Networks Back Big Three Bailout

Clarification: This story was changed to make clear that Roben Farzad does not support an auto bailout, although ABC made it appear that way.

     Journalists have yet to see a bailout proposal they don’t like. After supporting the $700 billion financial bailout, the broadcast network news outlets have promoted the proposed $25 to $50 billion bailout of the American automakers.

     Between Nov. 1 and Nov. 18, the three broadcast networks’ – ABC, CBS and NBC – morning and evening shows aired 31 stories with a pro-bailout tone, which was almost three times as many positive stories as balanced stories – only 12. Only one story, on ABC’s “Good Morning America,” presented an overall anti-bailout tone.

     And while ABC was the only network to air a clearly anti-bailout story, it had the worst ratio. The network aired 11 pro-bailout stories and only two balanced reports.

     “GM may not make it without help, and others may have to merge,” NBC “Nightly News” anchor Brian Williams reported Nov. 18. “If just one of the big three were to fail, an estimated two and a half million jobs might be lost.”

     ABC correspondent Chris Bury suggested it was only fair that automakers get a bailout because the financial industry got one. “After riding to Wall Street’s rescue,” Bury said on “Word News” Nov. 11, “can the government just say no to American automakers that are bleeding cash by the billions?”

     The networks’ heavy favoritism of pro-bailout views didn’t reflect Americans’ sentiments. According to a Gallup poll released Nov. 18, 49 percent of Americans oppose a federal bailout of the industry, while 47 percent support it.

     Reports on the bailout were overwhelmingly in favor of a government rescue, featuring twice as many pro-bailout experts (24) as anti-bailout voices (11). The networks cited Democratic politicians – who mostly favored the bailout – 17 times, but only featured Republicans six times – one of whom was pro-bailout California Gov. Arnold Schwarzenegger.

     Coverage also failed to pinpoint a major root cause of the industry’s financial problems: union contracts that put U.S. manufacturers at a distinct disadvantage compared to foreign companies that build their cars in the United States. Only four stories mentioned union causes.

     Most of the pro-bailout stories painted a picture of an auto industry in “dire” need of help – with major consequences for the U.S. economy if help wasn’t offered quickly.

     CNBC’s Melissa Lee characterized the situation as “dire and urgent” for automakers on the Nov. 9 NBC “Nightly News.”

     In an interview with President-elect Barack Obama Nov. 16, CBS “60 Minutes” correspondent Steve Croft declared General Motors was in “dire straights.” Croft may have borrowed the term from CBS colleague Julie Chen, who used the same phrase about the U.S. auto industry on “The Early Show” Nov. 7.

     All three networks reported that 2.5 million or more jobs could be lost if even one of the “Big Three” U.S. manufacturers went under. ABC and NBC each reported the statistic twice, while CBS referred to it seven times.

     But none of the reports explained that the pro-bailout Center for Automotive Research (CAR) provided the estimate. All three American manufacturers are listed as “Affiliates Program” members on the group’s Web site.

‘Experts’ Favor Bailout

     The three networks turned to pro-bailout “experts” by a 2 to 1 margin. One ABC segment Nov. 7 featured three pro-bailout experts against only one opponent.

     Representatives from the CAR joined General Motors CEO Rick Wagoner – who appeared on seven segments across all three networks, calling for a bailout. Other pro-bailout experts included “industry analyst” John Casesa, financial analyst Rebecca Lindland, Cars.com writer Joe Wiesenfelder and Syl Townsend, the vice president of a parts manufacturer.

     ABC quoted BusinessWeek writer Roben Farzad saying, “They need something to tide them over financially,” making it appear that he supported the bailout argument. However, Farzad has elsewhere advocated for “creative destruction” in the auto industry and has said he never advocated for an auto bailout.

     Often, reporters sided with the pro-bailout experts. On the Nov. 17 “Evening News,” CBS correspondent Jim Axelrod presented the pro-bailout argument that “if GM and others go belly up, the cost to the government in terms of lost taxes, covering defunct pension plans, is going to be a lot more than $25 billion.” But he didn’t offer any criticism of the bailout.

     Michele Norris, the host of National Public Radio’s “All Things Considered,” said on the Nov. 16 Chris Matthews Show that Republicans might oppose an auto bailout to hurt President-elect Barack Obama.

     “It’s why they’re passing a baton to him [Obama], hoping that it’s so heavy, that he’s got so much on his plate in that starting gate that he can’t help but stumble,” Norris said, “and they know that that sets the tone for the rest of the administration.”

     A Nov. 11 “World News” report from ABC’s Chris Bury offered experts from both sides of the argument. But Bury suggested a bailout was necessary because the U.S. industry “may be too big and important to fail.”

     Investor Steve Massocca and University of Maryland professor Peter Morici were cited – once each – to point out the negative aspects of a bailout. Cato Institute Center for Trade Policy Studies Associate Director Dan Ikenson was the most visible opponent, appearing on three segments – two on CBS and one on NBC.

     Massocca warned CBS correspondent Anthony Mason on the Nov. 12 “Evening News” that a bailout could look like the one Japan offered its manufacturers in the 1990s. “And what resulted from that was this sort of quote/unquote ‘zombie economy,’” Massocca said. “You had these zombie companies that were kept alive simply by the fact that the government was able to support them.”

Don’t Blame Bad Leaders or Unions

     A major force driving problems for General Motors, Chrysler and Ford is the United Auto Workers (UAW) union, which has contracts with the U.S. companies that put high production costs on the products. But only four network reports explored that cause.

     The UAW claims 640,000 members. Some of the member dues are used to support political candidates. The UAW gave more than $1.3 million to Democrats during the 2008 federal election cycle, compared to just $6,750 to Republicans, according to the Center for Responsive Politics.

     Rather than blaming bad leadership or union contracts, network journalists blamed the overall U.S. economy causing slumping auto sales.

     “With sales plunging 35 percent in October alone, the auto industry is reeling from the nation’s biggest financial crisis since the 1930s,” CNBC’s Trish Regan reported on the Nov. 8 NBC “Nightly News.”

     ABC’s Bianna Golodryga emphasized that Detroit’s problems weren’t just the result of a bad economy, but years of mismanagement. Her Nov. 18 “Good Morning America” report featured two experts opposed to the bailout and none in favor.

     What Golodryga didn’t mention was that union contract obligations put enormous financial pressure on the Big Three.

    Unions were only mentioned in 9 percent of the reports – four stories total.

     On NBC’s “Nightly News” Nov. 18, correspondent Andrea Mitchell offered a report on Obama’s political debts to unions, which have supported him for much of his career. She listed the auto industry bailout as one of the things union bosses expect Obama to deliver, but didn’t explain how union contracts were one of the main problems with the Big Three’s business models.

     NBC “Meet the Press” moderator Tom Brokaw mentioned unions during a Nov. 16 discussion with lawmakers. He referenced a column in The New York Times in which Tom Friedman criticized Michigan politicians for consistently voting with unions.

     But Ikenson pointed out on the Cato Institute’s Web site that unions are probably more responsible for Detroit’s problems than the media’s scapegoat of a generally bad economy. Those foreign nameplate manufacturers that sell in the United States “face the same contracting demand for automobiles as does the Big Three,” Ikenson wrote. “The difference is that these [foreign] companies have a better track record of making products Americans want to consume and are not seeking federal assistance.”

     Ikenson blamed an “inefficient, uncompetitive” business model for Detroit’s problems. “Management and labor consigned the Big Three to a future of troubles when they agreed to preposterous work rules, requiring management to pay workers 90% of their salaries when they were laid off,” he wrote. “Management also gave labor the ‘Cadillac platter’ of health and retirement benefits, all of which substantially increased the cost of producing vehicles at unionized plants in America.”

Bankruptcy over Bailouts

     Few network journalists explained how aside from the layoffs that would ensue, bankruptcy might actually be a better option for U.S. manufacturers than a taxpayer-backed bailout.

     NBC “Today” host Matt Lauer defended free markets in two separate interviews. On Nov. 10, he told liberal Democratic Michigan Gov. Jennifer Granholm that “a lot of people would make the argument … that the auto industry will fail because the auto industry has failed to keep pace with its competition.”

     In an interview with liberal Democratic New Jersey Gov. Jon Corzine, Lauer asked, “Should we bail them out? Or as some people say, is this survival of the fittest? Companies that make the right decisions survive; companies that don’t go away.”

     CBS correspondent Steve Kroft made a similar point in his Nov. 16 “60 Minutes” interview with Obama. “[T]here are a lot of people that think that the country would be better off, and General Motors might be better off, if it was allowed to go into bankruptcy,” he said.

     But aside from Lauer and Kroft, network journalists ignored the argument that bankruptcy, not bailout, might be the best solution.

     “That approach,” Heritage Foundation senior research fellow James Gattuso and research assistant Nicolas Loris wrote about a bailout, “however, is more likely to extend the status quo rather than lead to reform. A far better approach is to restructure the old-fashioned way, through a formal bankruptcy process if necessary.”

     “Bankruptcy – and the prospect of it – would provide both the incentive and means for making the hard and painful choices that Detroit needs to make. Lawmakers should turn down pleas for subsidies that would detour that process,” they wrote.

     Heritage Foundation senior legal policy analyst Andrew Grossman also wrote that the U.S. automakers need bankruptcy.

     “Rather than throw even more money at the problem to little effect, Congress and the Administration should let the automakers take advantage of the same legal process to reorganize that thousands of other businesses use each year,” Grossman said.

     “The bankruptcy process is designed to address exactly the kind of challenge that the automakers now face: realizing the full value of assets and organizations that have been mismanaged and kept from reaching their potential,” he wrote. “Conversely, outside of the bankruptcy process, the automakers will lack the legal ability, as well as the proper incentives, to confront their problems, restructure their operations, and return their assets and employees to productive service.

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