E-mail a friendDan Neil
airdate December 8, 2008
Dan Neil is the first and only automobile columnist ever to win the Pulitzer Prize. Described as having a "wicked way with words," he also has a passion for cars. Neil is a native of North Carolina, where he began his professional writing career as a copy editor. His weekly column in the Los Angeles Times, "Rumble Seat," won the Pulitzer for Criticism in '04. He's written for numerous newspapers and magazines, including AutoWeek magazine and The New York Times, and was a contributing editor for Car and Driver.
Automotive critic explains why he believes the U.S. government should nationalize General Motors. (2:55)
Full interview. (11:40)
Dan Neil
Tavis: Dan Neil is a Pulitzer Prize-winning columnist for "The Los Angeles Times" who in 2004 became the first-ever automotive columnist to receive journalism's highest award. His weekly column for the "Times" is called "Rumble Seat." Dan Neil, nice to have you back.
Dan Neil: Thank you, Tavis, nice -
Tavis: You been okay, man?
Neil: I'm doing fine, thank you.
Tavis: Good. What do you think? (Laughs)
Neil: Well, I think right now I'm hoping that they can stretch $15b billion. The auto industry has a long way to go, and not a lot of money to get there.
Tavis: I jumped right in, of course, because Dan knows his stuff, but the truth - the story is, as you know, that Congress today sent to the president a $15 billion loan package, and I stress the word loan because Pelosi and Barney Frank - the Speaker, Mr. Frank, both said this money must be paid back. So a $15 billion loan package. The money would arrive in Detroit about a week from now. Chrysler and GM are going to take it right away; Ford says we may need to draw down on it later, we will see.
It comes with a car czar - somebody who's going to kind of oversee this. All that said, so they are going to finally get some money. Too little, too late?
Neil: I frankly don't see how it's going to make a fundamental difference in changing the competitive dynamic of the Big Three. They needed a lot more money and they needed a lot more time, and the idea of having a car czar - I like that car czar rhymes with "commissar."
Tavis: Yeah. (Laughs)
Neil: That this person is going to be able to adjudicate the financial viability of these plans, these reorganizing plans going forward, I think that's something that's going to have to be really tested. Who knows? Doesn't seem feasible on the outside.
Tavis: So you are a Pulitzer Prize-winning journalist who covers this industry every day, who's telling me that you just don't see it. So for the persons watching right now, why then are we giving them, even as a loan, $15 billion of our money?
Neil: Well, this is pure temporizing, right? This is complete political expedience. You can't do what needs to be done in the time they want to do it. I also think this happens at the worst possible time, between the administrations.
If the Obama administration was in charge, then I think they would have broad authority to move forward with a more aggressive plan. This is the least best scenario for the carmakers, leaving Ford aside, which as you say is probably going to be okay. It certainly has said - Mulally has said that Ford will return to profitability in the next year or so.
For GM and Chrysler, this isn't going to help much. And they'll be back, and again they'll be too big to fail. This is the thing I don't understand. When do they become small enough to be allowed to fail? The answer is never, because the Democratic Party cannot let Michigan and Ohio go down the drain - it just can't be done.
Tavis: So they're going to come back and ask for more money later on?
Neil: I think that's likely, and that is why I wrote a story last week calling for the nationalization of General Motors.
Tavis: So by nationalization you mean basically that the government should buy GM.
Neil: I think the government should buy GM, because GM - first of all, I don't use the nationalization word lightly, but this is a national emergency and we typically nationalize vital industrial interests in times of crisis.
Tavis: Of course, just to jump in, we criticize others like Chavez in Venezuela for doing the same thing.
Neil: Well, the idea - I think the main thing is we criticize expropriation - that is, nationalizing something without compensation. In fairness to Chavez, he did pay the market rate to make the oil companies national. We're not talking about Mexico in 1938. And GM - we're at a critical point in a national emergency, not just economically, but we have to have a totally different kind of automobile in the next 10 years.
What we are looking at now is just continuing the same plan of building, okay, fewer cars or maybe slightly smaller cars, but it really doesn't change the fundamental oil security dynamic.
Tavis: Hey, but I saw those three CEOs get off those jets and drive in hybrids to Washington.
Neil: Yeah, well. (Laughs)
Tavis: I saw that.
Neil: Yeah, that was pretty cool. The whole jet thing - I mean, I know Americans need symbolism to wrap their heads around corporate excess, but this is a rounding error for these people. You could pay these guys 10 times what they're making and it still wouldn't make any real significant difference to the bottom line.
It's not that they're broke from paying their executives too much or that they have corporate jets, it's that the fundamental dynamic of the American nameplate industry is unsustainable.
Tavis: So what do you make of the fact, then, that Dodd yesterday on "Face the Nation," I believe it was - Obama's on "Meet the Press," Dodd, head of the banking committee in the Senate on "Face the Nation. Obama says on "Meet the Press," paraphrasing here, that the three CEOs had their heads in the sand and that there ought to be some changes at the top of the companies.
Dodd goes a step further on "Face the Nation" and says that Wagoner - Rick Wagoner, CEO of GM - ought to be gone.
Neil: Yeah, well, somebody's head should arrive on a platter. Maybe it's Rick Wagoner's. Unfortunately, Mr. Wagoner actually knows what he's talking about, and it'd be a shame to lose him at this critical juncture. But if human sacrifice is what is required, Wagoner certainly has made enough mistakes.
He had a bungled deal with Fiat that cost GM billions, and he certainly presided over a strategic decision not to invest in hybrids and advanced technology. He presided over the EV1 debacle. He's certainly done enough to warrant being fired, but I really don't think that makes the difference.
So as I was saying, the reason I would argue for nationalization is we have to make a car that will get us off imported oil. And in the short term, that car and that technology is not profit-making, and until it is, the market forces just don't align to make that car available to the public. So I believe that the carmakers, especially GM, is going to need much deeper pockets to provide that technology.
Tavis: Let's take your column, then, the idea you're expressing now that was written about in your column last week, to its logical end. So we nationalize - in the Neil formulation we nationalize GM -
Neil: Oh, by the way, I love the "Neil formulation." Can I have that?
Tavis: You can have that, you can have that.
Neil: That's beautiful.
Tavis: So we take your formulation, we nationalize GM. That process works how, and goes for how long before we get our money back?
Neil: Well, I would say that you buy the company outright; you make the board an offer. General Motors is an extremely rich, diverse, talented company - make them an offer. Buy it outright.
Then, using the power of the legislative pen to write the GM law - one problem that these reorganization and bankruptcy and all these scenarios, they involve downsizing the company through bankruptcy-like proceedings. None of that happens quickly.
You couldn't begin to downsize or renegotiate the deals with unions, suppliers, and the dealer bodies in anything like a short-term arrangement. GM would be dead and gone before you make those deals. So you need the federal power to abrogate those contracts and work out something quickly.
And then you encourage the industrialization of this plug-in hybrid and pure electric vehicle technology. Right now, General Motors has a car in the planning stages called the Volt. The battery is about $15,000. Very hard to tell somebody that they need to buy a car that looks like a $30,000 car, except it costs $50,000. And GM can't build it profitably. I think that they've admitted that they'd lose money on every one.
So you pursue that technology, you build it in vast numbers. You get those cars out into the marketplace with sufficient sales incentives so that they eventually make a difference in the amount of oil this country consumes (unintelligible).
Tavis: I don't know the numbers, I'm just - that's a lot of cars.
Neil: It's millions of cars.
Tavis: That's a whole lot of cars.
Neil: It's millions of cars, but we're in a serious situation. Year after year after year people say, "Well, we need to do something about our consumption of foreign oil." By the way, nuclear power plants have nothing to do with foreign oil, right? We run cars on foreign oil. That is the problem, that is the point of inflection, and we have to deal with that.
After this technology becomes commercially viable, we can sell the company back. The federal government did an IPO, an initial purchase offering, with Amtrak, sold it back, and make $2 billion - returned $2 billion to the public coffers.
Tavis: Talk to me about the role, since you referenced them earlier, the role that the unions have to play in this process. I don't mean the nationalization idea, the Neil formulation, but just in terms of turning this industry around, unions have to do what?
Neil: Well, I'm a union guy, and I think the union has made a lot of concessions, but the big enemy is the bureaucracy and the fact that the union has been around so long, the UAW, has feathered its nest so much they're going to have to have further concessions.
The job bank - that is one of the union's apparatuses whereby laid-off workers continue to draw about 90 percent of their salary - that's going away. They've also made concessions in terms of non-core workers and they've reduced those non-core worker salaries.
They still have very, very generous pension and health benefits. I think that there has to be some mechanism by which the union and nonunion autoworkers in this country reach some sort of compensation parity. Otherwise, the domestic carmakers are going to be always at a labor disadvantage.
Tavis: Dan Neil knows these issues better than most people because he covers it every day for "The Los Angeles Times." Pulitzer Prize winner is he on the subject matter, and some of us were a little happy, I guess, for a number of reasons when we heard that they were going to get some support in Detroit, and now Dan tells me it ain't going to work. (Laughter)
Neil: Did I say that? Yeah, I guess I did.
Tavis: Pardon my English. They'll be back for some more money. We will see how right Mr. Neil is in the coming months. For now, though, I thank him for coming on, as always, and thanks for your insight, Dan.
Neil: Thank you, Tavis.
Tavis: Good to see you.
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