Big Fat Story
Why pour good money after bad?
The Big Three American auto makers lose $2,000 on every vehicle they sell. Their labor and pension deals are so generous and watertight they pay for workers not to turn up rather than make them redundant. The auto industry has believed for generations that economic reality does not apply to it. It believes it is too important to the American economy to fail. But the day of reckoning may at last have arrived. As Dan Calabrese puts it, “Today, what’s good for General Motors is bad for America. GM’s survival may be the only thing worse than its death.” Many others agree. Professor Edward I. Altman at NYU's Stern School of Business writes, “Both GM and Chrysler should file for protection--yes, protection-- under the U.S. Bankruptcy Code, as soon as feasible.” John Gapper in the Financial Times gives three reasons bankruptcy would be preferable to a bailout. “[A bailout] will reward failure. … It will preserve chronic overcapacity. … [It] will harm the US auto industry as a whole because it will benefit the least efficient companies, while the most efficient ones – Asian companies that build vehicles at non-unionized plants in southern states – will face subsidized competition.” And Paul Ingrassia, in the December issue of Conde Nast Portfolio, argues that bankruptcy might even be just what GM needs to save itself, by allowing it to finally cut its costs and drop loser brands: All it needs is to find a way to guarantee warranty coverage to owners of GM cars in the interim, he says.
Photo: David Zalubowski/AP
He hasn’t even got his knees under the desk in the Oval Office and already Obama is managing his first crisis: the predicted collapse of the American auto industry. Obama is clear: he approves of a rescue, but he wants unspecified strings attached. “For the auto industry to completely collapse would be a disaster in this kind of environment, not just for individual families but the repercussions across the economy would be dire,” he said in his interview on CBS 60 Minutes. “We need to provide assistance to the auto industry. But I think that it can't be a blank check.” He hopes Congress will find a way of “providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all the stakeholders coming together with a plan. What does a sustainable U.S. auto industry look like? So that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere.” What Obama has in mind is the appointment of a government car czar to oversee the auto industry. Asked why the Big Three should not go bankrupt, the president elect said, “In this situation, you could see the spigot completely shut off so that it would not potentially permit GM to get back on its feet.”
Photo: Alex Brandon/AP
Three million jobs lost and a $165 billion welfare bill.
The free market solution is simply to allow General Motors to go to the wall. Over the years its fat cat management and labor have failed to respond to consumer demand, foreign competition, and environmental standards, and have wasted every previous taxpayer funded initiative to straighten out their business. Enough is enough. Let them go bust. But if GM ended up in Chapter 7, which is likely, it would mean total liquidation. The other two American auto giants would likely follow suit, and the knock on effect to the general economy would be devastating. “From Toledo to Tuscaloosa, the nation's assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money. Restaurants, gas stations, hospitals, and then cities, counties, and states--all of them would feel pressure on their bottom lines.” The alternative is not pretty either, with the taxpayer picking up the tab for maintaining unpopular gas guzzling marques and paying the extravagant pensions negotiated by the auto unions. There is a halfway house, with only those plants that can make buses, passenger vans, trucks and pick-ups, smart or mini-cars or working on gas free cars rescued. And the price of taxpayer support could be a revamped labor agreement that achieved greater workplace flexibility and lower labor costs. “Unless Congress insists on such change, Detroit will be back for more help before long,” warns the Washington Post.
Photo: Mark Duncan/AP
Big Three Bosses Come Cap in Hand
Today the bosses of the Big Three automakers stand before Congress with their begging bowls out. General Motors could file for bankruptcy before Christmas unless the taxpayer steps in. But why should such a badly managed industry be saved? Isn’t this what bankruptcy is for?
Nothing more clearly expresses why the Big Three are in trouble than a comparison between GM's hourly compensation—$71 in wage plus fringe benefits—with Toyota's $47. Such profligacy plainly can’t go on. And if to reward the union movement for helping it achieve success in the November 4 election the Democratic Congress goes ahead with a bailout, there will surely soon be a line that will stretch from Capitol Hill to every industry that finds itself in a fix. As Obama and the Democratic congressional leadership seem determined to hurl billions of dollars of taxpayers’ money at Detroit, some, like Robert J. Samuelson in Newsweek, are demanding strict conditions to deter other bad managers and hidebound unions from joining the breadline. “The reason for imposing tough conditions on the auto industry is not only to improve the odds of success, but also—by the sacrifices required—to make the process sufficiently unpleasant so that countless other companies and unions won't demand similar handouts,” he writes. And, argues David Pauly of Bloomberg, even if there is a bailout, the new car czar should treat the Big Three as if they had gone bankrupt: “Public shareholders of General Motors and Ford might be wiped out. That's usually what happens in bankruptcies.”
Photo: M. Spencer Green/AP
In late 2010, GM was scheduled to introduce the Chevrolet Volt, a plug-in hybrid that can go 40 miles without gas, and the Chevrolet Cruze, a gas fuelled compact that gets 45 miles to the gallon. The taxpayer has already loaned the car companies $25 billion to develop the cars of the future – that is a $7,500 public subsidy per car to roll off the assembly line. The Volt and the Cruze may be just what the greens have been waiting for – if GM is still in business to make it -- but they are not quite what they seem. As Holman W. Jenkins Jr. in the Wall Street Journal explains, “This is a car that, by GM's own admission, won't make money. It's a car that can't possibly provide a buyer with value commensurate with the resources and labor needed to build it. It's a car that will be un-salable without multiple handouts from government. … We're talking about a headache of a car that will have to be recharged for six hours to give 40 miles of gasoline-free driving. What if you park on the street or in a public garage? Tough luck.”
Photo: Carlos Osorio/AP
As usual the National Review blubbers on without knowing what it's talking about. The major cost to building cars is commodities, not labor. Commodities (steel, rubber etc) account for 70% of the cost, 30% for all other factors, including labor, pensions, health care etc. Commodity prices have been rising astronomically for the past five years. If labor were the big factor, then cars made in Mexico and sold here would be dirt cheap (which they are not) since Mexican labor rates are around what US labor rates were in 1965. In fact, US car companies are in the current bad spot chiefly because of bad purchases they've made over the past decade (Ford buying Jaguar/Land Rover etc) and the amount they've dumped into European and Asian markets which, combined with commodities, have led to tight money. Current labor contracts in fact call for all sorts of concessions, with starting wages retrogressing to 1980s levels; retirement benefits have been slashed for current retirees. Non-union workers currently lose nearly all health benefits at age 65.
Greedy Unions are the reason our jobs are gone! Lets face it,we can't afford there high priced products anymore! As long as we can buy better cheaper stuff from foreign countries Why should we buy there crap! Unions and Communism both sound pretty good in principal but in reality the can both really screw a country! I once seen a cartoon and in it was a WW2 home less American veteran pan handling with his cup in the street, and it showed Japanese and German business men walking and pointing at the vet laughing there ass's off! Well now China and India have joined in and that vet is the US and its high priced unions!!!
Why is no one dicussing the big three auto industry's Job Banking? Where auto industry union employees are paid 95% of their wages plus benefits NOT to work for months on end!?!?
If we are going to bail someone out, it is my beleif that they should at least be working for their pay. Something needs to change before we start throwing working taxpayer's money at this problem.
it is overall bad management, wrong decisions, arrogance, shortsightedness, bad labor relations, bad bets, lack of vision, and throw in unpatriotic for contravesy, total disregard of national interests. Since 1970-s we know better but all that knowledge was thrown out the window for short sited profiteering. the unions, yeah they are the same boneheaded characters like the management, they just declared that they rather die than cooperate, except that the management suppose to be the wise ones after all they cannot build cars without workers. i am a liberal but i say let it go bankrupt, so everybody wakes up, carries some of the burden for the failure, throw out the management with nothing and reorganize if there is any hope for the whole enterprise. i am sure there is.
To Grizzom:
Great idea! Lets reduce all labor costs to Chinese levels and everything will be fixed! We'll just have to learn to live off of about $200 a month for intense factory work and we'll all be happy right?
Look, I'm not saying labor is not part of the problem, and certainly unions have gotten greedy and need some restructuring, but unions are not inherently a problem if they are regulated properly. And if it were as simple as finding cheep labor don't you think all the car companies would have moved their factories to Mexico? This is a far more complex problem than just simply over paying workers. Unions can certainly get out of control in this country, but the fall back of, "Damn unions ruining our country!" is just a crutch often wielded by those who don't understand the important role unions play in the power of labor to negotiate.
Again, I'm not saying that the unions don't sometimes step out of bounds, but I think reducing this situation to, get rid of unions so we can live like those prosperous Chinese and Indians (who are not nearly as prosperous as you would think; I'd recommend reading the fascinating book, "The Elephant and The Dragon" by Meredith for more info) is a patently ridiculous proposition.
I would rather give high-end electric sports car maker,Tesla Motors, $25 billion and let them make a million electric cars that will sell at $25,000 apiece. GM, Ford, and Chrysler screwed themselves by siding with the oil companies and not innovating! The company executives paid off politicians to allow their cars & trucks to remain the same and now they have to lie in the bed they made. The sad thing is the blue collar workers will suffer for the selfish, greedy, idiotic auto executives!
11.14.2008
Main Street's engine
by Ron Gettelfinger
It's time to stand up for the Main Street economy.
In the face of a global credit crisis and a worldwide economic downturn, U.S. auto sales have slowed to a crawl. As insecurity spreads throughout the economy, consumers are delaying major purchases -- and those who do visit auto showrooms are not finding credit available on reasonable terms.
The domestic auto industry simply cannot succeed in today's unstable economic environment without immediate help from the federal government. And the costs of failure are unacceptable.
This isn't just about three large Michigan-based companies and the 240,000 people who work for them, including 150,000 of our members. It's also about thousands of car dealerships that are anchor businesses in cities and towns across America. It's about thousands of small and medium-size businesses -- employing millions of workers -- that provide parts, logistics, research, engineering and other goods and services to Chrysler, Ford and General Motors. If a major domestic auto company were to fail, a significant number of supplier companies would also be in jeopardy. This would quickly affect all the companies that produce autos in the United States -- including Toyota, Honda and Nissan -- because many of them buy parts and services from the same group of suppliers.
A major disruption in the auto supply chain would quickly curtail production at auto plants, whether domestic or foreign-owned, throughout the United States. The cost of failure at even a single U.S. automaker would be millions of lost jobs and hundreds of billions of dollars' worth of lost sales and revenue spread across all 50 states.
In addition, more than a million retirees and dependents receive pension and health-care benefits from Chrysler, Ford and GM. If these companies are unable to meet their obligations, the human toll on retirees and their families will be devastating. It's also possible that the failure of these companies could impose severe costs on the federal pension guaranty program and public health-care programs.
In the face of a looming economic catastrophe, it's disappointing to see The Post and some of its opinion writers indulge in old-fashioned Detroit-bashing -- especially since these observers seem to be writing about the domestic auto industry of the 1970s.
It is not the actions of our members that have caused the crisis in today's auto industry; the crisis is being driven by economic factors that have nothing to do with labor costs or factory performance. To the contrary, our contracts have put our employers in a position to compete.
The reality of today's auto industry is that union-made vehicles are winning quality awards and that union-represented factory workers are winning productivity awards. A Nov. 8 Post editorial claimed that unionized auto manufacturers pay "wages and benefits that far exceed those of non-union competitors," but recent labor negotiations with Chrysler, Ford and GM addressed this alleged wage and benefit gap.
Our 2007 labor negotiations with the companies transformed the domestic auto industry; when the agreements we reached have been fully implemented, they will largely or even completely eliminate the labor-cost gap between unionized auto plants and our nonunion competitors. One analyst has estimated that as a result of our contracts, GM will soon enjoy a labor-cost advantage over Toyota.
The various demands for cuts in the wages and benefits of active and retired autoworkers as a condition of federal assistance are curious -- and extremely unbalanced. To my knowledge, no one has proposed cutting the compensation of everyday active or retired bankers, bond traders, and office or building personnel who work at AIG, Bear Stearns or the numerous banks that have received billions in federal aid. Why is it only autoworkers who are singled out for this dubious honor?
Besides being unfair, government-mandated wage and benefit cuts make no economic sense. In the midst of the most severe recession in decades, the last thing we should do is take money out of the pockets of working families, since it is consumer spending that drives two-thirds of all U.S. economic activity.
President-elect Barack Obama has described auto manufacturing as "the backbone of the American economy," and bipartisan efforts are underway in Congress to provide strategic assistance for this critical U.S. industry. It's a good deal for U.S. taxpayers -- because the alternative is lost jobs, closed businesses and shattered communities, which would impose severe human and economic costs on all of us for many years to come.
Ron Gettelfinger is president of the UAW. This article originally appeared in the Nov. 14, 2008 edition of the Washington Post.
11.13.2008
GM: Tick, tick, tick ...
by Peter M. De Lorenzo
DETROIT -- So it has come down to this for General Motors: 100 years of living, breathing American industrial and social history is on the precipice of total disaster, with the once-glittering corporate icon facing certain collapse if some sort of government financial aid package is not put together in the next 60 days.
Think about that for a moment.
The company that basically powered this nation through a century of progress and helped this country muster the strength to fight world wars -- while contributing immeasurably to the fabric of America and the development of our vast middle class - is on the verge of filing bankruptcy.
Unbeknownst to the legions of people out there in "fractured" America, the ones who fill the Internet with bile and who project such a level of viciousness and unbridled glee at the thought of the collapse of our domestic automobile industry as if it were -- amazingly enough -- some warped opportunity for celebration, there are countless towns, big and small, scattered all across this nation that have grown up with GM as their main employer and the main source of income for thousands of American families.
I am absolutely convinced that the people who hate "Detroit" and want it to implode have not even the faintest of clues as to what it really means if it were allowed to happen. To those instant experts out there who are reveling at the thought of a major part of our country's industrial fabric collapsing, I say be careful what you wish for -- because if GM is allowed to fail, it will take the entire domestic auto industry down with it -- meaning thousands of suppliers and dealers in towns making up a cross-section of America will go under, too.
For the record, there are around14,000 domestic-oriented dealers in the U.S. employing approximately 740,000 people with a payroll of around $35 billion -- that's billion with a "B." But that's just the dealer side of the equation. When you add in the suppliers and all of the associated businesses that either directly or indirectly depend on Detroit for their livelihoods, we're talking almost three million people who would be out of work in a matter of just a few months, adding up to a $150 billion loss in personal income.
Let's take California, for instance. Judging by our reader mail, there seems to be a large contingent of people out there who adamantly believe that "Detroit deserves to die" etc., etc., and that whatever happens "won't affect me." But GM and the domestic auto industry's collapse will most definitely affect Californians as well. NUMMI, a joint operation between GM and Toyota (the Toyota Corolla, Toyota Tacoma and Pontiac Vibe are built there) and the only San Francisco Bay Area car factory, is already reducing shifts and may even shut down its Tacoma pickup truck line due to the burgeoning economic slowdown. One of our readers who understands the ramifications of a domestic industry collapse passed this interesting local news report along about NUMMI, which said, "There are tens of thousands of additional jobs on the line besides the 5,000 at NUMMI. There are over 1,000 suppliers in California that provide parts. They in turn employ 50,000 people."
That's just one factory. Now multiply that by the staggering totals involved if GM -- which has 22 stamping plants and 26 powertrain plants in North America on top of its assembly facilities -- and the rest of the domestic automobile industry is allowed to fail. The tentacles of this kind of cataclysmic disaster would spread throughout the nation like a virus that could not be contained.
I really don't know why it's so easy for people out there to dismiss the collapse of the domestic automobile industry as being some minor event that won't affect them in the least, because each person who is part of that figure of three million represents a real family and real human story, all across this nation. It's the mom and pop diners, stores and peripheral neighborhood businesses that depend on the workers who toil at these factories and plants for their livelihoods too. There are towns all across America that would simply dry up and blow away if the local GM or supplier plant shut down. That's not an exaggeration, that's a simple fact.
I have been vilified of late by numerous critics for shifting my commentary to a more political tone over this election year, but I don't offer any apologies. This country is not only in the throes of a financial crisis, it's in the throes of a fundamental identity crisis as well. We as a nation have been lulled into thinking that things will work out and that any unpleasantness headed our way will be mere speed bumps on our journey to becoming a state of perpetual consumer bliss.
Well, it just doesn't work that way, folks.
We live in a global economy that isn't big on history or what we as a nation once did or stood for. We have to compete, or else we will arrive at a point when our national future will transition from being one of destiny to one being dictated to us by a unsavory set of circumstances and interests not in line in the least with our hopes, our dreams or our thinking.
In order to compete in this global economy we have to get smarter in our schools and with our educational policies. A high school graduation rate of 50-60 percent should be anathema in our inner cities instead of too often the rule. Remedial classes for kids entering college (who are not able to handle freshman classes) should become a thing of the past. And our teachers need to be compensated realistically and properly so more of our brightest people can sign up to help shape our kids' futures.
Even though we as a nation don't seem to have the stomach for hard work and sacrifice any longer -- hell, I'm not sure those words and their meanings are even in the lexicon of vast swaths of our population -- we must get tougher in the midst of this global economy, and we have to steel ourselves for the kind of battles we'll face. And that means shoring up our manufacturing and supporting our homegrown industries that are so intertwined with communities all across this still great nation. It also means that President elect Obama will not only be President of the United States, he will have to be CEO of America, Inc. too.
And America Inc. not only needs to be rebuilt, it needs to be fortified with new determination because there are far too many talented and creative people in this nation who can do extraordinary things and we need to make the idea -- the idea that we can innovate, create, build and manufacture things that are the envy of the world -- cool again, and take pride in doing so as well.
In short, this nation needs a wake-up call.
Anyone who thinks this country will not be thrown into a full-blown depression if the domestic automobile industry is allowed to fail is simply kidding themselves. We are facing a perfect storm of events that could spell disaster if we as a nation don't act and act fast. And it would take years for this country to recover, too.
As I've said repeatedly the time for all of the idyllic, "let the free market run its course" hand-wringing is over. It's far too late for that. This country's leadership needs to get these loans to GM and the rest of the domestic automobile industry in the next 60 days, or life as we've come to know it in this country -- and I mean every part of this country -- not just here in the Motor City, will be severely and unequivocally altered.
That tick, tick, tick you hear?
It's the time running out on the future of America.
Let's hope that what needs to get done will in fact get done, before it's too late.
Thanks for listening.
After a 22-year career in automotive advertising and marketing, Peter M. De Lorenzo founded Autoextremist, an Internet magazine devoted to news, commentary and analysis of the auto industry. This article first appeared there on Nov. 12, 2008 and is copyrighted material used with the author's permission.
at www.worldreports.org/news the story of leo wanta and trillions owed American citizens shows how the Bush, Paulson and Greenspan are trying to swindle the USA with this financial crisis they created. A fascinating read.
Its easy for people to blame the big three and the unions. union wages only make up 8-10% of the cost to make a vehicle. When the 2007 UAW contract is fully realized with the big three the wages plus compensation paid to a union worker will be the same if not less than a worker at toyota. The UAW agread to a two tier wage system and major concessions in the last contract. It's too easy to blame the UAW when YOU DON'T HAVE THE FACTS STRAIGHT; but i have one question for those people: who's been buying those big suv's and gas gusslers? The market changed in a hurry and before the big three could complete the turnaround the credit crisis hit. The big three were on the way to making more economical vehicles because that is what the market demanded. GM has the most fuel saving line up in america. They have more models than toyota or honda that get over 30mpg and plan on producing the volt by 2009-2010. Chrysler recently revealed the range extended vehicle that will get over 40mpg and travel over 400miles on 8gallons of gas. The range extended vehicle is slated for production in 2009-2010(next year) watch the video at the following link: http://www.youtube.com/watch?v=gIaQIPBd5rs. The big three companies will produce these types of vehicles if they survive this financial crisis and prolonged recession. Get the facts straight before you start detroit bashing; its not the 1970's anymore!!! The companies are changing they just need a bridge past this tough economic time that was caused by the financial sector. I'll end with what Ron Gettelfinger wrote in "Main Streets Engine"; "To my knowledge, no one has proposed cutting the compensation of everyday active or retired bankers, bond traders, and office or building personnel who work at AIG, Bear Stearns or the numerous banks that have received billions in federal aid. Why is it only autoworkers who are singled out for this dubious honor?"
Maybe the Big Three should've spent a little more time investing in fuel efficient motors instead of lobbying to have SUVs classified as small trucks, thereby circumventing MPG fuel efficiency. I don't pity them in their greed, only the thousands of families their poor decisions will undoubtedly affect.
Labor costs matter. US manufacturers pay more for labor than their competitors. It's the differences that count, not the percentages. Toyota, Honda, VW, and the like keep building plants in the U.S., but not next door to the Big Three in Detroit. That has little to do with supplies and much to do with labor.
Management deserves the bulk of the blame as the U.S.-based version of this industry begs for a bailout, no question. But labor will end up taking--and deserving--its lumps as well. Workers build the cars that management designs, so workers cannot be blamed for that.
But this is 2008, not 1958. In 1958, the rest of the world's manufacturing had not yet rebuilt after WWII. When unions demanded higher wages and more benefits, management simply passed them on to consumers. That won't work now.
GM et al. need to make better cars, but labor also needs to recognize that its value is determined by how it compares to delivered costs from around the world, not from just across the street or next door.
Bail these guys out? Yes, but just one company. Make them merge, then learn to compete in the global market.
I've emailed this question to all my congressional representatives and I post it here with hope that it will find a larger public than this website. HAS ANYBODY CONDUCTED DUE DILIGENCE ON THE "BIG THREE" AUTOMOBILE MANUFACTURERS TO FIND OUT IF THEY WILL ACTUALLY RUN OUT OF CASH BY THE END OF THE YEAR?
My reason for this question should be self-evident but if it is not, perhaps they're lying so they can use they money to increase shareholders value, buy another company or what ever else they deem.
I think the taxpayers should save the taxpayers and let the American people bail out the entire economy. Seriously. $700 billion for banks? Ridiculous. $25 billion for automakers? I don't get it. Divide the money evenly among all taxpayers. We could payoff student loans and past due credit cards and car loans and all get a fresh start. If my debts were clear, I know I'd start spending again. I'd even buy another American car if my debt was clear.
For years the Detroit automakers have been in bed with the Oil Industry
in the 50's and beyond they were producing" rust buckets" that had life expectancy's of less than 5 years and "planned obsolesence"
Then came the Japanese cars that were quiet , had high gas mileage and Quality as a result of Dr Edwards Demming adopted phylosophy of hoe to "build in" Quality
They still would not adapt!!!!! and kept building gas clunkers and bowed to the excessive union demands for years and years
the leadership of these companies and polititians should have a place in history with Harvard Business School "case studies " naming nmes
What we don't hear is that all Ford Fiesta's for world wide consumption are being built in Mexico
Let the gas guzzelers be produced in Mexico and let mexico absorb the legacy cost of the unions in the US and the high mileage cars be produced in the US for under $10,000 so that families can have a second car that goes on trips of less than 20 miles per day and doesn't need to travel on the US interstate highway system or buy back the gas guzzelers over 7 years of age and give a tax credit so all citizens can buy a car that can acheive 40 miles /gal thus giving volume to Detroit to acheive the low material costs.
In addition give them "new management"!!!!
If they still cannot "make it" --let one or all---- fail
Amazing how more and more BIG business is not humilated at all about extending their palms for a hand out. Yet previoulsy, they're the first to scream when government attempted to step in. All proponets of "deregulation". Now look where we're at....The blame has to be at the TOP. The TOP makes the decisions. If we're lucky, Mexico will annex the US and we can all work for $2 an hour and live happily ever after. Great Powers DO NOT continue their 'imperialist stretch' with deficit spending, yet the US continues. Comparitively speaking, I make peanuts. Yet I'm asked to bail MORE BIG Business out....funny my finances are in check.
GM really is running out of money. It's probably to late for them to reorganize without a cash infusion. They will have to liquidate. They've got about $15 billion left and are bleeding cash at about $9 billion a month. At the current rate, they'll be done by Christmas--no money to pay the light bill kind of done.
That doesn't necessarily mean we should bail them out, but that's the situation.
As long as folks are ready for the everyday life described by David Brooks in today's NYT, I guess we're ready to let GM go down the toilet. I'm not advocating we throw money at them; I'm merely pointing out the more than likely effect.
Everyone is blaming the Unions and the legacy costs the companies have for health care. They try to make the comparison that Japanese companies have lower employee costs because they do not have to pay these legacy health costs. They neglect the fact that the reason that Japanese as well as European auto makers do not have these costs is because they have national health care systems. If we had a working health care system the car manufacturers would not have this problem.
I'm against a bail out as well, but with reservations. For years, the Big Three convinced Congress that producing the type of vehicles that Asian companies now produce is not what the public wanted; they were wrong. In fact, their mantra was "big cars are safer" and that is how they managed to reject designated fuel econony ratings for so long. The problem is a combination of high costs (unions) but MOSTLY BAD MANAGEMENT. They have pretty much shot themselves in the foot; now the question is should be provide aid to their self inflicted injury? If they file for bankruptcy, how will that effect the union payouts for salary while their employees are unemployed? If we give them the bailout, they have not shown the history that they can quickly rebound or redirect their products. Sooner or later, one or more of them will go belly up and cause a ripple effect in our economy.
Why not use that money toward retraining laid off workers vs putting it into an already broken company? What has AIG constructively done with their bail out? I say use the money to prepare for the fall out after these companies file for bankruptcy and help the thousands who lose their jobs find new jobs either in similar industry or by the infrastructure projects that the President-elect has made mention of in the past.
If the American people are dumb enough to believe that Dick Shelby is smarter than the head of GM, then we deserve the fate that is in store for us when our manufacturing base goes completely into the toilet. It would represent the ultimate victory of the Confederacy over the Union.
On the other hand, if we are dumb enough to believe that the head of GM is going to tell us the truth about what their true situation is, then we should be willing to throw our money into the same toilet. We have to loan them the money, but we have to hold them accountable.
While there is no getting around the devastating impact that the Big 3 going down will have on the rank and file workers, that ship is already sailing. Already 100,000 people have lost their jobs, and while those in the know are predicting another 100,000 jobs lost, there is certainly no gurantee that those workers won't end up getting let go later rather than sooner even if the extra money is given out.
Further, it is bad public policy and a dangerous precedent to set for the government to start choosing which industries to bail out, and then either give money with no strings attatched, or start managing these industries, which is much farther down the road to socialism than I think most Americans are willing to go.
I am coming to the belief that the best solution possible is for the Big 3 to go into Chapter 11, but that the government will then have to guarantee loans so that at least one or two of the companies can emerge, hopefully leaner, a little bit meaner, and a heck of a lot more responsible and intelligent in their decision making. Because as bad as the auto execs have been in determing what the market wants, I'd still rather have them making those decisions than a federal government agency like the Department of Transportation.
Oops, I think I wrote Chapter 11, which of course is personal bankruptcy, meant to write Chapter 7.
Thank you.
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