Bailout Watch 159: WSJ: Just Say No. Or Yes.
Unbelievable, The Wall Street Journal has an editorial that positions the paper four-square against a federal bailout for Detroit’s beleaguered automakers– and then wimps out. First, the “not with our money you don’t” bit. “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… In fact, the main point of any taxpayer rescue seems to be to postpone a day of reckoning on those contracts. That includes even the notorious UAW Jobs Bank that continues to pay workers not to work. A Detroit bailout would also be unfair to other companies that make cars in the U.S. Yes, those are “foreign” companies in the narrow sense that they are headquartered overseas. But then so was Chrysler before Daimler sold most of the car maker to Cerberus, the private equity fund. Honda, Toyota and the rest employ about 113,000 American auto workers who make nearly four million cars a year in states like Alabama and Tennessee. Unlike Michigan, these states didn’t vote for Mr. Obama.” Hey! Place nice! Anyway, you get the picture– if only because we’ve been painting it for the last three years. But there’s a sting in the tail…
To review and conclude: “If Uncle Sam buys into Detroit, $50 billion would only be the start of the outlays as taxpayers were obliged to protect their earlier investment in uncompetitive companies.” True dat. So what’s with the asterick separated coda? “If our politicians can’t avoid throwing taxpayer cash at Detroit, then they should at least do so in a way that really protects taxpayers. That means handing a receiver the power to replace current management, zero out current shareholders, and especially to rewrite labor and other contracts. Anything less is merely a payoff to Michigan politicians and their union allies.” Sounds to me like there’s some internal wrangling behind the scenes as Mr. Murdoch’s media property. We’ll keep an eye on it. Or two.
Crackers on Nov 10, 2008
The editorial sounds reasonable to me. The last part about appointing a receiver sounds exactly like C11 without calling it C11. This could work PROVIDED they choose a receiver that is free to make choices based upon the best interests of all taxpayers, not just a select few in the UAW. Of course, what are the chances of that really happening?
Rtr on Nov 10, 2008
I don't understand the bail-out. It seems to me that US automakers find themselves in difficulty largely because of UAW contracts which make it impossible to compete with foreign makers except in certain select areas such as trucks and big SUVs. Some accuse GM et al of mismanagement. That's harder to say from my perspective. When GM has to spend something like $1,300 more per vehicle than Honda or Toyota, how the heck can they compete? On the weekend I caught an interview on Fox, apparently, somoething like half of the bail-out will go to pensions and benefits for UAW members. How will that help? I also wonder if a Chapter 11 would allow GM, Ford and Chrysler to get out from under their UAW agreements? I don't doubt that GM and Ford have the talent but they are saddled with a legacy problem which no bail-out is likely to cure. Rgds,
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