The Motown Mop Up

Posted: November 20, 2008 by lamayor in Miscellaneous, Politics

car-crash

By LAMayor

Detroit is not just in trouble, it has already failed.  Now the gang that brought you The Katrina Rescue Plan and the soon to be released, Reagan: The Prequel, is rushing in to help.  Hasn’t Detroit suffered enough?  The American auto industry is being crushed by burdensome government standards, voracious unions, and an implausible business model.  I’m amazed they’ve survived this long.  So, how did we get here?

High labor costs.  Difficult and arcane work rules.  Payment to idle workers.  Massive costs due to retirees’ pensions.  Increasing employee and retiree healthcare costs.  Capital costs for equipment and real estate — many of which are underproducing and unproductive.  Union demands that amount to blackmail.  Not to mention government nitpickers that won’t be appeased until Detroit turns out a 100 mile per gallon car that runs on happy thoughts.

There is a way out of this: Filing for Chapter 11 — reorganizing the whole mess, enabling the market to succeed, and taming the union — is exactly what Detroit needs.  Time to introduce brighter minds to this conversation.  Robert Tracinski nails it at RealClearMarkets.  The $50 billion bailout plan will lead to more (mis)management and is nothing but a sop to the unions and an expansion of the nanny state (emphasis mine):

In essence, this is a plan for nationalization of the American auto industry under a new government-appointed board of directors who will supposedly tell the Big Three how to make a profit again.

But of course Detroit will never recover under this plan, because its whole purpose is to avoid the one step actually necessary to make the automakers profitable: breaking the hold of the bloated unions . . . . That is what a bailout is really meant to avoid: anything that would break the power of the unions. This is not a bailout for GM. It is a bailout for the UAW.

Amen.  Writing in The Grey Lady, Mitt Romney presents a sane, free market approach to saving Detroit:

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

I’m not an economist nor do I play one on TV.  I do know this, though: Detroit must be saved.  The auto industry’s collapse would be a national shame.  Even more shameful is a Democratic Washington in bed with the unions and whose only solutions are to expand government and throw good money after bad.  All it will do is kill the pain, not cure the patient.

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Comments
  1. Gail Pheneger says:

    Is it possible to use the photo of the car crash on your website in a powerpoint presentation for college about personal health record options? If so, could you respond via email with permission? Thank you for your assistance.

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