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Thumbs down on the bailout
Loathe though I am to agree with the Republicans, on balance I'm coming to the conclusion that they're right about the auto bailout.
It's probably true that going Chapter 11 would cause GM an enormous amount of short-term pain (and Chrysler might well just go under), and it's true that there would be a nasty, sharp contraction as a result. That said, if it was packaged correctly, I suspect that it would correct much more efficiently: it would rip the bandage off, and allow the industry to do the necessary restructuring fast. It would to a substantial degree break the UAW (which, even granting that it does *some* good, is doing too much harm at this point), and probably come out with a GM that was smaller but ready to fight back much more quickly.
And I suspect that much of the PR debacle could be offset if the company, from the start, aggressively painted this as "reorganizing to be stronger". (And, frankly, played the national-pride card hard.) They have to move off the defense publically, changing both their thinking and look into that of a scrappy competitor. Granted, they've shot themselves in the foot on this particular point (over and over and over again in recent weeks), but public attention is fickle, and I'd bet that it could still be turned around.
Chapter 11 and the bailout both have essentially the same medium-term goal: restructuring the auto industry to make more *sense*. The difference is that Chapter 11 would probably be much faster and more efficient, because the legal power to change would be stronger. And really, it would be more honest. The bailout has this image of "saving jobs" and suchlike, but that's nonsense -- the whole *problem* is that GM is ridiculously inefficient, and there's no way to save it in the long run without lots of pain. So the choice is between dragging that pain out over the course of years (the bailout) or getting it out of the way in a horrible shock (Chapter 11). The latter would be much nastier in the short run, but I suspect better a year or so down the line...
It's probably true that going Chapter 11 would cause GM an enormous amount of short-term pain (and Chrysler might well just go under), and it's true that there would be a nasty, sharp contraction as a result. That said, if it was packaged correctly, I suspect that it would correct much more efficiently: it would rip the bandage off, and allow the industry to do the necessary restructuring fast. It would to a substantial degree break the UAW (which, even granting that it does *some* good, is doing too much harm at this point), and probably come out with a GM that was smaller but ready to fight back much more quickly.
And I suspect that much of the PR debacle could be offset if the company, from the start, aggressively painted this as "reorganizing to be stronger". (And, frankly, played the national-pride card hard.) They have to move off the defense publically, changing both their thinking and look into that of a scrappy competitor. Granted, they've shot themselves in the foot on this particular point (over and over and over again in recent weeks), but public attention is fickle, and I'd bet that it could still be turned around.
Chapter 11 and the bailout both have essentially the same medium-term goal: restructuring the auto industry to make more *sense*. The difference is that Chapter 11 would probably be much faster and more efficient, because the legal power to change would be stronger. And really, it would be more honest. The bailout has this image of "saving jobs" and suchlike, but that's nonsense -- the whole *problem* is that GM is ridiculously inefficient, and there's no way to save it in the long run without lots of pain. So the choice is between dragging that pain out over the course of years (the bailout) or getting it out of the way in a horrible shock (Chapter 11). The latter would be much nastier in the short run, but I suspect better a year or so down the line...
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If Michigan had come to Congress with a plan and a defined need, or had presented their old plan clearly and discussed how diminished sales had damaged their redesign plan, I'd be more sympathetic.
I'm still somewhat disturbed that the Republicans managed to negotiate almost a pre-packaged bailout and then scuttled it in a demeaning manner.
I will object to one of your comments. I looked up (not long ago) the efficiency of car manufacture itself. American car companies are as efficient as any others in terms of man-hours per car. The problem is that union labor costs are far higher per hour, and then there is the overhead for benefits and pensions, which are also far higher. As much as 2,500 or 3,000 per vehicle.
For an American car to price-compete with a non-union labor car, they have to be MORE efficient. They are. But it isn't helping.
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Really, it's the thing that tweaks me about the Republicans in this case. They *ooze* vengefulness and antipathy towards the union, so obviously that I automatically get suspicious of them. Unfortunately, I think they're largely right that the UAW (and more specifically, the weight of history between the union and the car companies) is a large part of the problem...
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That's part and parcel of the union problem: they desperately need to shed capacity, but due to union contracts it's extremely hard for them to do so. I gather that, in the past, they've agreed to some pretty crazy buyouts just so they can close factories...
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There's certainly something to the labor difference. Ford is marginally profitable because of foreign operations, where presumably labor costs are more competitive.
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The same articles talked about overhead based upon superior benefits, and pension contributions.
If it matters to you, I can take the time to try again to find the articles, and recheck the figures. (I can't re-check the browser history, since I no longer have access to that computer.)
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