Loans to the Big 3?
What does bankruptcy for the Big 3 Automakers mean? Partially it means they can tear up or substantially change the contracts that cause them to legally owe money to hundreds of thousands of people in the form of other businesses (parts suppliers, etc.), employees, retirees, and so on. How is that a good thing? I call that passing the buck -- with subsequently many more megabucks of social costs.
I think that the 70-80’s era labor contracts with the Unions were foolish and short-sighted but they were ultimately agreed to by the executives of that time. The goal now is to figure out how to make it work in the present. It’s not like the current management did nothing but fiddle while Rome burned. Already the UAW and Auto Manufacturers have worked together to change their contracts such that current workers are *already* (apparently) price competitive with their foreign competitors. I would suggest that this was no easy task and represents exactly the type of movement that Mr. Romney says the Big 3 are incapable of making without a healthy dose of Bankruptcy.
Now it is possible that he’s right and that if *loaned* the money, Ford, Chrysler and GM will fritter it away and end up destroying themselves anyway. I would suggest, however, that change is already underway. Even though none of these companies made the Prius, GM still had a net profit in the 3rd quarter of 2004 of $1.3B. Yes, they were lured by the high profit margins of the gas guzzlers and trucks prior to the spike in oil prices – but if you think they aren’t already in development (or production) of a full line of vehicles more palatable to the customers of today’s economic and social zeitgeist, I’d be amazed and I’m sure the Boards of Directors would be….apoplectic.
In perhaps an unfortunately metaphor, I see the proposed industry loan guarantees as giving the Titanic the much needed bigger rudder – one that gives the majestic ship a chance of steering around its icy nemesis, and allowing it’s steersmen to learn to keep their eyes on the horizon (and ignore the young lovers on the…well you know).
All that being said…I buy Japanese.
I think that the 70-80’s era labor contracts with the Unions were foolish and short-sighted but they were ultimately agreed to by the executives of that time. The goal now is to figure out how to make it work in the present. It’s not like the current management did nothing but fiddle while Rome burned. Already the UAW and Auto Manufacturers have worked together to change their contracts such that current workers are *already* (apparently) price competitive with their foreign competitors. I would suggest that this was no easy task and represents exactly the type of movement that Mr. Romney says the Big 3 are incapable of making without a healthy dose of Bankruptcy.
Now it is possible that he’s right and that if *loaned* the money, Ford, Chrysler and GM will fritter it away and end up destroying themselves anyway. I would suggest, however, that change is already underway. Even though none of these companies made the Prius, GM still had a net profit in the 3rd quarter of 2004 of $1.3B. Yes, they were lured by the high profit margins of the gas guzzlers and trucks prior to the spike in oil prices – but if you think they aren’t already in development (or production) of a full line of vehicles more palatable to the customers of today’s economic and social zeitgeist, I’d be amazed and I’m sure the Boards of Directors would be….apoplectic.
In perhaps an unfortunately metaphor, I see the proposed industry loan guarantees as giving the Titanic the much needed bigger rudder – one that gives the majestic ship a chance of steering around its icy nemesis, and allowing it’s steersmen to learn to keep their eyes on the horizon (and ignore the young lovers on the…well you know).
All that being said…I buy Japanese.
posted by Dyrk | 4:26 PM
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