If it’s good for Citicorp, why not for GM?

It will be years before we know whether government bailouts of financial and other institutions were a good idea or not. While we’re in the midst of bailing out the planet (or so it seems) one question comes to mind. If Citicorp, why not GM?

Congress will hear from the big three automakers next Tuesday on whether to bail out the auto giants and meanwhile, their executives are devising a business plan to explain to members of the House and Senate how taxpayers’ dollars will keep the companies, including GM, alive. But if the U.S. government is going to bail out Citicorp, the once-largest bank in the country, why not do the same for GM, the once-largest automaker in the world?

Former Labor Secretary Robert Reich has some great thoughts on the topic. In a commentary for Marketplace Radio, he notes Citicorp has lost a huge chunk of market valuation, which hurts the company’s executives, shareholders and creditors. But if it went into Chapter 11, mutual fund shareholders and people holding Citicorp CDs would have their assets protected. If GM tanks, on the other hand:

“... General Motors has a far greater impact on jobs and communities than Citigroup. Add parts suppliers and their employees, and the number of middle-class and blue-collar jobs dependent on GM is many multiples of Citi. And the potential social cost of GM’s demise, or even major shrinkage, is much larger — including entire communities whose infrastructure and housing may become nearly worthless.”

Huge job losses

As we have heard by now, the ramifications through the U.S. economy would be massive if GM were to collapse. Jobs — high-paying factory jobs — would leave our now service-oriented economy never to return to the U.S. Job losses, with parts suppliers and other subcontractors included, would number more than 2 million. Those jobs would be resurrected in developing nations where labor is much cheaper. Why help other countries to feast on the carcass of our once-strong manufacturing sector?

Congress should not go easy on GM if it does approve a bailout, but Congress has shown no sign of going easy on the auto giant. The idea of setting auto executives scurrying to produce a business plan is nothing short of brilliant. I’ve got suggestions for what such a plan should include. But first and foremost it should be focused on one word and one word alone: green.

No more SUVs and gas-guzzlers. Even in the truck division, GM could make its heavy-duty vehicles much more fuel-efficient and price them so that they could only be purchased by commercial ventures. Private citizens who want to drive guzzlers should be priced out of the market and should instead be forced into low-mileage cars. GM created this mess when it chose to cater to America’s sick addiction to gas-guzzlers instead of leading the consumer market in the proper (i.e. green) direction. Now’s the time to lead, not cave in.

Dan Beuke of BusinessWeek writes:

“End of discussion about higher mileage rules. For years, honest efforts to boost fuel efficiency were snuffed out in Washington by Detroit and its fellow travelers in Congress. Enough. I say we build right into bailout legislation a 40-mpg average for cars by 2020. That’s up from 27.5 today, and a big step up from the 35 mpg goal that Detroit is supposed to achieve. I don’t care how they get there: Build cars that burn corn cobs — or For Sale signs, for that matter. Just get there.”

America cannot afford to have GM go under any more than it could afford to lose Citicorp, AIG and all the rest. And the stock market seemed to understand that this week as GM stock was up by 30 percent in midday trading on Wednesday on hints that Congress was closer to acceding to GM’s come hither pleas.

I know there’s no such thing as fairness when it comes to business and money, but what’s sauce for Citicorp ought to be sauce for GM, too.

X Bonnie Erbe is a TV host and writes this column for Scripps Howard News Service.