Detroit Comes Begging
Can we save corporate dinosaurs that have been mismanaged for decades? Yes, we can!

By Rich Lowry


One of Barack Obama’s acts of courage as a presidential candidate, his campaign maintained, was to give a speech in Detroit excoriating the auto industry for its carbon-emitting sins. Obama noted how the industry had long played “typical Washington politics” by hiring an “army of lobbyists” to get its way.

Well, Obama hadn’t been president-elect for more than 72 hours before he suggested that auto-industry executives descending on Washington to plead for a bailout might get it. Can we save corporate dinosaurs that have been mismanaged for decades? Yes, we can!

The auto companies argue that they have been caught up in the credit crunch, and therefore deserve a piece of the financial bailout. General Motors’ sales dropped 45 percent in October. Ford and GM lost nearly $15 billion in cash between July and September, and GM says it might not have enough cash to operate by early next year.

But this crisis is only the punctuation mark on decades of decline. Once a market-dominating behemoth, GM had 50 percent of the U.S. market in the 1960s. It is down to almost 20 percent now. U.S. consumers have long been voting against U.S. automakers. Now, they’ll be asked to put their tax dollars at risk to preserve the very companies from which they don’t want cars.

The bailout would be of the United Auto Workers as much as of the automakers. It’s the UAW that saddled the Big Three with unsustainable labor costs and obligations to retirees. Detroit has desperately been trying to get out from under this burden, but Ford still lost $1,467 per vehicle in 2007, while GM lost $729 and Chrysler lost $412. Where the UAW doesn’t reign, the industry thrives. Toyota and others profitably manufacture almost 4 million cars in nonunionized states in the South.

The case for the bailout is that the job losses from a GM going down — 100,000 directly, and many more indirectly — would be too painful to bear, and the government would be left holding the bag on GM’s pensions. This line of reasoning conceives of GM essentially as a job programs and welfare agency.

The cost of the government keeping the Big Three afloat would surely be more mandates for politically correct “green” cars. Holman Jenkins of The Wall Street Journal has pointed out the damage of already-existing mandates: “The Detroit Three have been effectively required to build small cars in high-wage, UAW factories, though it means losing money on every car.” If the Big Three have been inefficient until now, just wait until the Sierra Club is in charge.

A bailout of the automakers would signal a new era of government protection from competitive failures. Every other troubled business would show up in Washington, in the spirit of folk singer Tom Paxton’s lines after the Chrysler bailout in 1979:
“I am changing my name to ‘Chrysler.’
I am leaving for that great receiving line,
And when they hand a million grand out,
I’ll be standing with my hand out.
Yes, sir, I’ll get mine.”
The Paulson financial rescue obviously created a dangerous predicate. But the financial system is uniquely fragile. Banks that are otherwise sound, and have been run profitably for decades, can go under in a panic. Wells Fargo, which took an equity injection under duress, shouldn’t be confused with GM.

Washington Post business writer Steven Pearlstein suggests a compromise: Only commit government funds if the auto companies taking them go bankrupt. A bankruptcy court can reduce the obligations to retirees, make it possible for Chrysler and GM to pare back their unnecessary dealerships, and scale back wages and benefits. Top management should be fired. All of this can be set in a “prepackaged” bankruptcy that won’t disrupt operations.

But that probably makes too much sense. We’re a long way from the 1950s, when G.M. President Charles Wilson said, “What is good for General Motors is good for the country.” In a bailout nation, it’s the opposite.

__________________
Liberals are people that will believe anything twice.

The only problem with the article is that it misquotes the quote.

The correct quote was, "What is good for the Country is good for GM."

Ironically, now, letting GM fail would be good for the country, and not good for GM.

__________________
Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis

the best thing for the big 3 would be fire all top management. fire the board of directors and put them under government control...

God no, the only thing the government knows how to do is operate at a deficit. The best thing to do with those failing, bloated behemoths it to let them fail.

They had superior products, and an advantage and threw those things away.

Ford had the Ford Contour which actually beat the Corolla and the Camry, and then in the height of stupidity Ford threw that advantage away.

GM had the EV1 which they had to force the test group to give back.

No, those companies deserve to fail. They have been mismanaged for several decades, and any advantage they had has been undermined by stupidity in upper management and self-centered greed by the UAW. Prior to the recent pay cuts the average UAW worker at the Big 3 was making over $80K including benefits.

Why should they continue to benefit, when it was their selfish greed that destroyed those companies?

__________________
Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis

3 million jobs at risk.

__________________
i'm the guy i've always wanted to be

Well, if the government is so concerned about them, then it must not just stop at giving them a bail out, but by withdrawing from NAFTA, GATT and WTO, and raising tariffs and duties on foreign automobiles and foreign auto parts.

Personally, by calling for their destruction, I am destroying one of my dreams, and that was that one day I would be able to purchase a Ford Mustang, but I can not justify having that dream fulfilled if it means that I end up paying for the damn thing twice. Once by taxation, and again by purchasing it.

Ford, GM and Chysler deserve to fail, and the UAW deserves to suffer with them. Perhaps then they will understand that self-centered greed is not a path to advantages, and that $50,000 over 20 years is better than $5,000 today.

__________________
Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis

Real men don't need bailouts.

__________________
Are you stupid or apathetic? I dont know and I dont care

You mean like the Messerschmitt factory in fascist/Nazi Germany?

Vi

__________________
Liberals are people that will believe anything twice.

I have to say, I campaigned for Obama with UAW members, and these people have it easy. They're crippling the auto industry and they lead a really good lifestyle considering what the rest of the country is going through. His union policies are one of the few things I disagree with Obama over.

I figure I better pre-empt any attempts to accuse me of hypocrisy. There is a vast difference between my self-centered greed, which is the desire to be able to keep all of what I produce, and the self-centered greed of the UAW which was always demanding more pay, and more benefits.

Edited to add.

Of course, that creates the question, of it the taxes in the United States were not so oppressive wouldn't have the UAW been able to settle for less pay and benefits, and thus there would be no need to talk of a bail out for Detroit?

__________________
Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis