Tuesday, November 18, 2008

Screw You, Detroit -- With Apologies To My Father

Dear Dad,

I know you bought bonds in an American car company, and I'm certain that you'll take a haircut if it goes bankrupt.

But I can't support handing these staggeringly incompetent companies billions of dollars in taxpayer money, when they look like lost causes.

The 25 billion that was supposed to be a loan to Ford, Chrysler and GM, --allowing them to retool and create more fuel efficient cars -- is suddenly being discussed as a band-aid cash infusion just to get them through the next few months.

At which point we'll give them another 5o billion, a possibility that prompts me to ask (not for the first time ) "How badly do you have to fuck up in this country before we pull the plug?"

Let them declare Chapter 11. Here's why.

Argument 1: Bankruptcy is not the end of the world. Every time I turn on a TV, I see one of the Big 3 CEOs jacking his jaws into a microphone, telling me that if his company has to declare bankruptcy, the economy will collapse. This is manipulative bullshit. 5 million people will NOT be thrown out of work and Michigan will not vaporize into dust and get hoovered up by the Japanese.

Many high profile companies have filed bankruptcy in recent years and are still around: Delta Air Lines, United Air Lines, Global Crossing, as well as steel producers and retail firms. They continue operating, people come to work and life goes on.

Some workers would probably lose their jobs, but that is going to happen anyway. The US auto industry can turn out 5 million more cars a year than its customers want to buy. Keeping that kind of excess capacity around for no reason would be even dumber than paying workers not to work. Except GM acutally does that. Which brings me to my next point.

Argument 2: Enough rewarding failure. Why do the slack-jawed idiots who run America's car manufacturers get to stick their noses into the money trough, when their decisions have been so spectacularly bad?

GM has 20% of the US car market. Why does it need 8 brands? And why do those 8 brands sell rebadged versions of the same cars? Case in point: The Chevy Aveo is, with the exception of the front bumper, the exact same car as the Pontiac G3. (It was bad enough the first time around.)

And it gets worse: the Chevy Venture minivan is nearly identical to the Pontiac Montana. You'll go crosseyed trying to tell the difference between the unlovely Saturn Outlook, pondorous GMC Acadia, and lumbering Buick Enclave.

Badge engineering is so appallingly stupid because it requires GM to market the same car 2 or 3 different ways, wasting money and diluting any value that these exhausted brands still have. Does Toyota (which has roughly the same percentage of the US car market as GM) sell the Camry 3 different ways?

Argument 3: Going into bankruptcy is the only way these companies can get the legal cover to reorganize.

GM knows its dealer network is too big and too expensive, but cutting brands and dealership agreements is a long, expensive and painful process. Bankruptcy can get it done quickly enough to make a difference, and without igniting a legal firestorm that would make the incendiary bombing of Tokyo look like a burnt-out match.

And I haven't even mentioned the unions yet. Pensions, health care and wages for the unions add $2,000 or more to the cost of every car that comes off an assembly line in Detroit. Want to know why the Corolla feels like better ride than the Ford Fusion? The Japanse don't have the UAW making them pay janitors $28 an hour to sweep floors, and handing other workers full pay and benefits to stay home.

Any solution to this disaster has to include sharp reductions in these giant costs, or in another 6 months we'll see the same 3 CEOs back in Washington looking for another handout.

Let em sink. Sorry, Dad.



PS. I just have to add this: According to James Sherk, a labor policy analysts at The Heritage Foundation, reports that workers at the Big Three earned between $71 and $76 an hour for a total of $130,000 in 2006. By contrast, employees at Japanese plants made between $42 and $48 an hour for about $80,000. The average American private sector worker earned about $25 an hour in 2006. (h/t to Redstate)

This means that when Barney Frank was on NPR this morning complaining that Republicans were blocking the Detroit bailout in order to strip the UAW of righteous concessions that it had won from the rapacious car manufacturers, a river of shit was flowing out of his mouth.

There is NO WAY that assembling cars -- which is essentially unskilled labor -- should earn a worker 130k a year. It is utterly unsustainable in this environment.

(And if you don't think its unskilled, I suggest you read this.)


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