December 9, 2008

Mr. Jesse Cain

Dear Mr. Cain,

Thank you for your email regarding potential legislation to bail out the auto industry. It is good to hear from you.

As you know, Congress is considering a bailout of the U.S. auto industry that would cost $25 billion. I understand the frustration that you and many Oklahomans have over government money being spent on private companies. I adamantly oppose all current legislative proposals for bailing out U.S. automakers and charging it to American taxpayers.

In recent years, General Motors Corporation, Chrysler LLC and Ford Motor Company lost their competitive edge among other automakers (foreign and domestic) and are now on the brink of failure. Rather than lobby Congress for a short-term fix, U.S. automakers must instead target the underlying factor overwhelming their balance sheets. These companies jeopardized their futures by allowing employee costs to cripple their competitiveness as salaries for Big Three employees are nearly double that of comparable competitors. Total hourly compensation packages for employees of the Big Three average $73.21. The same figure for American Honda, Toyota and Nissan plants is $44.20. The average hourly cost for goods-production jobs in the United States is $31.59. Labor wages, combined with an excessive corporate tax rate that has continued to grow in the U.S. and diminish abroad, will undermine any bailout plan from Congress. Additional federal funds would only prolong the need to reorganize and reduce company costs.

Additionally, I am opposed to industry-specific bailouts in the first place. It is unfair to make American taxpayers subsidize poor management decisions or to have their own businesses fail but not be chosen to receive federal support. I believe it is important to remember that a fundamental characteristic of free markets is the ability of private companies to succeed as well as to fail. In the case of U.S. auto industry, Detroit's Big Three failed to adapt to changing trends despite clear economic warning signs. Just as it is beyond the scope of the government to mandate company product mixes, it is also outside the realm of government to save failing enterprises. Congress must make certain it does not interfere with what consumers dictate in the free market. Bailing out the auto industry would set a dangerous precedent of unconditional government assistance and encourage private enterprises to make decisions without considering true risk, all of this to the detriment of taxpayers. As a result, more billion dollar tax-funded bailout decisions would be left to the discretion of politicians in Washington, a profession not known for its wisdom and foresight.

Over 300,000 Americans are employed by these manufacturers directly and millions indirectly. I certainly do not want to see U.S. automakers fail or their workers displaced; however, we must allow the free market to work. If Congress legislates to save this industry, it must do so with the long-term in mind rather than simply handing over taxpayer dollars. Such a short-term boost would only treat the symptoms of a deeper problem. In contrast, fair bankruptcy proceedings would present an opportunity to re-negotiate unsustainable labor contracts and restructure failed business models. Specifically, Congress could protect these companies as well as taxpayers by guaranteeing loans and providing oversight over all bankruptcy proceedings.

The last thing the American people want is a government-managed auto industry. The federal government cannot even manage itself and has no businesses extending its reach into America's auto industry.

Again, thank you for contacting me on this topic. I look forward to hearing from you in the future.

Sincerely, A

Tom A. Coburn, M.D.

United States Senator

TC: CTL