Monday, March 30, 2009

Calling the Shot...

Today the newspapers were free in Detroit. Not on the web, I mean free. Paper.

They picked a helluva day to give away papers. Everyone had one in their hand today. The big red letters jumped off the page:
U.S. SHREDS AUTO PLANS
I have to agree with James Lileks who sent this out on Twitter today:
Maybe I’m old-school, but “President fires CEO” looks as wrong as “Pope fires Missile.” Does not compute.
The President has warned that filing bankruptcy may be necessary for GM and Chrysler, but I think this is just hot air, at least as far as GM is concerned. I mentioned that a Green American auto market is a pipe dream back in 2008 before the first bailouts, but I'll sum it up here.

Here are the options:

Option 1) GM can build more inexpensive fuel-efficient green cars
Option 2) GM can preserve UAW jobs, contracts, and legacy commitments
Option 3) GM can be profitable

Pick two.

The math doesn't work out any other way. It is an impossibility.

Analysis:

Option #1 is pretty much a given under the current administration and Congress. CAFE standards and a near religious-like zealousness amongst the Democratic party base has pretty much settled this issue. So it largely comes down to a choice between Option #2 and Option #3. That choice is between continued bailouts of GM, or GM filing bankruptcy and shredding its union and dealer contracts (mostly union).

Anyone here think that given the choice between 1) destroying one of the nation's largest unions or 2) shelling out taxpayer money to prop up a failing business, President Obama will choose to let the UAW go down? I didn't think so.

The dismissal of Rick Wagoner is just a distraction. The Obama Administration needed a head on a pike to show to the bailout-weary masses. They had to talk tough with threats of bankruptcy to sound credible. What they did was shovel $6 billion more dollars into GM, and throw a sacrificial lamb to the angry mob. This bought them another 60 days, during which time they hope that some of the bailout/stimulus/TARP/TALF/TARPII/Geithner-printing-a-trillion-dollars-quantitative-easing fatigue dissipates, and the mob gets tired of toting those pitchforks and torches around.

At which time, they will trot out a restructuring plan that looks a whole lot like the one they have on hand, tell us all that it's a lot better now, and fork over more taxpayer money to GM. All without having done anything that will allow GM to emerge from this as a competent, competitive corporation.

I don't like the options any more than you do. I *live* in this town. I know a lot of UAW workers. Just about everybody I know is bound to the auto companies in some way. Dear friends are out of work. Many more have moved away. To say that these people are "hurting" right now is a shameful understatement. But in the long run, setting up GM as a permanent ward of the state is not a viable option. I'd like to believe that Chapter 13 restructuring is really on the table, and that *some* of the American auto industry and its jobs may be preserved, but I can't really believe it.

The current administration will instead put GM on life support, injecting wasted bailout after wasted bailout, until the voters demand that they pull the plug. Who knows how many billions of dollars on down the road that will be, and what kind of irreversible damage will be done by then to the American auto industry.

1 comment:

  1. P.S. Ford is cooling it's heels on the sidelines, hoping that GM really does go through some sort of massive restructuring/bankruptcy. Once the UAW and GM's dealer network is forced to take a massive haircut (the kind that leaves scars), Ford will be an indirect beneficiary of of the new terms on the market for labor.

    ReplyDelete