19 November 2008

Rule number one: It’s never the government

Rule number two: It’s never the union.

It’s nice to have a company so big and important that it positively cannot be permitted to fail. Laws, including laws of economics, are for other people. That’s why the Big Three auto makers want bailed out.

They should really file for bankruptcy. In the long run it would good for the auto industry and the consumer, who presently pays too much for a car.

There are, of course, people who don’t immediately benefit from bankruptcy.
Rep. Barney Frank, D-Mas…say[s] choosing the bankruptcy option would likely mean abrogation of labor contracts. “We already have too much union busting,” Frank said.
[…]
Frank…suggested congressional bias in agreeing to help white-collar bankers but not blue-collar auto workers.
Yes, well, those blue-collar workers don’t work for peanuts. Try, on average, $73 per hour.

For Detroit, [bankruptcy] means release from ruinous wage deals with their astronomical benefits (the hourly cost of a Big Three worker: $73; of an American worker for Toyota: $48), massive pension obligations and unworkable work rules such as "job banks," a euphemism for paying vast numbers of employees not to work. – Charles Krauthammer, here.
Getting back to Frank’s point, it’s easy to see why labor union lovers (so to speak) wouldn’t want the Big Three to file for bankruptcy. Think of all those renegotiated union contracts (if the union itself survives) which could result in a loss of union money in campaign coffers.

Oh, and the way to fix that bias for white-collar bankers is to refuse to bail them out too. Even so, giving a bail-out to white collar bankers is no excuse for giving one to blue-collar workers. If there really isn’t money for the one, there certainly isn’t money for the other. And there really isn’t money for the one.

Henry Thompson explains how bankruptcy could help the industry:

Bankruptcy is a normal part of economic life, covered by laws that guarantee stockholders will be compensated as much as possible. More efficient firms move in to take over what is left of bankrupt firms, buying what can be put to productive use. There is no crime in bankruptcy and, if handled quickly, little economic harm. When the largest US energy company Enron went bankrupt a few years ago, there was not even a ripple in the energy markets, much less the economy. Bankruptcy is not criminal and should not be a surprise, but it can be unnerving if large, well-known firms go bankrupt.


It’s especially unnerving to the executives, who aren’t shy about explaining why they don’t want to file for bankruptcy:

Chrysler LLC CEO Bob Nardelli rejected suggestions that the automakers should seek Chapter 11 bankruptcy protection similar to airlines that later emerged restructured and leaner. “We just cannot be confident that we will be able to successfully emerge from bankruptcy,” Nardelli said. Ford Motor Co. CEO Alan Mulally said the three automakers are highly interdependent.


No guarantee that they will “successfully emerge from bankruptcy”? The poor dears. Why should they have to go through life like the rest of us?

And did you note the passivity? Not, “We’re not sure we can manage our companies successfully enough to survive bankruptcy.” But, “We’re not sure we’ll emerge successfully.” These guys want to emerge, not manage. I don’t suppose that could have anything to do with their present condition. I mean, they’ve all but admitted they don’t have confidence in their ability to do the jobs they were hired to do. That’s awfully darn close to taking responsibility.

No, it couldn’t be that. Not surprisingly, politicians know the source of these ills:

Lawmakers complained that many of the industry's problems were self-made, citing their past reliance upon gas-guzzling trucks and SUVs and opposition to tougher fuel efficiency regulations. (Here)
That’s a politician for you. It’s resistance to government intervention which causes problems, never the government’s intervention.

MSN story is here. It’s thrilling, just thrilling.

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James Frank Solís
Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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