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Taxpayer money for Big Three coming, but questions remain

As congressional leaders and the White House work this week to finalize the details of a quick, short-term financial aid package for domestic automakers, the details emerging raise a host of questions for lawmakers and citizens to consider.

Seeing a deal that has real strings attached and includes oversight, many people are asking why similarly tough conditions were not attached to the billions of dollars in taxpayer money targeted to the financial industries and Wall Street. If major management changes are needed at Ford, GM and Chrysler, why not make similar demands at Citicorp, AIG, Fannie Mae and Freddie Mac?

Some restrictions were included in the financial industry bailout deals, namely limits on executive compensation, a ban on paying dividends and a requirement that the government benefit from a turnaround to profitability. But many people might ask why Wall Street's money did not have more strings attached.

Another issue not discussed is Chrysler's private ownership. Unlike GMand Ford, Chrysler is not a public company. Based on its track record, Cerberus Capital Management, the private equity firm that bought Chrysler from German carmaker Daimler, made a big bet, hoping for a quick turnaround and a big profit.

Chrysler, the smallest of the Big Three, also is seen as the weakest, prompting Sen. Christopher Dodd, D-Conn., to suggest this week that the company should be merged with another, healthier automaker.

A component of the proposed Detroit bailout is the appointment by the president of a "car czar" to oversee the restructuring of the automakers. But it's worth remembering that Fannie Mae and Freddie Mac were guided by directives from Congress. But lax regulation and oversight by Congress — and active resistance by Democrats to additional oversight — is now known to have been a key factor in the subprime mortgage meltdown that triggered the current recession.

Will Congress do a better job of influencing and monitoring the auto industry than it did of influencing the home mortgage industry?

It is encouraging to learn that the United Autoworkers union is prepared to give more financial assistance to help U.S. carmakers restructure their operations and reduce costs.

The UAW appears to understand that it must play a major role in helping the Big Three automakers trim their costs of operation to a level comparable to the U.S. operations of Honda, Toyota, Nissan, BMW and other foreign automakers.

Federal oversight of Detroit's turnaround effort is expected to be influenced by a "Green"agenda famously promoted by Barack Obama and others during the 2008 presidential campaign, meaning more high-mileage vehicles and more hybrids.

But now that gasoline prices have fallen below $2 a gallon, there is no guarantee that Americans will line up to buy those fuel-efficient cars with the same enthusiasm as when gasoline was $4 a gallon.

To deal with that issue, it is possible that the federal government might see the need to impose a gradual increase in the federal gasoline tax, to keep fuel efficiency a top priority among car buyers. The idea would be to create an artificial price floor for gasoline, at $3-a-gallon or more, so that consumers will not lose interest in miles-per-gallon figures. It is a crucial part of the goal of reducing America's dependence on imported oil.

The current Big Three bailout plan reportedly is for $15 billion in emergency aid to go to General Motors and Chrysler. Ford, which is in better financial shape than its domestic competitors, is requesting only access to a line of credit.

Congressional Democrats have agreed with a White House condition that the $15 billion should come from the $25 billion loan package already approved by Congress to help U.S. automakers retool to produce more fuel-efficient vehicles.

Whatever shape the final bailout package takes, it is clear that Detroit's automakers face severe challenges. As clear as the challenge, it's equally unclear whether this bailout or the expected follow-up aid will save the U.S. automakers.

The critical response from Congress and most of the American public to the pleas of the domestic automakers for a multibillion-dollar bailout reflects the perception that Detroit's troubles are mostly of its own making — shortsighted management and shortsighted and, until recently, inflexible unions.

Still, it's worth noting that GM and Ford are successful in overseas markets, including Europe. GM, in particular, is strong in South America and China. So it is encouraging that these two U.S. carmakers can produce attractive cars that consumers want to buy. Now, they just have to figure out how to do that here.

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