Thursday, December 13,>1979^
Page 2— Vernonia Freedom
Public Forum Page
To Freedom:
The other day a union leader from
Oregon called me to urge my support for
the Chrysler Loan Guarantee Act, a bill to
be voted in the House this week that
would provide government backing for
$1.5 billion in loans to the Chrysler
Corporation.
The caller pleaded for my help and
noted that his organization had always
been supportive of me. He reminded me
that members ot the union local in Oregon
had walked door-to-door on my behalf
during my first campaign for Congress.
One by one, he gave their names. He
urged me not to forget them on the
Chrysler bill.
For him, and for them, there is but one
issue with Chryler: keeping their jobs. It
isn’t hard to understand why in the eyes
of these men and women that’s all there is
to the Chrysler decision.
The problem is that Congress might
see things the same way. The real issue is
what will happen to our economy if the
government steps in and props up a
company whose products have been
rejected in the marketplace.'
As a member of the House Banking
Committee which considered the Chysler
bill, I am convinced that it would be a
mistake for the government to guarantee
$1.5 billion in loans to Chrysler.
A mistake not only because Chrysler is
a bad risk, though the company’s
performance in recent years justifies that
assessment; a mistake because it would
undermine the structure of our economy
and assure that it will never be the same
again. If the government insulates
Chrysler from loss, then any and every
consumer product company that gets in
trouble can make the same claim. How
can Congress say no? How can it
discriminate? .
No one can be indifferent to the
prospect of Chrysler falling into
bankruptcy. particularly the employees
whose jobs are on the line. But what
about the 200,000 workers who lost their
jobs in October because of the slowdown
in our economy? Many of these workers
are the perennial recession victims — the
first to be laid off in a recession and the
last to be hired in a recovery. These people
may well have a higher claim for
assistance than more highly skilled
workers. But who is stepping in today with
a $1.5 billion program to save their jobs?
In Oregon last year, 129 small
businesses went under. The year before
that, 192 failed. Who at any time
suggested that the federal government
should have kept them afloat? Each year
about 25 percent of the commercial
licenses issued to offshore troll fishermen1
in Oregon go unrenewed. No one has
proposed a federal bailout for:
unsuccessful fishermen. Small family
farms in Oregon continue to disappear.
There has been no government safety net
forthem.
Should Chrysler be any diffemt?
There are two principles that have made
our economic system the most dynamic in
history: the opportunity for profit and the
risk of loss. When you take away the risk
of loss, as the Chrysler bill would do, you
take away incentives for business
executives to economize, to innovate and
to increase efficiency and productivity.
A Chrysler bailout will send a signal to
other companies that the federal
government will act as a banker of last
resort if they get in trouble. With the risk
of loss removed, there will be less
incentive for corporate managers to make
the careful, tough decisions needed to
keep a company vigorous.
The Chrysler bailout, and the others
that are sure to follow, would only
perpetuate the problems of lagging
productivity, job layoffs, aging plants
and machinery that exist in other
industries and are dragging our economy
now.
The answer is not to pour money down a
sinkhole, but to encourage investment in
more productive companies that will help
expand their operations, creating new
jobs.
Sometimes loan guarantees are a
necessary tool for accomplishing
important national goals — such as
providing housing for low- and middle
income families. But those loan
guarantees should not be used to aid an
individual company, large or small, whose
troubles result from poor management
and consumer rejection of its products.
At a time when smaller companies —
including many Oregon electronics
companies — are crying for scarce venture
capital, it makes no sense to pass a bill
that could divert investment capital they
need to expand operations, create jobs
and produce new products.
If the logic behind the Chrysler bailout
is allowed to prevail, the result will be
clear: billions of government dollars
propping up inefficient companies that
make products people don't want. Had
this logic prevailed years ago, the
government would now be spending a
fortune to support the makers of buggy
whips and washboards.
The real choice for Congress comes
down to this: A sluggish economy where
government props up inefficient,
mismanaged companies,thereby
perpetuating
inflation
and
low
productivity, or a vigorous economy that
encourages innovation, productivity and
intelligent management.
The
Chrysler
Corporation,
its
employees, its dealers, and its bankers
have been pressing hard for federal help.
While they warn of massive economic
dislocation without quick action, Chrysler
and its friends have failed to make a
convincing, case.
The
prinicpal
arguments:
•“Jobs”: Job-less estimates of 500,000
if Chrysler goes under are based on a
worst-case set of assupmtions. First of all,
Chrysler under bankruptcy proceedings
would still be able to operate at a reduced
level. Chapter XI of the Bankruptcy Act
was written by Congress with precisely
this form of corporate failure in mind. It
provides an orderly way for a company to
operate while undergoing reorganization
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‘ - a way to stand its creditors in line, to
liquidate assests and to begin to show a
profit once more.
Second, demand for cars doesn’t depend
on the financial condition of Chrysler.
Someone will build those cars — most likely
GM and Ford, since their products most
closely resemble Chrysler’s. That means
some people will lose jobs. But others will
change employers.
Moreover, even with a bailout, Chrysler
will have to lay off workers. Under the
plan submitted to the Banking
Committee, some plants — the most
inefficient — will be closed.
•“Close to the federal government”:
One of the arguments put forward by
Treasury Secretary Miller is that without
a federal bailout, the treasury stands to
lose $2.75 billion in taxes and extra
payments
for
unemployment
compensation. That figure is so
exaggerated as to be absurd. First of all.
while Chrysler is losing money, it pays no
federal income tax. Even if Chrysler gets
help, it won’t become a money-making
operation for years. And the job losses, as
we have already see, would be nowhere
near the 500,000 assumed by Mr. Miller.
•“The Lockheed precedent”: Lockheed
Aircraft also received a federal loan
guarantee. But unlike Lockheed, a major
defense contractor which subsequently
paid off government-guaranteed loans,
Chrysler fundamentally is a producer of
consumer products and thus doesn’t even
have the thin veil of “national security”
in its favor.
•“Government regulation is to
blame”: It has been argued by Chrysler
and others that the federal government —
by imposing safety and air pollution
standards — has caused the company’s
financial woes.
There may in fact be a need to re
examine those standards in the light of
Chrysler’s problems. Still, the standards
have been applied uniformly to other car
companies, large and small. While some
are having financial difficulties of their
own, none are in danger of imminent
collapse.
In fact, if we carried this argument one
more step, the federal government would
have to set different standards for
companies, depending on their size.
That’s’like saying that the pollution from
a Chrysler is less harmful than the
pollution from a Chevy.
The preponderance of evidence is that
Chrysler’s problems are of its own
making. Among the factors contributing
to its difficulties were these:
Chrysler tried to match the overseas
business ventures of GM and Ford.
However, the expansion was poorly timed
and-Chrysler wound up acquiring only
failing companies abroad: Simca in
France and Rootes in Great Britain. This
siphoned off capital that should have been
used at home to meet fuel economy and
safety standards and other capital needs.
In 1971, rather than meeting
subcompact market competition by GM
(Vega) and Ford (Pinto), Chrysler opted to
redesign its big cars.
After the Arab oil embargo of 1973,
rather than redesigning cars and
undergoing retooling, Chrysler instead
cut costs by laying off hundreds of
engineers, styling and sales personnel at
the very time they were needed most.
Chrysler has never been able to meet
demand for its smallest car, the
Omni/Horizan, because it contracted with
Volkwagen to build the engines; only
300,000 of them a year.
•“A loan guarantee for Chrylser is a
good risk”: The argument for an
investment in Chrysler runs something
like this: Lee lacacca is a masterful
businessman and administrator who will
be able to turn Chrysler around. And
Chrysler is retooling some of its plants to
produce more small cars. With that kind
of momentum, Chrysler’s sales and
market share are bound in increase.
The Banking Committee heard
testimony that was less optimistic. First,
Chrysler’s bankers said they wouldn’t
give the comapny another dime without a
federal guarantee. If Chrysler is such a
good risk, why do they want taxpayers’
money to prove it?
Second, the Treasury Department
testified that if Chrysler’s market share
does not increase over the next two years,
then the $1.5 billion in loan guarantees
won’t be enough. That means that
Chrysler will be back at the doorstep of
Congress asking for more. And Chrysler
will get it. Like any other investor, the
federal government will want to keep its
investment in sound condition.
Recently, in preparing for the Banking
Committee’s hearings on the Chrysler
bill, I came across an interesting article
from Barron's magazine. The article,
entitiled “The Big Two-and-a-Half,”
talked about prospective gains in market
share for GM (No. 1) and Ford (No. 2) and
a decline in car production for Chrysler
(the half)- In part it said: “The truth
would seem to be that GM and Ford have
styled their cars to catch an increasing
share of any market, whether small or big.
The Chrysler company, on the other hand,
has gone .. . with cars that are generally
spoken of in automobile circles as * out of
fashion’ ... A check of machine tool
companies indicates that Chrysler faces a
tall, order to rectify its styling mistakes in
time to get ahead of GM and Ford .. . ”
The article was published in February
of 1954 — 25 years ago.
Chrysler’s problem now is the same as
it was a quarter of a century ago. The only
difference is the seriousness of the crisis,
and the fact that Chrysler has turned to
the government for help.
If the government bails out Chrysler
now, we would be taking a giant step
backward in what must be a massive
effort to reduce inflation, stimulate
productivity and invigorate our economy.
For then Chrysler will know — as will
other companies — that though it may be
inefficeint, though it may misjudge the
market, and though consumers may
reject its products, there nonetheless
would be a pot of gold at the end of the
rainbow. It is a fairy tale this country
cannot afford.
Les AuCoin
Congressman
To Freedom:
Two weeks ago, I wrote a letter to the
paper in which I made a critical comment
about the academic quality of the schools.
One of the Vernonia teachers has pointed
out to me how discouraging it is for her to
hear so many negative comments about
the school when she herself works so hard
to provide a good program. There are
some things happening in the school that
I really do appriciate, among them, the
films being shown at noon, the small class
sizes, and the dedication of many of the
teachers. I would like to apologize for my
overall negative statement to those
teachers who do really care about what
our children learn.
Susan Miller
Mist
Behindthe Walls
The Only One Left
by David Wright
When I walked through the security
gate, she was sitting on a blue settee
clutching a locker key and occasionally
straightening the change so evenly
arranged on a formica table. It had been
five years since I had seen her, longer yet
since, in a fit of anger, she had told me
where all bad children go. I remembered
the fury in her eyes, the clenched fists,
and the belts, hair brushes, and shoes,
still warm from contacting my bottom
side. The fury is gone now, replaced by a
deep hurt, but the fists are still clenched
sweating, and holding dearly to that key.
I hugged her, called her Mom, and felt
the dampness of a tear on my cheek.
Taking the key from her hand, I noticed
its number, fiftey-four, the year of my
birth, and returned it to her fingers, the
look in her face telling me how much the
irony meant to her, how hurt she was to
be here. I hurt too, but I could not match
the pain in her face.
Didn’t she know of the grandfather
clock, the green plants and colonial
wooden entrance signs that cheered our
movements
from
destination
to
destination? At her first words, solemn
utterances of comtempt, it was obvious
she was not impressed. The back of her
mind contained steel gates, uniforms, nine
hours of freeway, and a question for me —
why? Why had I hurt her so? And I’m
prepared to explain how three hot meals a
day, recreation, and twice a week movies
hurt, but I don’t.
Last time I hurt, lying in a hospital bed
with thirty stitches in my abdomen, a
journey to Reno kept her from my side.
When I needed a friend and sent her plane
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