Editorial: Bailout Watch 258: Now What? (Part Two)
If there is one man responsible for GM’s successful semi-suckle on Uncle Sam’s teat, it’s Steve Harris. I reckon GM’s PR mastermind moved the Congressional bailout hearings from the beginning of the week to the end. Tuesday’s catastrophic new vehicle sales numbers highlighted the fact that SOMETHING HAD TO BE DONE. Friday’s unemployment stats added the critical word NOW. Once Congress convinced itself that it could convince the American public that really bad shit was about to go down, the bailout was a done deal. In truth, it’s just the start. Harris knows it, you know it, and the American people know it.
A recent CNNMoney poll revealed an enormous gap between voters who don’t support the Detroit bailout (61 percent) and those who don’t support the Detroit bailout and think it won’t help the U.S. economy anyway (70 percent). In this latter assessment, for once, common sense prevailed. If $700b to the smartest minds on Wall Street didn’t stop the recession, why would handing over less than a tenth of that to a troika of failed companies have a salutatory effect?
I choose my words carefully. Despite The Big 2.8 and our (their?) elected representative’s concerted and sustained effort to make Motown a synonym for domestic automobile manufacture, the average Jorge and Juanita knows the difference between Chrysler, Ford and GM and “the American automobile industry.” They understand that they have alternatives. Hell, they like the alternatives. They bought the alternatives. And no one’s threatening to take those cars away. Which frees them to ask the obvious, inescapable question: “where’s MY bailout?”
Considering the source of Motown’s collective “bridge loan,” this IS their bailout. And if taxpayers aren’t happy about the tens of billions of dollars heading for The Big 2.8’s coffers now, just wait until March, when Detroit’s begging bowl brigade descends on DC for Round Three. The chance of them getting a second bite at the multi-billion dollar proverbial cherry grows dimmer by the day.
In their search for survival at any cost, Motown’s mavens have maneuvered themselves into a lose – lose situation.
For one thing, either the economy will be in a severe recession/depression by March or it won’t. If it is… see? The Detroit bailout didn’t work. Fairly or not, if the industry’s prospects still suck, Congress will have little luck trying to sell the electorate on the idea that the bailout was a “success” that deserves repetition. If Detroit’s prospects suck even more than before– a downgrade that occurred during the two-week bailout-begging interregnum– the pro-bailout position will grow even less tenable.
At that point, by March, bailout fatigue will be terminal. Voters will realize that this Detroit bailout thing was never about “us.” It was always about THEM. And sorry guys, you had your go. Sink or swim. We’re floundering in our own sea of troubles.
If, however, the U.S. economy is NOT any worse than it is now, the argument underpinning the bailout ALSO loses justification. Once again, the feds bailed someone out and… nothing happened. American voters aren’t like OCD sufferers constantly checking to make sure the gas is off. The fact that a cataclysmic event didn’t occur isn’t proof that Uncle Sam was right to devote his time and our money to making sure it didn’t happen. Triple negative aside, what the Hell was THAT all about? I’m not paying for THAT again!
If voters are P.O.ed that Wall Street “squandered” their $700b, how do you think they’ll feel about Chrysler, Ford and GM’s “progress” over the next two months? Let’s face it: The Big 2.8’s sales will continue to fall. Their share of the shrinking U.S. market will continue to erode. Union concessions, debt-for-equity swaps and (God forbid) management changes will do nothing to staunch the flow of red ink, or remove the big fat “L” tattooed on Motown’s collective forehead. No matter what they do or don’t do, this bailout brands them as losers; now and into the future.
To counteract this cancerous concept, GM PR will spend the next couple of months spinning their [same old] turnaround story. Ford will continue to trot-out their entirely disingenuous “What me worry?” insouciance. Chrysler? Fuhgeddaboutit. They’re already dead. Come March, they’ll just be deaderer. Maybe even officially.
There’s your wild card. On one hand, the remaining domestics could point to a Chrysler collapse as a cautionary tale. Fork over more money or stick a fork in us. Your choice. On the other hand, Chrysler’s extinction could provide a compelling argument for a GM (and thus Ford) Chapter 11 reorganization. See what happens when you try to bailout a lost cause? Abandon all hope of a non-C11 turnaround ye who enter these congressional halls.
And that’s how this will go down. Next week’s bailout billions will be the only pre-C11 money for Chrysler, Ford and GM. Anything after this will be a debtor-in-possession deal. Bankruptcy isn’t just the right thing for these automakers; it’s the only thing. Even Steve Harris knows that. And if he doesn’t, God help Detroit.
More by Robert Farago
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The phenomenal misunderstanding of the entire nation, much less this comment board is the face that I, and many others -- am not a UAW employee. I am an IT service supplier worker. I don't work directly for the big three, but I am damn sure aware that If I don't deliver the best service that I can that my job won't be there tomorrow -- under ANY circumstance. I've never had an entitlement to my job. I work for an "at will" employer. Most of us here are in the same boat. I happen to think that the smart thing is to stay and fight for my job, my state, and this business that I grew up in.
Christopher, I don't think that it's all that surprising of a misunderstanding. The Big 3 have made it all about themselves. From a PR standpoint they have made a huge mistake. They have played into the public's preconceived biases. For just a moment try to forget that your living is tied to these guys and think like the average consumer for a moment. -average consumer rant on- The Big 3 are truck companies that occasionally make cars. They used to make cars, even good cars, but with a few notable exceptions the only vehicles that they make that are top of their class anymore are trucks (or based on trucks). They are also the guys who designed and built the worst cars we were ever forced to drive (whether by finance, availability, Hertz or our parents). While we were driving these cars, we had to deal with useless guarantees, design and manufacturing mistakes, and Dealers that lied, cheated and stole whenever possible. Now the Big 3 are in trouble, trouble they brought on themselves by not diversifying their product lines like their competition, and by not investing their profits for the future but buying various ancillary businesses, running them into the ground, and then selling them for a loss. They somehow manage to ignore the problems that have been evident for years. They wait till the enormity of the worst financial collapse in at least a generation has finally hit the general public. They then finally break down, admit that their might be a little problem with their business model, and ask for help. To get help they go to the only body of people who are collectively hated more then themselves, Politicians and in specific the US Congress. The Big 3 and the UAW have made the face of the bailout: A) the companies that have screwed the American public for years B) the "greedy" and "lazy" workers who put the vehicles together (and who get great retirement, great pay and health insurance) C) the greedy, double dealing, Dealers who are the local face of the corporations that have screwed the consumers for years and frequently gouge the consumer on new and "Pre-Owned" cars, and repairs to the cars they sell. Those are the people that they constantly bring up as the losers if they go under. The suppliers are an afterthought mentioned in passing, until someone points out they employ a lot of people too. They don't mention the industries that depend on the salaries of those UAW workers and Automaker execs, and not the contractors like you. Now the average consumer is looking at his 401k halved, his job is shaky due to the economy, and every morning on the way to work he hears about another 100,000 people being laid off on the Hot 100 Zoo Crew. Now a bunch of multi-million dollar CEO'S are asking for billions of dollars to bail out companies who have screwed him over for years. -average consumer rant off- Who would blame him for saying SCREW YOU. With the weight of all those biases, fair or unfair, true or untrue, the average consumer and taxpayer is uneasy with giving these guys any money, much less buying one of their vehicles. Then the CEO's and UAW show up in DC and confirm all the worst of the biases. Flew in on their private jets (what, CEOs are to good for coach?) They take on no responsibility for the crisis in their own business (Unfair competition! Eleventy bajullion models that get better than 60MPG {when driven by left handed rabbits, on E85 EPA estimate}). The union guy just keeps talking about the same little old lady who got some money out of the last renegotiations (it sounds like a great story the first time, by the fifth, not so much, more like he couldn't find another quite so pathetic) They can't even tell the congress how much money they need. Is it too much to ask for a detailed plan? Then they came back a few weeks later and it was even worse! They asked for more money, and their plans were mostly wishlists, it was almost like they were writing Santa. Is there a solution? I don't know. I do know when we were looking for a car a few months ago I wouldn't touch a Big 3 car with a ten foot pole. Not for quality issues, but because I don't want to buy a car, no matter how cheep, without a guarantee that can't be shed in the inevitable bankruptcy. I cannot be the only one. As RF and others on this site have frequently (and correctly) pointed out, there is no way out for GM and Chrysler but Chapter 11. Ford could possibly make it without... perhaps... maybe. They all have to shed, brands, dealers, union commitments, and bad products. There is just no really good way to do that without Chapter 11. Throwing money at them and hoping for the best is the same as burning it. I too work in a dying industry and I will tell you what I tell everyone that comes to work for us. Don't plan to retire here. Keep your skills current and saleable. Take care of your own money, put some aside for the lean times, and contribute to your 401k at least for the matching. But when it starts looking really bad, don't look for me. I will already be gone. Good luck to you, I hope it works out, but remember what happens to the guys who go down with the ship.