I am as terrified as anyone of the domino effect on industry and workers if GM were to collapse. But if we are going to use taxpayer money to rescue Detroit, then it should be done along the lines proposed in The Wall Street Journal on Monday by Paul Ingrassia, a former Detroit bureau chief for that paper.
“In return for any direct government aid,” he wrote, “the board and the management [of GM] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver – someone hard-nosed and nonpolitical – should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company. … Giving GM a blank check – which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant – would be an enormous mistake.”
I would add other conditions: Any car company that gets taxpayer money must demonstrate a plan for transforming every vehicle in its fleet to a hybrid-electric engine with flex-fuel capability, so its entire fleet can also run on next generation cellulosic ethanol.
Lastly, somebody ought to call Steve Jobs, who doesn’t need to be bribed to do innovation, and ask him if he’d like to do national service and run a car company for a year. I’d bet it wouldn’t take him much longer than that to come up with the GM iCar.
Friedman the purported internationalist ought to know that an industry-specific bailout would raise objections under the anti-subsidy provisions of the World Trade Organization. A bailout would allow U.S. trading partners to bring a WTO complaint which, I suspect, would be successful, entitling them to impose their own countervailing trade restrictions on U.S. imports. The trade restriction can be on any U.S. goods, not just automotive goods. Thus, in return for, say, $25 billion in uneconomic low-interest loans and cash infusions to GM, we may be hit with billions of dollars of duties and restrictive quotas on competitive U.S. products exported to the EU, Japan, and Korea, such as pharmaceuticals, agricultural products, aeronautics, etc.
What happens to all the retiree medical benefits? Pensions?
#2 – medical benefits – it’s called Medicare. Pensions don’t exist for many of those in the work place, why should they continue for retirees? We have 401Ks now instead, or least some of us do. My in laws are living off of a Ford pension so I’m arguing contrary to my interests here – were they to lose that pension they’d be in DEEP financial trouble. But it might be better for them spiritually, from what I’ve seen their pension has not borne fruit.
“That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company.”
A stopped clock tells the right time twice a day – Friedman hits the nail on the head.
Their “pension has not borne fruit” — that seems a rather harsh judgment. I’m with Friedman on this one. I read somewhere yesterday that when the government bailed out Chrysler some years back, it ultimately made money on the deal. But I think the auto makers need some hard-headed leaders who will look at the market and not just keep making the same vehicles and doing things “like they’ve always done them”.
#4 – yes it is harsh, it’s also an observation I’ve formed over the last 12 years, and their daughter (my wife) largely agrees. In 1980 Chrylser was lent $1.2 billion. Even adjusting for inflation, that is a fraction of the $25 billion they were loaned in September. And now they want $25 billion more? Where does this all end?
[blockquote]And a government-appointed receiver – someone hard-nosed and nonpolitical – should have broad power[/blockquote]
I think they tried this in the novel [i]1984[/i] and it didn’t work so well.
“In return for any direct government aid,” he wrote, “the board and the management [of GM] should go. Shareholders should lose their paltry remaining equity. And a government-appointed receiver – someone hard-nosed and nonpolitical – should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others and downsizing the company. … Giving GM a blank check – which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant – would be an enormous mistake.”
The above is what a bankruptcy is anyway-with the addition of a “government receiver” to add inefficiency and waste…. why not just let it happen and avoid printing more government dollars to pour down another rathole?
Government intrusion is what is killing the auto industry. Now the same idiots want to add more government mandates?
*Sigh* Thomas Thomas Thomas…
Okay – mostly I agree. But then you miss a couple big ones:
1) ethanol? Tell me you did not bring that up. Please. Tell me you don’t drink the stuff before you write your articles.
2) Wait a second – is it not so that at least sometimes not Detroit blocks environmental initiatives so much as environmental initiatives block Detroit? Hello? Clean diesel anyone? Why is Ford developing some interesting innovative automobiles – that is has to sell overseas? This cuts both ways baby!