Bail Out, Fail Out
An argument against specious arguments
This week, Detroit will once again come to Congress and beg for money, after car-pooling or taking commercial flights to Washington. We can probably greet them at Gate 24 at United, in Reagan National. But Homeland Security might want us to wait in the baggage area. Be wary .. they have a lot of baggage.
BMW, Toyota, and Honda seem to be doing ok … they have plants in America, courtesy of cheap exchange rates a few years ago (and now, again). They make reasonably good decisions, and don’t have decades of union agreements to foil them … they are hurting, but not as much as the “Big Three.” They directly employ about half of the Americans Detroit has on their payroll, most under non-union contracts.
Most of the arguments for another bailout are specious … they don’t hold water, and this is the last chance at the well.
“We made a profit on Chrysler” … sure we did, twenty years ago … and the Company tried desperately to breach the covenants that gave our Government a lot of stock and options while Iacocca took $1 a year in salary. Sure, Chrysler paid off their bailout … but they basically invented the minivan, and then sold out to Mercedes-Benz.
“It’s a National Security issue” … c’mon, folks … GM made the Sherman Tank (WWII), and Chrysler manufactured the M-1 in its early years. But Detroit no longer makes snazzy new tanks Even if they could, by the time anybody ramped up production, a tank war would be over. Desert Storm (1991) provided six months for America to build up 600,000 troops on the ground, with plenty of completed tanks to support them … today, we haven’t even 500,000 troops in the Active Army. The first Iraq War lasted 100 hours. Despite media reports to the contrary, the second Iraq war (against an Army) lasted only 26 days. The last time our government simulated a Soviet (the old Russians) attack with tanks on Europe, the war was over in days (note: the simulation required tactical nuclear weapons). In any future war, there will not be enough time for any US industry to convert to the “war effort” ancient Congressmen might remember. Get over it: we had years to get around to entering either World War; today doesn’t give us time to build even a single “ninety-day wonder.”
“Jobs will be lost” … ayup, they will … poop happens. There are a lot of Lehman Brothers traders that are well-qualified to measure the torque on a water-pump bolt. Take a hint from the Auto companies themselves: they “spun off” their parts subsidiaries.
“Nobody will buy a car from a bankrupt company” … My cousin was recently offered his great-grandfather’s 1935 Marmon (the company won the Indi 500 for several years running) for over $40,000; recent sales of similar cars were priced less than $30,000. I own a Packard piano (made in West Bend, IN) from the late 1800’s … that company later entered the automobile business and was associated with Studebaker and Chrysler. I flew Delta through bankruptcy, and American on the verge of it. Technically speaking, a bankrupt company can avoid old debts but is responsible for every debt the day after declaring. Is anyone foolish enough to think that GM, Ford, or Chrysler might stop making cars? They might. But there are thousands of companies that will continue making spare parts for them, for the next hundred years. And they will need workers. *