Saturday, November 15, 2008

Do We Let GM Die?

Yes, I know the headline is melodramatic, but that seems the bottom line of the argument for or against a government loan to General Motors. Tom Friedman over at The New York Times seems to be getting most of the heat for making the argument and I got to say rightly so. David Kiley at Business Week has Taking On The NYT's Tom Friedman's Indictment of Detroit that - to my mind - refutes Friedman better than I ever will.
In conclusion: Tom…I’m no defender of Detroit CEOs. I think, and have said, that the generation of management that has run the Big Three in the last fifteen years has been the worst in U.S. Industrial history. They have been incrementalists. Their idea of a long-range plan is 5-7 years. Toyota and Honda’s idea of a long-range plan is 25 years. They do have one advantage, though, in that they have a very predictable government energy policy to plan around. Have these managers shown an astonishing lack of vision, creativity, foresight and guts? Absolutely.
I cannot think but a few in this area who might think highly of GM (generally those peioeple who think the UAW as the worse thing that ever happened to American automobile industry), but I cannot say that not loaning money to GM is a good idea however poorly I think GM has been run (and for far more than the 15 years cited by Mr. Kiley).

From today's Muncie Star-Press comes these comments by the current president of the UAW:
COLUMBUS, Ohio (AP) — Even as Detroit’s Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that workers will not make any more concessions and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy.

“The focus has to be on the economy as a whole as opposed to a UAW contract,” Gettelfinger told reporters on a conference call, noting the labor costs now make up 8 percent to 10 percent of the cost of a vehicle.

“We have made dramatic, dramatic changes and the UAW was applauded for that,” he said.

Instead, Gettelfinger blamed the problems the auto industry is suffering from on things beyond its control — the housing slump, the credit crunch that has made financing a vehicle tough and the 1.2 million jobs that have been lost in the past year.
“We’re here not because of what the auto industry has done,” he said. “We’re here because of what has happened to the economy.”

Gettelfinger also called on Congress to act quickly on a bailout plan for the auto industry, saying action is necessary before President-elect Barack Obama takes office in January.

He said if one automaker were to file for bankruptcy, the others may follow. He said the automakers would find it difficult to restructure under bankruptcy laws and instead could end up out of business. “Would you buy a car from a bankrupt automaker?” he asked.

The Center for Automotive Research, which receives funding from the auto industry, has warned that the collapse of the Big Three could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and more than $150 billion in tax revenue over the next three years.
From what I could tell from last night on MSNBC, even Pat Buchannan thinks this is not such a bad idea. I think it was he who made the point that it was GM's factories which made the planes and tanks we fought with in World War Two. (Yeah, turf where Plant 11 stood was where we made the tools of war that brought down Hitler and Tojo - go and take a look.)

Howey's Political Report has Lugar proposing a deliberative approach (as he should considering how much of Indiana still remains beholden to the Big Three) but there is also a quote of utter stupidity from another Republican:
Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, said he would not support legislation to aid the auto companies and seemed prepared to let one or all of them collapse (New York Times). “The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force,” Mr. Shelby said in a statement. “The financial situation facing the Big Three is not a national problem but their problem.”
Not of national concern? Come on. What do people do to make a living in Alabama? What are they driving down there? So much for what is good for GM is good for the country.

I come down on the side of not killing off the Big Three. I do not think that we need to give an unconditional loan to them. Two different things and one that seems clear to this small town lawyer that escapes the Alabama Senator.

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