By now I'm sure most of us have seen the result of a week or so of intensive image counseling with the CEO's of the "Big 3" automakers out of Detroit (see photo). Emerging from the intensive PR boot camp leaner and greener, the three most powerful men in the American auto industry are selling their souls to "bail out" their companies. Simultaneously South Carolina Governor Mark Sanford is telling us that the auto industry in his state is strong. No matter which way you look at it or whether or not you support floating tax dollars to mismanaged companies, the cheap prostituting of American capitalist centerpieces like GM, Ford, and Chrysler raises some interesting questions.
1. Why are the "Big 3" in Michigan so far behind the plants in South Carolina and other states? Well, for starters the plants Gov. Sanford was referring to are not "American" manufacturers. For all the hysteria and hyperbole associated with the potential failure of the Big 3, it's really unfortunate that the Detroit manufacturers have, in the interests of labor negotiation, leveraged their financial future on union labor. Too bad, because the mixture of no-work jobs and pension costs are driving their productivity per payroll dollar through the ground. I have heard estimates that the healthcare costs alone associated with a car are around $1500 more expensive for manufacturers in Detroit than Tokyo. Correct me if I am wrong, but on a $30,000 car that's a 5% head start right from the get go.
2. Why does management not want to fix this through reorganization? Why perpetuate bad business practices by opening up potentially limitless federal subsidies? Going bankrupt is not the end of the world. Especially if you have assets to protect. The only way it IS the end of the world is if assets are non-existant or pledged. So which is the case here? If 100 years of operations has produced an asset base, why not protect those assets through bankruptcy from the consequences of decades of short-sighted management?
3. If they are such a good investment why hasn't anyone else offered to inject capital? I cant expound much on this because it seems like such an obvious question. What is preferable about kneeling to a heavy-handed deep-pocketed government to making a legitimate business deal? Are things really that bad, and if they are will this money really change anything or just delay the inevitable?
4. Why are these titans of capitalism begging for government moneys, replete with all the strings and regulation that will doubtless accompany the checks, and leaving their companies saddled with unsupportable costs, instead of doing their jobs and taking the company into bankruptcy protection, reorganizing and protecting the assets? The logically implied answers to this are perhaps the most troubling of all. If the largest of our corporations have such incompetent leadership, what about those without the resources of a GM? Seeing these supposedly brilliant and savvy and urbane executives knuckling under and begging for capital from the likes of Barney Frank and Chuck Schumer is almost enough to make me throw up.
President Bush has put the brakes on a government takeover of the auto industry for now. President-elect Obama is telling the automakers that he will get them cash as soon as he takes office, if not sooner. So one way or the other this charade is something we will all likely be forced to witness. Last but not least, once the government runs everything large and the rest of us little guys are competing against our own tax dollars, where do we go from there? Is this a new era of leadership by inaction? Is New Age management nothing more than calculating that the least risk to an organization is to simply let the ill become terminal and then hoping for government help? It is a joke alright. Unfortunately the joke is on you, the taxpayer. Welcome to Obammunism.
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