Auto Bailout: A Horse With Two Ends
There is an old expression describing a prospective deal: “This is a horse with two ends”. The Auto Bail Out deal is certainly a horse with two ends. The problem with the deal seems to be that everyone involved is on the wrong end of the horse.
I’m not thrilled with the government bailing out private sector businesses but recognize that the American auto Industry needs more than a little help. I get a little crazy when I hear the public pronouncements and suggested solutions of the politicians, administration officials and the talking heads on the Sunday news.The suggestion by politicians that we will not let GM Ford and Chrysler go bankrupt is a curious and short sided suggestion. Taking bankruptcy off the table eliminates a bargaining tool to get needed concessions from both management and the unions. If they can’t get together, a bankruptcy court will referee the concessions.
The Senate piling on the unions for large concessions is certainly not the way to establish a cooperative negotiation. I don’t have any inside knowledge of the UAW but a little research into the actual figures involved indicates, the piling on, is using wage figures in a politically skewed fashion. The union and non-union auto workers hourly rate is really pretty close.
The big three auto makers over the years have agreed to expensive fringe retirement benefits that have placed them in a tough competitive position with the foreign manufacturers. To indicate that the workers are taking home twice as much as their foreign counterparts and is the cause of the problem is hugely unfair. These working men and women build what management dictates and do a good job. They don’t design the cars and trucks and should not be held responsible for poor management decisions concerning what products the company brings to the market. The unions cannot be blamed for taking benefit packages from management that are excessively generous but they now must be prepared to make the cuts on their end of the horse to make a deal work.
Last year Toyota and GM built approximately the same number of vehicles. Toyota made $18,000,000,000 in profits and GM lost ($39,000,000,000). FYI those figures are billions, if like me you have trouble with that many zeros. If General Motors was a baseball team there is no doubt where the management would be headed. Out the door! GM has obviously become too big for it’s legs to hold it up and keep functioning. The management legs of the company need immediate strengthening..
Tough moments are facing our nation and we each need to take some time to come to an understanding of the basic issues. I concur with, an earlier guest posting by Heath Suddleson that emails, phone calls and letters to your congressman and senator should clearly state your opinion, for or against, bailing out the auto industry and other private sector mismanagement cases. I think each message should counsel your political representative that the nation needs leadership with transparency, not political posturing from our political “employees”. Make a clear point that leadership characteristics will determine whether you will considering rehiring them at the next election. They do listen when reelection is mentioned.
The technical aspects of the bail out resolution will be complicated. Watch closely and you will recognize those leaders who are working to restore the industrial and commercial strength of this still great nation.
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In supporting our national defense, the Pentagon engages in “war games” to try out the generals’ strategy and tactics so that should the “real thing” ever come about we have run through a good practice drill so we can plan for the real deal with greater competence.
Does anyone practice “economic panic games” for practicing what to do in an economic catastrophe? The panic of 1873, the Great Depression, The early 80s recession, etc. We have a recession every decade or so and full blown panics every 50 years or so. Certainly we could spend a few million dollars every couple of years to work out scenarios for economic panics so that we might be able to devise a plan to address the crisis effectively.
I suggest that we organize a department somewhere in government or the academy tasked with anticipating and scenarioizing plans to effectively handle such crises. The ad hoc approach is clearly not the way crises should be handled.