{"id":3626,"date":"2008-11-13T06:00:02","date_gmt":"2008-11-13T11:00:02","guid":{"rendered":"http:\/\/www.shotinthedark.info\/wp\/?p=3626"},"modified":"2008-11-13T23:14:34","modified_gmt":"2008-11-14T04:14:34","slug":"you-think-american-cars-suck-now","status":"publish","type":"post","link":"http:\/\/www.shotinthedark.info\/wp\/?p=3626","title":{"rendered":"Too Big To Let Fail"},"content":{"rendered":"
<\/div>\n

The phrase that started it all. First AIG then the rest. The Big Three are about to become U, S, and A. The UAW and the Congress killed the Big Three, now we’re going to own them.<\/p>\n

Let’s assume that the powers in Washington<\/a> — the Bush team now, the Obama team soon — deem GM too big to let fail. If so, it’s also too big to be entrusted to the same people who have led it to its current, perilous state, and who are too tied to the past to create a different future.<\/p>\n

In return for any direct government aid, the board and the management 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.<\/p>\n

That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others, and downsizing the company. After all that, the company can float new shares, with taxpayers getting some of the benefits. The same basic rules should apply to Ford and Chrysler.<\/p><\/blockquote>\n

So first shareholders take it in the shorts, then taxpayers.<\/p>\n

In the Washington mind, there are two kinds of private companies<\/a>. There are successful if “greedy” corporations, which can always afford to pay more taxes and tolerate more regulation. And then there are the corporate supplicants that need a handout. As the Detroit auto makers are proving, you can go from being the first to the second in the blink of an election.<\/p>\n

For decades, Congress has never had a second thought as it imposed tighter emissions standards on GM, Ford and Chrysler, denouncing them for making evil SUVs. Yet now that the companies are bleeding cash, and may be heading for bankruptcy, suddenly the shrinking Big Three are the latest candidates for a taxpayer bailout.<\/p>\n

…Senator Debbie Stabenow (D., Mich.) wants another $25 billion, this time with no strings attached<\/strong>.<\/p>\n

Barack Obama implied at his Friday press conference that he too favors some kind of taxpayer rescue of Detroit, though no doubt he’d like to have President Bush’s signature on the check so he won’t have to take full political responsibility<\/strong>.<\/p><\/blockquote>\n

Why would there be a political liability for bailing out our automakers? Is it possibly because most Americans are against it? Think about that for a second. Our government is increasingly acting as if it is no longer accountable to it’s citizens.<\/p>\n

A bailout might avoid any near-term bankruptcy filing, but it won’t address Detroit’s fundamental problems of making cars that Americans won’t buy and labor contracts that are too rich and inflexible to make them competitive.<\/p>\n

While GM has spent billions of dollars on labor buyouts in recent years, they are still forced by federal mileage standards to churn out small cars that make little or no profit at plants organized by the United Auto Workers.<\/p><\/blockquote>\n

Sounds like good money after bad to me on the surface, but the government, along with the unions are culpable. This scenario is an example of the effect of overarching regulations. CAFE standards force automakers to flood the market with cheap, poorly-conceived\u00a0high-mileage models to bring down the C<\/strong>orporate A<\/strong>verage F<\/strong>uel E<\/strong>conomy, forcing automakers to manufacture a higher percentage of\u00a0a certain model than the market demands from that particular manufacturer.\u00a0This along with an inflated\u00a0labor cost destroys profitability, in turn forcing Ford, GM and Chrysler to come to the government with their hands out.<\/p>\n

The Japanese have proven that there is a stong market for small, efficient cars but since they don’t make large vehicles, which are also in demand for certain consumers, they aren’t forced to dump smaller cars on the market at a loss to meet CAFE standards.<\/p>\n

We need to allow the Big Three to shed themselves of union extortionists and at the same allow the free market to determine how many small cars people want to buy and from whom.<\/p>\n

Otherwise, expect the government to have to bail out (what’s left of)\u00a0the domestic auto industry every few years.<\/p>\n

Update:<\/p>\n

Why GM can’t survive bankruptcy<\/a><\/p>\n

Does this mean I get to keep my Suburban and not make the lease payments? Mr. President elect? Hello?<\/p>\n","protected":false},"excerpt":{"rendered":"

The phrase that started it all. First AIG then the rest. The Big Three are about to become U, S, and A. The UAW and the Congress killed the Big Three, now we’re going to own them. Let’s assume that the powers in Washington — the Bush team now, the Obama team soon — deem […]<\/p>\n","protected":false},"author":228,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[57],"tags":[],"class_list":["post-3626","post","type-post","status-publish","format-standard","hentry","category-economy-and-the-market"],"_links":{"self":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/3626","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/users\/228"}],"replies":[{"embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3626"}],"version-history":[{"count":0,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=\/wp\/v2\/posts\/3626\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3626"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3626"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.shotinthedark.info\/wp\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3626"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}