The End of the Affair

The fate of Detroit isn’t a matter of economics. It’s a tragic romance, whose magic was killed by bureaucrats, bad taste and busybodies.

The phrase “bankrupt General Motors,” which we expect to hear uttered on Monday, leaves Americans my age in economic shock. The words are as melodramatic as “Mom’s nude photos.” And, indeed, if we want to understand what doomed the American automobile, we should give up on economics and turn to melodrama.

Politicians, journalists, financial analysts and other purveyors of banality have been looking at cars as if a convertible were a business. Fire the MBAs and hire a poet. The fate of Detroit isn’t a matter of financial crisis, foreign competition, corporate greed, union intransigence, energy costs or measuring the shoe size of the footprints in the carbon. It’s a tragic romance—unleashed passions, titanic clashes, lost love and wild horses.

Foremost are the horses. Cars can’t be comprehended without them. A hundred and some years ago Rudyard Kipling wrote “The Ballad of the King’s Jest,” in which an Afghan tribesman avers: Four things greater than all things are,—Women and Horses and Power and War.

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Insert another “power” after the horse and the verse was as true in the suburbs of my 1950s boyhood as it was in the Khyber Pass.

Horsepower is not a quaint leftover of linguistics or a vague metaphoric anachronism. James Watt, father of the steam engine and progenitor of the industrial revolution, lacked a measurement for the movement of weight over distance in time—what we call energy. (What we call energy wasn’t even an intellectual concept in the late 18th century—in case you think the recent collapse of global capitalism was history’s most transformative moment.) Mr. Watt did research using draft animals and found that, under optimal conditions, a dray horse could lift 33,000 pounds one foot off the ground in one minute. Mr. Watt—the eponymous watt not yet existing—called this unit of energy “1 horse-power.”

In 1970 a Pontiac GTO (may the brand name rest in peace) had horsepower to the number of 370. In the time of one minute, for the space of one foot, it could move 12,210,000 pounds. And it could move those pounds down every foot of every mile of all the roads to the ends of the earth for every minute of every hour until the driver nodded off at the wheel. Forty years ago the pimply kid down the block, using $3,500 in saved-up soda-jerking money, procured might and main beyond the wildest dreams of Genghis Khan, whose hordes went forth to pillage mounted upon less oomph than is in a modern leaf blower.

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Horses and horsepower alike are about status and being cool. A knight in ancient Rome was bluntly called “guy on horseback,” Equesitis. Chevalier means the same, as does Cavalier. Lose the capitalization and the dictionary says, “insouciant and debonair; marked by a lofty disregard of others’ interests, rights, or feelings; high-handed and arrogant and supercilious.” How cool is that? Then there are cowboys—always cool—and the U.S. cavalry that coolly comes to their rescue plus the proverbially cool-handed “Man on Horseback” to whom we turn in troubled times.

Early witnesses to the automobile urged motorists to get a horse. But that, in effect, was what the automobile would do—get a horse for everybody. Once the Model T was introduced in 1908 we all became Sir Lancelot, gained a seat at the Round Table and were privileged to joust for the favors of fair maidens (at drive-in movies). The pride and prestige of a noble mount was vouchsafed to the common man. And woman, too. No one ever tried to persuade ladies to drive sidesaddle with both legs hanging out the car door.

For the purpose of ennobling us schlubs, the car is better than the horse in every way. Even more advantageous than cost, convenience and not getting kicked and smelly is how much easier it is to drive than to ride. I speak with feeling on this subject, having taken up riding when I was nearly 60 and having begun to drive when I was so small that my cousin Tommy had to lie on the transmission hump and operate the accelerator and the brake with his hands.

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A 1950 Studebaker Commander Convertible, with its famous ‘bullet-nose’ front end.

After the grown-ups had gone to bed, Tommy and I shifted the Buick into neutral, pushed it down the driveway and out of earshot, started the engine and toured the neighborhood. The sheer difficulty of horsemanship can be illustrated by what happened to Tommy and me next. Nothing. We maneuvered the car home, turned it off and rolled it back up the driveway. (We were raised in the blessedly flat Midwest.) During our foray the Buick’s speedometer reached 30. But 30 miles per hour is a full gallop on a horse. Delete what you’ve seen of horse riding in movies. Possibly a kid who’d never been on a horse could ride at a gallop without killing himself. Possibly one of the Jonas Brothers could land an F-14 on a carrier deck.

Thus cars usurped the place of horses in our hearts. Once we’d caught a glimpse of a well-turned Goodyear, checked out the curves of the bodywork and gaped at that swell pair of headlights, well, the old gray mare was not what she used to be. We embarked upon life in the fast lane with our new paramour. It was a great love story of man and machine. The road to the future was paved with bliss.

Then we got married and moved to the suburbs. Being away from central cities meant Americans had to spend more of their time driving. Over the years away got farther away. Eventually this meant that Americans had to spend all of their time driving. The play date was 40 miles from the Chuck E. Cheese. The swim meet was 40 miles from the cello lesson. The Montessori was 40 miles from the math coach. Mom’s job was 40 miles from Dad’s job and the three-car garage was 40 miles from both.

The car ceased to be object of desire and equipment for adventure and turned into office, rec room, communications hub, breakfast nook and recycling bin—a motorized cup holder. Americans, the richest people on Earth, were stuck in the confines of their crossover SUVs, squeezed into less space than tech-support call-center employees in a Mumbai cubicle farm. Never mind the six-bedroom, eight-bath, pseudo-Tudor with cathedral-ceilinged great room and 1,000-bottle controlled-climate wine cellar. That was a day’s walk away.

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Henry Ford and his Model T.

We became sick and tired of our cars and even angry at them. Pointy-headed busybodies of the environmentalist, new urbanist, utopian communitarian ilk blamed the victim. They claimed the car had forced us to live in widely scattered settlements in the great wasteland of big-box stores and the Olive Garden. If we would all just get on our Schwinns or hop a trolley, they said, America could become an archipelago of cozy gulags on the Portland, Ore., model with everyone nestled together in the most sustainably carbon-neutral, diverse and ecologically unimpactful way,

But cars didn’t shape our existence; cars let us escape with our lives. We’re way the heck out here in Valley Bottom Heights and Trout Antler Estates because we were at war with the cities. We fought rotten public schools, idiot municipal bureaucracies, corrupt political machines, rampant criminality and the pointy-headed busybodies. Cars gave us our dragoons and hussars, lent us speed and mobility, let us scout the terrain and probe the enemy’s lines. And thanks to our cars, when we lost the cities we weren’t forced to surrender, we were able to retreat.

But our poor cars paid the price. They were flashing swords beaten into dull plowshares. Cars became appliances. Or worse. Nobody’s ticked off at the dryer or the dishwasher, much less the fridge. We recognize these as labor-saving devices. The car, on the other hand, seems to create labor. We hold the car responsible for all the dreary errands to which it needs to be steered. Hell, a golf cart’s more fun. You can ride around in a golf cart with a six-pack, safe from breathalyzers, chasing Canada geese on the fairways and taking swings at gophers with a mashie.

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Louis Chevrolet sits behind the wheel of his prototype car in 1911.

We’ve lost our love for cars and forgotten our debt to them and meanwhile the pointy-headed busybodies have been exacting their revenge. We escaped the poke of their noses once, when we lived downtown, but we won’t be able to peel out so fast the next time. In the name of safety, emissions control and fuel economy, the simple mechanical elegance of the automobile has been rendered ponderous, cumbersome and incomprehensible. One might as well pry the back off an iPod as pop the hood on a contemporary motor vehicle. An aging shade-tree mechanic like myself stares aghast and sits back down in the shade. Or would if the car weren’t squawking at me like a rehearsal for divorce. You left the key in. You left the door open. You left the lights on. You left your dirty socks in the middle of the bedroom floor.

I don’t believe the pointy-heads give a damn about climate change or gas mileage, much less about whether I survive a head-on with one of their tax-sucking mass-transit projects. All they want to is to make me hate my car. How proud and handsome would Bucephalas look, or Traveler or Rachel Alexandra, with seat and shoulder belts, air bags, 5-mph bumpers and a maze of pollution-control equipment under the tail?

And there’s the end of the American automobile industry. When it comes to dull, practical, ugly things that bore and annoy me, Japanese things cost less and the cup holders are more conveniently located.

The American automobile is—that is, was—never a product of Japanese-style industrialism. America’s steel, coal, beer, beaver pelts and PCs may have come from our business plutocracy, but American cars have been manufactured mostly by romantic fools. David Buick, Ransom E. Olds, Louis Chevrolet, Robert and Louis Hupp of the Hupmobile, the Dodge brothers, the Studebaker brothers, the Packard brothers, the Duesenberg brothers, Charles W. Nash, E. L. Cord, John North Willys, Preston Tucker and William H. Murphy, whose Cadillac cars were designed by the young Henry Ford, all went broke making cars. The man who founded General Motors in 1908, William Crapo (really) Durant, went broke twice. Henry Ford, of course, did not go broke, nor was he a romantic, but judging by his opinions he certainly was a fool.

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Preston Tucker, in one of the few Tucker cars produced, celebrates being acquitted of charges of fraud over the failure of his automobile business in 1950.

America’s romantic foolishness with cars is finished, however, or nearly so. In the far boondocks a few good old boys haven’t got the memo and still tear up the back roads. Doubtless the Obama administration’s Department of Transportation is even now calculating a way to tap federal stimulus funds for mandatory OnStar installations to locate and subdue these reprobates.

Among certain youths—often first-generation Americans—there remains a vestigial fondness for Chevelle low-riders or Honda “tuners.” The pointy-headed busybodies have yet to enfold these youngsters in the iron-clad conformity of cultural diversity’s embrace. Soon the kids will be expressing their creative energy in a more constructive way, planting bok choy in community gardens and decorating homeless shelters with murals of Che.

I myself have something old-school under a tarp in the basement garage. I bet when my will has been probated, some child of mine will yank the dust cover and use the proceeds of the eBay sale to buy a mountain bike. Four things greater than all things are, and I’m pretty sure one of them isn’t bicycles. There are those of us who have had the good fortune to meet with strength and beauty, with majestic force in which we were willing to trust our lives. Then a day comes, that strength and beauty fails, and a man does what a man has to do. I’m going downstairs to put a bullet in a V-8.

P.J. O’Rourke is the author of 13 books, including “Driving Like Crazy.”

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Full article and photos: http://online.wsj.com/article/SB10001424052970203771904574173401767415892.html

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After 1,250 Columns, It’s Time to Shift Gears

T he first of 1,250 columns, nine years ago, spoke of a time that seems impossible now, of heady young tech moguls flush with money and drunk with possibility, instructing the chef at The Palm in Tysons Corner to spell out “Netscape” for them — in crabmeat.

Today’s is my last column, and as I scan the archives, I see stories of public arrogance and private foibles, but mostly, I see stories of people poking their way through life — a quest I’ve tried to capture here a few times each week.

Those first columns covered topics that seem all too familiar today: police beatings, dreams of a trolley line from Bethesda to Silver Spring, schools that teach little more than cynicism. But other pieces feel like relics of another world: a journey with the mapmaker scurrying to keep up with the leading edge of sprawl, a visit with city kids who played baseball where dreamers thought there might someday be a major league stadium, an attempt to understand what drove angry college kids to shut down the city with protests against . . . well, it never was quite clear.

Those demonstrators didn’t teach me anything about globalization, but writing about them did show me that the relationship between news writers and readers was changing forever.

For that column, published the day after the anti-globalization movement held its biggest demonstration here, I wandered around downtown asking protesters what they were so angry about. One young woman explained that her parents failed to see the root injustices of society: “They say, ‘I like my VCR and my Saab, and I like medicine and fried chicken.’ ”

“Such terrible people,” I wrote. “Imagine, liking medicine and food!”

The reaction to my description of “humorless bands of adolescents . . . searching for ways to upset their elders” was immediate: Thousands of e-mails poured in (this was just as broadband was becoming commonplace), most howling about how mean I was. The issue was fleeting, but what stuck with me was how the culture of the Web was shifting the relationship between writer and reader. People took a visceral interest in how the story was told. They wanted to know how I’d chosen whom to quote, what views I’d brought to my reporting. I’d always received letters, but this was new — in the size of the response, in the unchecked venom, in the expectation that there ought to be a continuing conversation between news purveyor and news consumer.

There was something empowering about the new media, the digital technology that let readers speak out in the same format, the same time frame and the same space as the news that had hitherto been delivered from on high.

I loved the new battleground of ideas even as I lamented how opinion — the laziest form of journalism — was elbowing out the rigorous work of reporting. In this new world, it was so cheap to mouth off that the difficult and sometimes less-exciting work of ferreting out facts became too easy to discard or trim back.

On the first day I was given this space to play with, the great columnist Mary McGrory summoned me to her office with a note: “Come see me. I have three words for you.”

I scurried over and presented myself. Mary looked up from her desk and said, “Three words: Cruelty is important.” To do this job right, you must name and blame the bad guys. You must call it as it is. The minute you hold back, your credibility is shot. The second you stop reporting, you’re just one more pontificating, pusillanimous pundit.” (When my friend and colleague Marjorie Williams launched her column, she, too, received the gift of three words from Mary: “Subtlety is overrated.”)

The beauty of a column is that you can dig up the story, then say it straight: You can expose the cynicism that leaves D.C. school kids worse off at the end of their education than they were at the start, then you can call that system a criminal enterprise. You can reveal the narrow-mindedness that threatens to put mentally retarded people out on the street and then push until embarrassed officials do the right thing. You can keep hitting the same note until a school principal with a phony doctorate is removed.

But this work breeds humility and frustration, too: No matter how many times I wrote about the folly of zero-tolerance policies, bureaucrats held dear to rules that treat kids like crooks and punish them as we never would adults. Reporters like to think that merely shining light on a problem will lead good people to solve it. Sometimes that’s right, but often it’s not: I wrote over and over about how to move homeless people into housing at relatively low cost, yet many readers found my energy misplaced, preferring to rely on the old canard about the homeless being on the street because they want to be.

And readers consistently told me that I was dead wrong about privacy issues, even when it was clear (to me, anyway) that rules supposedly designed to protect people were instead preventing the public from learning about wrongdoing (this comes up especially on mental health and crime issues, such as after the Virginia Tech shootings).

This gig was always huge fun. I staged stunts: Amid the security hysteria after 9/11, I walked along downtown sidewalks wearing a gas mask and crash helmet to see how people would react (to my joy, most got the joke). I took the Virginia and Maryland standardized tests that are inflicted on eighth-graders (I’m still lousy at math). I watched 24 hours of the D.C. government’s self-promoting cable TV channels (I might have been the first customer to call the cable company requesting an outage).

In the column and on the Raw Fisher blog, which started in 2007, I have learned how deeply many of us crave community. The more atomized our lives become, the more we yearn to be part of something larger. Yet we also live in a time of great skepticism about the motivations of others. “Leave me alone” does constant battle with “hold me tight.”

The daily newspaper, like TV news anchors and radio DJs, was for many years a regular visitor in most homes. Newspaper columns were an invitation to a relationship with a reporter who would take you to places and introduce you to people you might not know firsthand but were part of the place you called home.

That much hasn’t changed: Readers taught me early on that while editors worried about whether we were writing about each locality in the Washington region, what mattered was the people and the stories. Even those who live miles away and take pride in never setting foot in the District would clamor for more on the city, because it is the central depot of our collective awareness. People want to talk about the great characters whose antics, agonies and achievements we all know, whether that be Marion Barry appalling us, Dan Snyder disappointing us or President Obama stirring us.

There are a million stories in the naked city, someone once said, and I told 1,250 of them here, and 1,200 more on the blog. I heard from readers 250,000 times, and I tried to respond to all of them. I could stay on this road for years to come, I love it so. But this path feels worn and familiar, and the challenge now is to hack out a new one.

Newspapers are in a fight to survive, desperately searching for new ways to reflect the world to an audience that is less trusting, more distracted and diffuse. For many people, digital connections seem to trump geography as the central definition of home. But those electronic ties don’t fulfill all our needs. Where we live still matters. Starting next month, I’ll be putting together a group of writers whose job it will be to tell the truths of the Washington area in compelling and essential ways, combining traditional storytelling with new forms that involve and engage the people who live here.

The ideas are the same ones that drove this column: to figure out what connects us — even when that something is paradoxically the very thing that divides us. To introduce readers to the characters whose stories tell us something about ourselves.

I’m grateful to the many who have come along on this ride, who have argued with me, fed me tips and steered me right. Thanks to all who shared their stories and even to those who splattered venom all over my e-mail queue. I’m off to expand my collection of funhouse mirrors and point them somewhere new.

Marc Fisher, Washington Post

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Full article: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/30/AR2009053002020.html

Oregon man, 92, promoted to admiral in Polish navy

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Jerzy Tumaniszwili

Jerzy Tumaniszwili was a 23-year-old naval gunnery officer in the Polish navy when his destroyer left port to escape the imminent 1939 German invasion of his county.

He achieved the rank of lieutenant commander while serving 5 1/2 years during World War II, chasing German U-boats and protecting troops on D-Day in 1944.

Tumaniszwili emigrated to the United States after the war because he was considered an enemy by the Communist regime that had taken over Poland.

Now at 92, Tumaniszwili sets sail these days mostly on rivers and lakes. But his birth country isn’t finished thanking him: The government is honoring him as a rear admiral in the Polish navy.

“It’s probably because I’m the oldest one still alive,” Tumaniszwili said in an interview with The Associated Press. “It really surprised me.”

The Polish ambassador, Robert Kupiecki, was scheduled to present the promotion to Tumaniszwili at a ceremony on Sunday in Portland on behalf of Polish President Lech Kaczynski.

The promotion was approved last year, but Tumaniszwili was unable to attend a ceremony in Poland, according to Piotr Erenfeicht, counselor of political affairs at the Polish embassy in Washington, D.C.

Erenfeicht said promotions of retired servicemen occur “from time to time” and that other Polish Americans have received the honor.

But he said it was clear from his record that Tumaniszwili deserved it.

“When looking at his biography, you can see, he was very honored, very respected, a hero of the Second World War,” Erenfeicht said.

After the war, Tumaniszwili found a job with a medical equipment company in Waterbury, Conn., and was part of a team that helped invent a disposable hypodermic syringe.

He took the name George Trapper, a combination of his Polish first name, which translates to George, and the pseudonym, “Trapper,” which he used when he wrote of Polish navy exploits for British newspapers during the war _ “trapping” U-boats.

Tumaniszwili stayed with the Connecticut company through changes in ownership until retirement, which he had decided would be in Oregon after a visit in 1976.

“My wife and I, we just fell in love with Oregon,” Tumaniszwili (pronounced too-MAHN-ish-veel-ee) said from his home nestled in the Cascade Range foothills between Portland and Mount Hood.

Tumaniszwili met his wife, Jean, in England, and they had a son and daughter. “When my ship docked in Plymouth in 1940, I met her and fell in love with her,” Tumaniszwili said. “I said, ‘This is it, this is my wife.'”

She died four years ago, survived by her husband, their children, seven grandchildren and nine great-grandchildren, many of whom will be on hand to see Tumaniszwili honored with his promotion.

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Full article: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/30/AR2009053002122.html

Photo: http://www.polishnewsseattle.org/2009/May09.htm#Tumaniszwili

After Many Tuneups, A Historic Overhaul

A Global Industry Is Transformed In Race to Reinvent U.S. Automakers.

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Frank Stronach, chairman and founder of Magna International.

In the space of five head-spinning months, the economic downturn and a few strong-willed financial officials in the Obama administration have done what legions of car executives, consultants and policymakers had failed to do in three decades: overhaul the U.S. car industry.

This weekend marks a major turning point for two U.S. giants — General Motors and Chrysler — with the federal government, having already replaced their top executives, now set to take majority share positions in both companies. Chrysler, seeking to emerge from a quick trip through bankruptcy, will learn Monday whether a judge will bless a shotgun cross-national marriage that would wed the company with Fiat technology, models and management.

On the same day, GM is expected to file for the bankruptcy protection it long swore it would avoid, with its reorganization already well underway. On Friday, the company relinquished control of Opel, its German-based European arm since 1929, to a large but little-known Canadian auto-parts maker with global ambitions, German government loans and Russian bridge financing. The far-flung parts maker, Magna International, might better reflect the industry’s future than GM, which will soon be shorn of other established but money-losing brands, too. Magna agreed to limit job cuts in Germany and, at the Treasury Department’s request, keep Opel out of the U.S. market.

If all that were not enough, the Obama administration this month unveiled new fuel-efficiency standards that will change the engines, and perhaps the shapes of vehicles across the industry, challenging long-established American tastes for cars with size and power and stretching the limits of automotive and battery technology.

“It’s certainly an inflection point. This is an historic transformation,” said David McCurdy, president of the Alliance of Automobile Manufacturers who helped negotiate the new fuel standards. “We’ll look back in a number of years and realize it was a significant point of change.”

In the new upside-down world of automobiles, the U.S. government will be the majority shareholder of both GM and Chrysler, giving rise to gibes that GM now stands for Government Motors.

“What is the role of the board of directors in this case?” said Maryann N. Keller, an independent auto analyst and author of a history of GM. “To operate in the economic best interests of this company? Or to operate it based on government policy, which may be in conflict with the profit motive? We’ve never had an entity like this, and we’re all going to watch it unfold.”

What’s good for the country might not be good for GM. Some difficult decisions could include whether to outsource manufacturing to countries such as China, South Korea or Canada where costs might be cheaper. GM has said it would buy components for electric car batteries from a South Korean company, though many U.S. firms are vying for that business.

President Obama has also urged car manufacturers to make fuel-efficient vehicles, but if oil prices stay low, demand for such vehicles could be weak. Last year, U.S. small-car sales held steady at 2.5 million, increasing market share to 19 percent as sales of big cars fell. “Small cars are a bit of a challenge for any carmaker in the U.S.,” said Itay Michaeli, an auto analyst at Citigroup. “They are entry-level cars and don’t command much premium. So it is difficult to make much money selling small cars without substantial volume and market share.”

On Friday, GM said it would build a new small car, about the same size as the Chevrolet Aveo, which is manufactured in South Korea by GM Daewoo, a joint venture. United Auto Workers President Ron Gettelfinger said in a PBS interview that he had pressed GM and the administration to drop plans to make small cars in China for the U.S. market.

The track record is mixed when it comes to government intervention to save and revive big auto companies. British Leyland burned through $16.5 billion of British taxpayer money before going out of business. The French government had somewhat more success as a major shareholder in Renault, which has partnered with Nissan. South Korea’s government also intervened to bolster Kia when it was ailing.

The winners in the new world of autos could be a Chinese car company like Geely or India’s Tata Motors, which are building on strong domestic markets and looking to expand abroad. Or it could be the Canadian auto-parts maker, Magna International, which next week will take over Opel. Whereas some of the traditional auto companies have seen top executives evolve from founders to creative managers to caretakers (and perhaps undertakers), many of these companies are run by innovators and empire builders in countries with markets expanding much more rapidly than the mature U.S. market.

Time magazine covers were once graced by icons like GM chief executive Alfred P. Sloan and Lee Iacocca (once as Ford’s chief and once as Chrysler’s), but the man in automotive news this weekend is Frank Stronach, chairman of Magna. His company shows the industry’s key trends and challenges.

Stronach, who began as a tool-and-die maker, moved at age 21 from his native Austria to Canada with a few hundred dollars in his pocket in 1954. He rented a garage and bought some machines. Today he has 85,000 employees. A quarter of Magna’s $26 billion sales are to GM, but with the major manufacturers downsizing, Magna also assembles cars for Chrysler, BMW and Mercedes.

Unlike the ailing major manufacturers, Magna began conserving cash five years ago and has $1.5 billion in cash and no debt.

In an interview, Stronach said that Detroit’s Big Three suffered from years without competition followed by years of labor strife. His company has a “constitution” that promises workers 10 percent of profit — half paid in cash and half in stock — over and above wages.

“The Obama administration is doing the right thing by saying they have got to do everything to preserve jobs, to preserve hope and create an environment where things will get done,” Stronach said. But, he added, “you don’t change a culture in a few years.”

Magna’s strategy for Opel also reflects the future of the auto industry: The fastest growing markets are in Brazil, Russia, India and China. But getting a foot in the door of emerging markets can be tricky. Magna has already overhauled an assembly line owned by Gaz, part of the corporate empire belonging to Russian aluminum tycoon Oleg Deripaska. Stronach said that he hopes Opel — which last year sold about 1.5 million cars worldwide — can make 300,000 to 400,000 there.

But Russia wants a joint venture there with Russian partners owning a major stake. Stronach said Magna would accept a minority, but controlling, share while GM would retain the same 35 percent interest it will keep in Opel. Deripaska, who is close to the Kremlin, could be a partner, but he was so pressed for cash last year that he was forced to forfeit his $1.5 billion stake in Magna, which he had pledged as collateral for a loan. The Russian state-owned bank Sberbank has pledged financing.

Political complications aren’t limited to emerging markets. The Treasury has imposed a condition on the Opel deal that flies in the face of free markets, but is designed to shield existing U.S. jobs; Opel must be barred from selling cars or setting up manufacturing plants in the United States. And the Treasury insisted that, at least for a time, Opel stay out of China, where GM is strong.

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Full article: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/30/AR2009053002146.html?hpid=topnews

A Red State Booster Shot

Those in the red states still smarting over Barack Obama’s election victory can perhaps take solace in this: The Democrats’ No. 1 domestic policy initiative, universal health care, is likely to help red America at the expense of blue.

Health-care reform may be overdue in a country with 45 million uninsured and soaring medical costs, but it will also represent a substantial wealth transfer from the North and the East to the South and the West. The Northeast and the Midwest have much higher rates of coverage than the rest of the country, led by Massachusetts, where all but 3 percent of residents are insured. The disproportionate share of uninsured is in the South and the West, the result of employment patterns, weak unions and stingy state governments. Texas leads the way, with a quarter of its population uninsured; it would be at the top even without its many illegal immigrants.

Then there is the matter of paying for universal health care. The plan picking up steam on Capitol Hill is to cover much of the $1.2 trillion cost over 10 years by taxing employer-provided health benefits. And who has the highest benefits? People in the North and the East, thanks to pricier health care markets, higher state standards for health coverage and stronger labor unions. Depending on how such a tax were designed, it could land hard not only on corporate executives but also on union workers whose compensation gains show up as health benefits instead of wages.

It would not be the first time that the historically more affluent part of the country has subsidized the less prosperous one. Long before jobs flowed to Mexico and China, they flowed from Massachusetts and Michigan to North Carolina and Tennessee, where unions were weaker and employers could pay less and provide fewer benefits.

The people followed, moving to a Sun Belt where taxes were lower because states offered less in the way of safety nets — nets that the North and the East will now pay to stitch up via universal health care.

“The cost of health care benefits was very much a factor in plant relocations in the eighties,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass. “And now we end up paying for [Sun Belt health care] anyway? It’s incredible.”

So far, though, the health-care debate is not talked about much in regional terms. In the fight over regulating carbon emissions, regional self-interest is plain, with Republican and Democratic lawmakers from coal-dependent Midwestern and Southern states trying to blunt the legislation. But pushing universal health care are Northeasterners such as Ted Kennedy and Chuck Schumer, and pushing against it are Sun Belters such as John Cornyn and Jon Kyl.

It is a rare triumph of principle over parochialism — or maybe no one is looking at the numbers.

Nationally, about 15 percent of Americans lack health insurance. But in the North, many states in addition to Massachusetts have less than 11 percent uninsured. They include Pennsylvania, Connecticut, Michigan, New Hampshire, Ohio, Iowa, Wisconsin and Minnesota. In the South and the West, where small businesses dominate, many states other than Texas have more than 17 percent, including Arizona, Florida, California, Louisiana, Georgia, Arkansas, Mississippi, Oklahoma, Nevada and New Mexico.

The disparities extend to the value of employer-provided benefits. It is highest in the Northeast and the Midwest, lowest in the South and the West.

That means a big regional slant if the plan raises money by ending the tax exemption for employer health benefits or by taxing the value of above-average benefits, which is what Congress is leaning toward. Critics have long argued that exempting employer-provided benefits from taxes is unfair to self-insured people who have to use after-tax dollars to buy coverage, and that the exemption drives health costs higher by encouraging generous benefits plans.

But opponents of taxing health benefits say that it would hit many middle-class families whose packages are worth more than average simply because they live in high-cost markets. They argue that much of the Northeast has high health-care costs partly because the cost of living there is high, not because medical spending is out of control. Indeed, when it comes to Medicare spending, some of the top spending areas are in the South and the West, such as Miami and McAllen, Tex., while some of the most efficient areas are in the North. Better, some say, to raise revenue through other routes — reducing tax deductions for the wealthy, taxing sugary sodas, raising the capital gains tax or expanding the Medicare tax to unearned income.

“There’s a big regional backdrop to this,” said Harvard health policy professor Robert Blendon. “Those who are the beneficiaries of all this money that’s going to be floating around is one group of states, and who’s going to have to pay for the taxes if they lift this exemption is another group.”

For example, he said, if you’re a New York policeman married to a nurse and your combined salaries are $80,000, your health insurance will be taxed to pay for a family in Mississippi. “I’m trying to figure out how Chuck Schumer can raise his hands and say this is a good thing if New York workers are going to be such losers based on taxes,” he said.

Now, if national reform really does restrain health-care costs over the long run, it would help employers and consumers in the Northeast and the Midwest just as it would those elsewhere. And to lessen its effect on the middle class, the plan could limit taxes on employer benefits to wealthier taxpayers, or it could adjust the subsidies for the uninsured to reflect the higher cost of health care in certain areas. But that would complicate the tax code, cut into the needed revenues and arguably undermine the effort to reduce health-care costs.

Meanwhile, not everyone in a state such as Texas will gain from health-care reform. Larger employers will face a mandate to cover workers or pay a fee. Residents will probably face a mandate to buy coverage and not all will qualify for subsidies to do so. New federal standards for health benefits will mean that self-insured residents of states with loose standards will get easier access to coverage and better benefits, but they’ll have to pay more.

Still, the regional tilt is clear. One of the likeliest options for reform is to increase coverage among the working poor by expanding Medicaid eligibility in Southern and Western states that now limit it, even though, with their lower per-capita income, they receive a higher federal match to cover the cost. Texas, for instance, has not updated the Medicaid eligibility rules for parents of poor children in 23 years — most working parents qualify only if they earn less than $308 per month.

But to persuade stingier states to expand eligibility, the federal government may cover the full Medicaid cost of their newly eligible residents for at least a few years. This will draw howls from states that long ago expanded their eligibility rules and have been paying a large share of the cost of having done so. Again, the plan could try to mollify these states with extra aid, but that adds to the price tag.

“Do you penalize those that have been good in the past by only putting the new federal dollars into where the problem exists, or do you try to equalize the playing field to help the states that have been the best?” asked Diane Rowland, executive vice president of the Kaiser Family Foundation.

To conservative health-care experts, a westward and southward wealth transfer is welcome and long overdue. Exempting health benefits from taxes, they say, has meant a big tax break for employers and workers in the wealthier and more unionized regions. And for union members to complain about being taxed for their good benefits just shows that they, too, have been hurt by the system, because health care absorbs too much of their compensation.

“No one should assert that what we have now produces some grand equitable solution,” said Joseph Antos of the American Enterprise Institute. “We’re going to be moving from imperfect to imperfect.”

Then there are staunch advocates for universal health care, like Anne Dunkelberg of the Center for Public Policy Priorities, who reject outright the regional point-scoring mindset, arguing that health-care reform is a national need. “We should be motivated by the fact that [the current system] is unsustainable for the whole country,” she maintained.

Of course, that’s easy for her to say: She’s in Austin, Texas.

Alec MacGillis is a reporter on the Post’s national staff.

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Full article: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/29/AR2009052901548.html

Freedom on the Defensive

After pledging to defend democracy, the Organization of American States ignores Venezuela — and courts Cuba.

“THE PEOPLES of the Americas have a right to democracy and their governments have an obligation to promote and defend it.” So reads the first sentence of the Inter-American Democratic Charter, which was adopted on Sept. 11, 2001, by the Organization of American States and signed by all 34 active member countries. Founded in 1948, the OAS defines its two top purposes as “to strengthen peace and security on the continent” and “to promote and consolidate representative democracy.” So with the organization’s annual assembly set to open Tuesday in Honduras, you’d think a principal item of business would be the rapidly deteriorating political situation in Venezuela, where would-be strongman Hugo Chávez has ordered up criminal investigations against most of his leading opponents — jailing one and driving another into exile — and is threatening to shut down the last opposition broadcast television network.

Not a chance. Far from facing the sanctions that the democratic charter authorizes, Mr. Chávez will be helping to lead a charge aimed at lifting the 1962 suspension of Cuba’s OAS membership — a campaign that enjoys the support of almost every government in the region. No, Cuba doesn’t come close to meeting the requirements of the democratic charter — in fact, its totalitarian domestic regime has remained essentially unaltered during the last 47 years. Nor do Raúl and Fidel Castro wish to rejoin the OAS; like Mr. Chávez, the Castros would prefer to form a new regional organization that excludes the United States.

Nonetheless, Latin American governments from Mexico to Argentina have chosen to make Cuba’s readmission the centerpiece of this year’s assembly. It’s a cheap and popular way to please leftist constituencies at home — and to pressure the Obama administration, which has unilaterally lifted several sanctions against Cuba but not what remains of the economic embargo. Sadly, even democratic governments such as Brazil and Chile are unwilling to stand by the pledge they made just eight years ago — they, too, are clamoring to restore Cuba’s membership while remaining silent about Venezuela.

Mr. Obama has proclaimed his wish to set U.S.-Latin relations on a new footing; he shook Mr. Chávez’s hand at a recent hemispheric summit and has refrained from criticizing the crackdown in Venezuela. That seems to have emboldened leftist leaders to press their own agenda at the OAS. The administration has been trying to finesse the issue: Last week it proposed that the suspension be lifted but that Cuba’s reinstatement be linked to steps toward democracy. When that proposal failed to gain traction, U.S. diplomats joined a working group trying to hammer out a compromise. But most likely the administration is fighting an unwinnable battle. By signaling that it cares more about “partnership” with Latin American governments than defending democracy and human rights, it has allowed support for those principles to crumble at the very institution founded to defend them.

Editorial, Washington Post

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Full article: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/30/AR2009053001692.html

GM Is Sunk. Just Ask the Merchant Marine.

Once, the U.S. merchant marine included hundreds of ships that regularly transported a significant portion of U.S. imports and exports and employed tens of thousands of Americans at sea and on land. Today, only a handful of such liner vessels plying regularly scheduled routes still fly the Stars and Stripes and employ crews of U.S. citizens. But these ships (including the recently pirated Maersk Alabama), though subsidized by the U.S. government, are actually owned by Danish or Singaporean interests, and U.S. taxpayers enjoy little or no benefit from them. Essentially, the U.S.-owned and -operated merchant marine liner fleet no longer exists. And in its demise lies a lesson for the U.S. auto industry.

Despite the car manufacturers’ critical state, the United Auto Workers are resisting concrete steps to help the industry that has provided their livelihood for 70 years. Instead, they look to the government for subsidies to help their employers survive, at least for the near term. Reports from the annual AFL-CIO conference earlier this year detailed the UAW’s search for support from other unions — primarily the teachers unions — in lobbying Washington for more funds to stave off bankruptcies in Detroit.

Shades of the U.S. maritime industry, which began its death spiral in the 1970s, a time when it was massively subsidized by the federal government and when laws guaranteed that U.S.-flag vessels would carry all government-related cargo. Yet even with these subsidies and guarantees, the dozen or more U.S. companies — including such once well-known names as American Export Lines, Grace Lines and Pacific Far East Lines — failed, one after another, in the face of competition from more efficient carriers as more and more countries entered the international shipping market.

Initially, the unions and their congressional supporters pointed to “cheap foreign competition” as the source of their troubles. But those cries persisted even into the late ’70s and ’80s, when European and Japanese carriers were paying higher total wages per seafarer than U.S. flag vessels. It’s widely believed that along with less-than-stellar management, union demands for ever-higher wages and excess manning levels — such as insisting on crews of 35 or 40 when crews of 18 are sufficient to operate safely — doomed the U.S. flag industry. Even with all the subsidies, even with technical innovations, containerization and other pioneering cargo advances, U.S. companies couldn’t survive the financial burdens of the union demands.

I was frustrated watching all this unfold when I served in the State Department’s Office of Maritime Affairs. Instead of fixing the problem and meeting the competition, industry officials offered excuse after excuse and repeatedly trekked to Capitol Hill in search of more money. They sought protectionism as a remedy. That might have helped the industry, but only at the expense of American consumers and exporters, as it would have resulted in higher, less competitive prices for U.S. exports.

Ironically, all this happened not in a time of economic downturn like today, but over a two-decade period when international trade and shipping were experiencing their greatest growth. The only U.S.-owned liner shipping company that did well during those times, SeaLand, was the one carrier that held out longest without taking subsidies and sought out profitable trade lanes.

The lesson this experience teaches is simple: In an open economy, the most efficient providers of goods or services that are similar in price or quality will succeed, and those with costs that outpace their earnings will fail. The parallels between the auto industry and our departed maritime industry are bright beacons.

Foreign carmakers with plants in the United States, such as Honda, Toyota and Hyundai, have a total average hourly cost of $55 an hour per worker, whereas GM, Chrysler and Ford spend close to double that figure. GM loses money on every car it sells. Sadly, the UAW leadership, now buoyed by the prospect of Washington ownership and control of Chrysler and GM, has appeared reluctant to negotiate in a meaningful way to reduce the companies’ costs.

Although executives who fly private jets in troubled times are not blameless, the UAW, instead of looking for help in its lobbying efforts, should unilaterally announce its willingness to accept the same employment terms as those offered by foreign auto manufacturers operating in the United States. Such an announcement would remove one of the most difficult barriers to restructuring the industry. It could also open a whole new era of U.S. automaking. A positive effect on the stock market and on overall consumer confidence would follow.

The maritime example has shown that trying to keep a whole loaf instead of settling for half a loaf will result in no loaf at all. UAW-management labor negotiations over the past 30 years have (after difficult and strike-threatened periods) ballyhooed the ultimate “partnership” between management and labor. We now see that those pronouncements were window dressing even more illusory than announcements of bipartisan achievements in Washington. As unemployment figures continue to climb, it’s time for the UAW to protect its members, provide a true service to all its workers and become a real partner with Washington in the recovery the entire nation is waiting for.

Or else be prepared to go down with the ship.

Richard K. Bank, president of Millennium International Consultants, LLC, and a longtime international transportation and trade lawyer, was director of the State Department’s Office of Maritime Affairs from 1972-79.

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Full article: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/29/AR2009052901551.html