Look! There’s Another Wolf! No, I Just Saw Him, Behind That Tree!by
Vin Suprynowicz Even as Detroit’s Big Three automakers teeter on the brink of collapse – General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking $25 billion from the government to get them through the worst sales slump in 25 years, with GM particularly short on cash and reporting an inability to borrow more – United Auto Workers President Ron Gettelfinger announced on Nov. 15 his workers will not make any more concessions. “The focus has to be on the economy as a whole as opposed to a UAW contract,” Gettelfinger told reporters on a conference call, noting the labor costs now make up 8 percent to 10 percent of the cost of a vehicle. Other number-crunchers report that for the Big Three, contractual long-term health care obligations, alone, add nearly $5,000 to the cost of each new vehicle. Mr. Gettelfinger called on Congress to act quickly on a bailout for the industry, saying action is necessary before President-elect Barack Obama takes office in January. He said if one automaker were to file for bankruptcy, the others could follow. The union chief said the automakers would then find it difficult to restructure under bankruptcy laws and instead could end up out of business. “Would you buy a car from a bankrupt automaker?” he asked. Well, did American commuters buy tickets on the famously “bankrupt New Haven Railroad,” or more recently on airlines which were reorganizing under bankruptcy protection? Yes they did. Why this bum’s rush for a congressional “bailout,” really? Why this demonizing of the well-established option of bankruptcy protection, when this is precisely the circumstance for which our bankruptcy laws – the envy of the world’s economies – were designed? If the current bank bailout is a model, the word “bailout” has essentially now come to mean (quite literally, to the denizens of Washington) “the government will purchase shares of your stock as a way to bolster your balance sheets.” That’s the form of economic central planning made popular by Mussolini and Hitler. Is that really where we want to head? What was the last thing Congress had to do “urgently – no time to waste”? Oh yeah, they had to hand Shifty Paulson $700 billion, right away before the election, to buy all those “poisoned mortgage-based securities” and get them off the balance sheets of his friends the investment bankers. Remember? Had to do it right away, remember? Otherwise the economy would collapse. That was a month ago. How many “poisoned assets” has the Treasury Secretary now bought? None. Changed his mind. But look! There’s another wolf! No, I just saw him, behind that tree! You’ve got to believe me! The best thing Congress could do to “bail out” Detroit – at no financial cost to taxpayers, and at a considerable benefit in highway safety – would be to repeal all “fleet fuel economy” standards (the imposition of which exceeds Washington’s constitutional powers, anyway), allowing auto makers to build exclusively the safer, more attractive, more solid cars and trucks U.S. consumers want, without the artificially imposed mandate to crank out low-powered, easily-crushed little wind-up toys on which the Big Three lose money on each unit. But that’s never going to happen if Washington becomes MORE directly involved in auto plant management, rather than less. There are plenty of U.S. auto plants with addresses considerably south of Detroit that still manage to turn out fine cars at a profit, because they pay only about $48 per hour in wages and benefits to their mostly non-union workers (hardly a starvation wage), as opposed to a number approaching $75 in Detroit. Congress is granted no authority in the Constitution to “bail out” failing private enterprises, and for good reason. To do so stymies the orderly working of the free market, which “wants” (if we may anthropomorphize that unseen entity, for a moment) the assets of such failing firms to pass into the hands of new managers with plans to make an honest profit giving the public what it wants. There is an established way for a company to shed unmanageable accrued debts and obligations and “come out the far side” as a sleeker, streamlined and newly profitable venture. It’s called bankruptcy, a system under which management receives temporary protection from creditors while a new business plan is developed. The first thing any competent bankruptcy judge would examine, in the case of Ford, Chrysler, and GM, is their unsupportable labor costs under their current union contracts – and not so much their basic hourly wages (though those may also exceed market norms), but especially their long-term health care promises. Shed those (even without a repeal of the so-called “CAFE” standards, though that would also help), and the industry might very well be profitable again. If union members seek someone to blame, talk to a Congress that’s been busy regulating the size of our toilet tanks, the innards of our lightbulbs, and … oh yes, how much of the gas we pay for (and pay taxes on) we’re allowed to burn, each mile we drive. While they block new drilling, new refineries, new coal-fired plants, new nuclear plants … Once Congress steps in and forestall the orderly, deliberative process of bankruptcy relief, we’ll likely end up with white elephant auto plants in Detroit that will never again compete on true cost and quality with free-market factories elsewhere, instead turning out “fuel-efficient, green” cars consumers don’t want, under management by a consortium of federal bureaucrats and the labor unions, abetted by a bunch of hollow public relations happy-talk. Do you suppose they’ll do as well as the Russians did with their Lada? Will they rival the VA hospitals in innovation and customer service? And how will Congress then deal with the refusal of consumers to buy their lovely new models, the “Rayburn,” the “Johnson,” the “Meany,” and the “Hoffa”? By piling punitive “windfall” taxes onto their remaining free-market competitors to “level the playing field”? Fortunately, chances for a rash move toward nationalization before January are already fading. Till then, the Republicans still have 49 senators, and they’re balking.
In the House, Minority Leader John Boehner, the Ohio Republican, assailed the proposed aid to Detroit as “neither fair to taxpayers nor sound fiscal policy.” Senate Banking Committee Chairman Christopher Dodd, D-Conn., replied that he knew of no Republicans who would support the $25 billion proposal by Democrats, and he was disinclined to move a bill without bipartisan support. Majority Leader Harry Reid finally canceled the vote a few days ago. Good. You wouldn’t buy a used car from a salesman who told you, “This offer expires in 10 minutes!” We should be at least as cautious about a bum’s rush to nationalize a major part of the U.S. economy. November 25, 2008 Vin Suprynowicz [send him mail] is assistant editorial page editor of the daily Las Vegas Review-Journal and author of The Black Arrow. Copyright © 2008 Vin Suprynowicz
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