William vanden Heuvel shares lessons from the German auto industry.
While the American automobile industry is in despair, Europe's largest car market--Germany-- is having an unprecedented boom. Its car dealers are having a hard time keeping their lots full. Our government has already extended $17.4 billion in loans to GM and Chrysler, but this costly restructuring will have no prospect of success unless customers buy their products. That is not happening.
But American enterprise and energy should be brought together to change course -- and at the same time give a sense of appreciation to the workers and a sense of benefit and participation to taxpayers and citizens. They are, rightly, increasingly unhappy at the enormous amounts of money being spent to salvage the banking system, while precious little funds have been used to stave off unemployment and help millions of families approaching despair.
In February, Detroit's Big Three posted sales declines of nearly 50 percent. Meanwhile, in Germany during the same period, new car sales increased 21 percent. The difference? Germany established an incentive program for ordinary people, not corporate management. The program invited Germans to turn in cars, nine years or more old, for a 2500-Euro credit (about $3300 these days) toward a new, environmentally friendly car. In the first three months of the incentive program, more than 350,000 new cars were sold. German manufacturers are sweetening deals for customers with their own incentives. The workers, the dealers, the parts manufacturers -- in short, the extensive network of companies connected to the automobile industry -- are all rejoicing.
Such programs are probably not the answer to the fundamental problems of overproduction and reorganization. On the other hand, twenty percent of the money already doled out to auto companies could have paid for a similar incentive for a million or more American cars. And that would have less measurable but equally important impact: involving average citizens in the benefits of the bailouts -- and giving breathing space and hope to American manufacturers.
Ambassador vanden Heuvel has served as Deputy U.S. Permanent Representative to the United Nations and as U.S. Ambassador to the European Office of the U.N. He is also chair of the Franklin and Eleanor Roosevelt Institute.