Why is everyone in the media not looking at the impact that this will have on all of America? People are just focusing on the heads of the big three and what about AIG, their bail out money wass spent on vacations and retention bonuses, come on people wake up and realize, this bail out is a loan to the big three, not a hand out.
Posted by: Shari Adams | December 4, 2008, 7:15 am 7:15 am
I think the auto industry should have to do the same as the airline industry -We should not be bailing them out! Our country is in the situation because of spending more than we can pay for anyway!
Posted by: Kathryn Robinson | December 4, 2008, 11:42 am 11:42 am
I firmly believe our Government should bail out the 3 auto companies as they will be repaid. However, I do feel the executives should take a large cut in pay and the government should oversee these 3 auto companies to make sure they use the funds properly. If these 3 large companies go bankrupt, it will be a disaster for our country resulting in a depression worse than the Great Depression. Is the government ready for this?
Posted by: Jean McCoy | December 4, 2008, 6:00 pm 6:00 pm
So, the auto Big Wigs drive in to beg for money in alternative autos..rather than the private jets the first time. Lets them know WE are watching.
A GM car I bought in 1982..my first brand new car, all the bells an whistles..had more problems than I wish to count. The one problem that turned me Toyota…was that the transmission was found to be missing bolts inside. My extended warantey was invalid for this reason. I called Detroit and was accused of removing the bolts by some customer service woman. Me, a single nurse took bolts out???
Bleed hard Detroit…it has been 26 carefree years without you!
Posted by: Cindy | December 4, 2008, 9:16 pm 9:16 pm
Sell Detroit Auto Companies to Employees
Sell the Detroit auto companies to the employees, using the money Congress has already given to the banking and wall street communities.
If the employees don’t feel its worth buying, why should the American tax payer?
Posted by: SpokaneRH | December 4, 2008, 10:17 pm 10:17 pm
So far I do not see where the auto maker are hurting.If you fly in to ask for money to help you and at the same time you have a jet in your back yard they are crazy. When are they going to put some of their gold back into their company?The money they want should go back and into all of use. If we all had a million dollars to pay off our bill and morgages we could keep our homes and be able to buy a part od America with food and a roof over our heads.
Posted by: s. eminhizer | December 5, 2008, 8:59 am 8:59 am
The Auto Industry, Wall Street, CEO’S, U.A.W.Unions have been living HIGH OFF the HOG. Well itis about time they get knocked off their HIGH HORSES and learn to live on 100,00.00 and NO MORE than that. Most people I know do not even make 60,000.00 per year and get along very well.Anyone who makes more than 100,000.00 Per Year is a SELFISH person,if you can call them that. People and children are homeless, starving, on the street, NO HEALTH CARE,and NO HOPE of getting back what the RICH PIGS have taken away from them(the WORKING Class) if it wasn’t for them ALL THOSE RICH HOGS would not have All the MONEY they have NOW.
Posted by: Yvonne Ray | December 5, 2008, 3:04 pm 3:04 pm
This infuriates me. The government was so quick to bailout the banks with hardly any questions asked, but since the southern officials have vested interests in the FOREIGN auto companies they house in their states they don’t want to offer the big 3 any assistance. EVERYONE will feel the PAIN if the AMERICAN auto companies fail. Don’t forget it’s not just the auto companies that will go bankrupt, their suppliers will as well meaining millions of jobs lost. The mortgage crisis drives me insane as well. If people would learn to live within their means the majority of that crisis could of been averted. Yes, the banks are at fault for handing out loans to anyone and everyone but if people would have educated themselves on SMART ARM and ADJUSTABLE rate mortages maybe they would have thought twice before signing on the dotted line… sheesh!
Posted by: Steph | December 5, 2008, 3:32 pm 3:32 pm
To Yvonne Ray, I am a UAW employee and i can assure you i don’t make anywhere close to $100,000 per year. I am not a RICH PIG as you call it, I am part of the WORKING CLASS. You are probably one of the blind followers that actually believe that UAW members make $70 per hour on their paychecks. I make $28 per hour (a very good wage) all of the other money that goes into the $70/hour figure is money the company says it costs them to employ us (benefits and costs to retirees among other things). Please don’t believe everything you hear on TV. Believe it or not the TV stations have an agenda they are trying put forth. They love people like you, who follow the crowd and don’t ask questions or think for themselves.
Posted by: Sean | December 6, 2008, 12:41 am 12:41 am
I do not think people know what is going on in the auto industry,
1 the big 3 have been in busines over 100 yars and they have millons of people who get retierment and health care so people are gitting down on the auto co for takeing care of there employes
2 people bitch about no health care .the american auto co are the WORLDS bigest priveder of thalth care so there goes the health care co
3,all 3 co showed a loss last year but they payed 40 billon in taxes what about the supliers how much was there tax bill. taxes go up for every one
4,if they go out the unemploment rate would sky rocket you are looking at 6 millon people out of work when it is all done there are more auto co than just the detroit 3 tangled in this thing .jobs lost would be white ,blue OUT <dealers OUT ,supliers OUT<all the people working in the shops OUT ,and all of those workers shop and suport there local economy they all have phones and cable and buy all kinds of things they dont need to live and it gives other people a job, so if you think it does not effect you how wrong you are.It would start a snow ball affect that i do not want to see .It would be world wide
5 people want them to file chapter 11, do you know how many auto co in the world that filed chapter 11 are in busines to day i will tell you { 0 } people do not trust an auto co in bankruptcy so do you think that is a good thing for them to do it would speed up the fall of the economy
6 people do not like the unions but what they dont see is that the pay non union employes get is effected by how much the union employes make .people want talk about the working class but with out the unions there would not be a working class it would all be slave labor
Posted by: chris | December 6, 2008, 12:55 am 12:55 am
FYI- i just want to clear up what people are saying about UAW workers getting 95% of their pay for doing nothing. When a UAW member receives SUB pay, the SUB pay is 95% of their NET pay (not GROSS pay) minus $30 (administrative cost) then deductions such as federal taxes, state taxes, fica, and medicare. the actual % compared to a normal 40 hour paycheck is far less than 95%, probably closer to 60 or 70.
Posted by: Sean | December 6, 2008, 1:18 am 1:18 am
No bailout… Why should we pay for the their greed? They are no different than any other business. It was extremely arrogant on the CEO’s part to show up in there million dollar jets to ask for billions of dollars. They should be fired. Sorry but I would say absolutely no deal.
Posted by: Sue | December 6, 2008, 9:52 am 9:52 am
I know let the ceos take a north west so they can sit on the tarmack for 6 hours then take a cab get stuck in trafic show up 8 hours late how good would that look
they have time lines to deal with people just think that they sit around couting there money .they are running around like chickens with there heads cut off
Posted by: chris | December 6, 2008, 12:28 pm 12:28 pm
If it wasnt for the crooks running the banks, GM and Chysler could get the loans on their own. Ford obtained all its loans prior to this credit crisis. Now there is very little credit to go around.
Posted by: Kerman | December 6, 2008, 3:24 pm 3:24 pm
why should the govt help the automakers. they are just taking the money away from the people.help the people not the automakers. they will still be driving around in jets.
Posted by: joan | December 6, 2008, 5:13 pm 5:13 pm
At this point in time, considering all factors and implications, it looks that a bailout is a necessary evil. I personally do not agree to it firstly because it is not fair to the rest of the industries and small businesses. I believe that a private or public (i.e., non-government) company that has been in business for a century should be self-sustainable or else. And a bailout is not fair to us, the taxpayers. However, a bailout looks the most-reasonable compromise in these rough times to save not only the three US auto makers as businesses, but the collaterals as well (third-party industries and suppliers, pension funds, auto dealers and so forth).And of course, a bailout would save the employees’ salaries and benefits.
BUT, given the magnitude of the bailout, which currently is 15B US dollars, the BAILOUT must be CONDITIONAL and GRADUAL. The government, which is the lender in this bailout, should act like a Bank or a Venture Capitalist versus a private company (start-up or well-established) seeking funding or financing. Here is how the bailout should generally be implemented:
1.BAILOUT – CONDITIONAL
1.1.The auto companies must provide extensive detail of their plan to overcome their current condition and especially what they will do and provide in return for the bailout money.
1.2.Each board of directors of the three auto companies agrees to a clean-up and reorganization of the high management, including stepping down of the CEO and other Officers and high-ranked positions. We need to agree here that the high-ranked management is responsible for the critical condition of the auto maker companies. The engineers design what they are requested to design and the workers produce what they are requested to produce. And also, the auto dealers sell what they are given to sell. It is the high management that makes the key decisions and those decisions have proved not profitable. This is why a reorganization is needed to give these companies a fresh start.
1.3.The government becomes heavily involved in the high management of the auto companies and takes an active role in drafting, approving and supervising all key decisions of the auto companies.
1.4.Each board of directors of the three auto companies agrees to create an expert team that will consist of nine (9) members, wherein each member is invited from one major auto maker, namely Mercedes, BMW, Audi, Honda, Toyota, Nissan, General Motors, Ford and Chrysler. The expert team will be actively involved in new product development.
1.5.The salaries of the CEOs and all high-ranked positions of the three US auto makers must be regulated.
2.BAILOUT – GRADUAL
2.1.The bailout must be offered in quarter installments, not a one-time deal. The auto companies must prove that they have achieved the projected goals in order to receive to installment for the next quarter.
2.2.Each board of directors of the three auto companies agrees to an open-books policy, such that the government and other parties involved in the bailout process have unobstructed access to check the status of the companies at any time and take any corrective action if deemed necessary.
I believe that the CEOs of the three US auto makers deserve to be stepped down, both for the critical condition of their respective companies and for their public behavior. I am not referring here only to the private jet issue. I believe it is in bad taste that GM announced a 2000 job cut in the day they received the $15B bailout. It looks that the three CEOs are using the figure of 240,000 employees of their combined companies only to blackmail the government and the public opinion for the bailout money but they actually do not care too much about their employees.
I hope this helps.
Posted by: scr | December 6, 2008, 5:24 pm 5:24 pm
DO NOT BAIL THEM OUT. THE CHEAP MADE CARS ARE NOT SELLING ANYWAY. BESIDES THEIR NOT SAFE ENOUGH TO DRIVE ON OUR ROADS, BUT THEY ARE CHARGING A SMALL FOTUNE TO HAVE ONE. WHO CAN AFFORD TO BAIL THEM OUT, IT IS OUR MONEY, I KNOW, LETS ASK FOR OUR TAX DOLLARS BACK AND SEE HOW THEY WILL VOTE ON THAT ! !
SNEAKYPETE
Posted by: SNEAKYPETE | December 7, 2008, 3:46 pm 3:46 pm
One of the requirements from an Automotive bailout should require the return of all jobs sent to China and Mexico.
Posted by: Floyd | December 8, 2008, 4:29 am 4:29 am
No bail out payola. Get the union to scale way back. Union are no longer needed. Employees and employers can negotiate better and cheaper for the consumer.
Posted by: Joe Vasquez | December 8, 2008, 6:54 am 6:54 am
The bottom line is that letting them fail will cost millions of jobs, well, at best one million jobs. Think of the people who will lose their jobs if a bailout is not enacted. I agree with scr above.
Posted by: Mard | December 8, 2008, 8:57 am 8:57 am
I have mixed feelings. My husband was laid off from his job as an engineer for a auto supplier. Many people are losing jobs, at all levels and this will topple are already crippled economy. People need to stop and think about the effects of doing nothing. On the other hand, the US auto makers need a great deal of direction and be forced to make changes.
As for the wages for union workers, the numbers of $70 per hour is wrong. This calculates the wages by taking the current income of ALL current and retired auto workers and dividing it by the number of current (not retired) workers. If you know basic math, you can see how this would inflate the current wage rate. There are thousands of retired people gathering pensions and they should not be included in the calculations. Auto workers make an average of $26 an hour, still a good wage, but in line with wages paid by Toyota and others. The unions have already made many concessions to reduce benefits and essentially, lower the wages paid to them. I am sure they would negotiate further it if means keeping their jobs.
Remember, these are jobs that cannot be economically outsourced. It cost too much to ship a fully finished car to the US from China so they are made here. Do we really want to see this industry fail? It will affect not only the union workers and the people of Detroit, but the hundreds of thousands of people who work for suppliers and vendors to the auto industry. Yes, they deserve to fail..but do we deserve to pay that price as a country? Out of work people do not shop or go out to eat or pay their mortgages.
Posted by: LW | December 8, 2008, 9:52 am 9:52 am
I don’t really know what to think of the bailout.
On one hand, I don’t think bankruptcy is an option for the companies if they wish to survive. Car companies are not airlines; people buy Ford/GM/Toyota/etc. cars on the assumption that the companies will exist in 5+ years while someone’s loyalty to United Airlines only goes as far as his return trip home after the holidays. Bankruptcy of the car companies will destroy people’s confidence that they will be able to drive into a dealer to get something fixed or complain; Chapter 11 reorganization will quickly turn into a Chapter 7 liquidation.
Further, America needs a manufacturing base; we need to be able to keep the expertise in building big things like cars. The foreign automakers’ factories don’t count as the workers there merely assemble a final product; little of the expertise in making the cars is located in America.
On the other hand, the Big Three have clearly painted themselves into this corner by misusing their expertise, using their lobbying and advertising muscle to prevent further regulation of their companies, and crafting/using federal/state laws to stifle any innovation from American auto start-ups to keep themselves entrenched at the top (why isn’t anybody asking why we haven’t seen a single new successful American car company in decades?). They, in the long run, probably should disappear, but once replacements for them can be found.
If we do loan them money, we must take control of the companies, no questions asked. They cannot be allowed to control their or our country’s manufacturing destiny any more as they clearly don’t deserve it.
Posted by: pgbsan | December 8, 2008, 10:03 am 10:03 am
Let the big 3 file for chapter 11. Restructure, reorganize, cut the pay of unionized workers. The umemployment lines are long enough that the current workers can be replaced by people willing to work at 1/2 the salary.
Posted by: Barb | December 8, 2008, 11:32 am 11:32 am
That’s right, Barb. Make everyone work for half their present salary. That way, people can buy half as much and the economy will recover half as fast! Seriously, when did you first realize you were no longer a human being? Even better, fill those assembly lines with untrained workers currently getting unemployment benefits. That’ll make missing bolts in your engine (read the very first post in this thread) seem like a day in the park. My suggestion, Barb: educate yourself a little bit about what “skilled labor” is- and what it means to live in a SOCIETY, not just a bunch of greedy individuals looking out for themselves only.
Posted by: Chris | December 8, 2008, 11:52 am 11:52 am
what is the U.S. congress solution to the auto makers bailout
Posted by: chris rodriguez | December 8, 2008, 12:34 pm 12:34 pm
I am amazed at how the worlds largest,most advanced economy has many of the worlds dumbest people.You reelect a president you and the world despise throwing your spiralling economy and stature in the world away.Your elected officials are willing to throw trillions of dollars at wall street and the big banks no questions asked. The money these firms have been given has not been used as intended only used for bonuses and buying other firms. You people need to wake up before the us is totally destroyed by debt and greed. While Im at it did you think you could pay off a 400000 mortgage and a new car while working at almart? Now lets even borrow the equity in the home to so you can never pay it off. smart move But that wasnt enough lets get 8 credit cards and max them out too. you need to get your own house in order. as for uaw workers there pay is less than 10% the price of a vehicle. They could work for free and still lose money.All 3 went through many restructurings and concessions from workers and would be profitable if the credit crunch(brought on by wallstreet)didnt drop vehicle sales from 16 million to 10 million.If you dont address the real problems you will continue your rapid decline. can you really afford 3 million more jobless people. If everyone made 10/Hr nobody would be able to afford much of anything let alone a car.Unions have raised the standard of living for all areas of employment whether unionized or not.
Posted by: bob | December 17, 2008, 12:34 am 12:34 am