Tonight, I was going to write the most definitive post in the entire world on the plight of the Detroit automakers, and the arguments both for and against their receiving the government bailout that Democrats are asking for, but then I entered into the magical realm of the Ypsilanti 2020 Task Force, where my razor sharp wit (and will to live) got worn down to a dull, little nubbin by two-and-a-half hours of group editing… I mean, I love the folks I serve on the committee with, and I appreciate their dedication to this struggling little town of ours, but after an hour of debating punctuation, wording and layout issues with a dozen people, I’d do almost anything to make it end… Fortunately, our meetings don’t take place near a tiger enclosure.
As for the Big Three getting their piece of the $700 billion bailout pie, it looks like we could see a vote in Congress as early as Wednesday. Right now, it doesn’t look as though any Republicans are onboard, but maybe that will change if they become sufficiently scared between now and then. GM, in hopes of seeing that happen, has just released a terrifying new video about what we can expect if they go out of business. As fear seems to have been the primary motivating force responsible for the Wall Street bailout, I suppose it’s got a pretty good shot at working here.
And here’s a clip from CNN:
…Senate Democrats were trying to earn GOP support for their proposed bailout of the Big Three automakers. Democrats would like to see a vote Wednesday, but some concede they probably don’t have the support.
Senate Majority Leader Harry Reid, speaking on the Senate floor Monday, urged action on the plan.
“The Treasury Department has acknowledged that they could provide the auto companies the temporary assistance to keep automakers solvent by taking money out of the $700 billion we’ve already provided to the Treasury Department,” Reid said.
“If we move forward, we can protect American jobs, help American families and prevent our economy from falling further into a recession,” he said. “In the event there is objection to passing this important legislation, we’ll have the opportunity to vote on a second piece of legislation … that consists solely of unemployment insurance and relief for the auto industry and the auto industry’s work force.”
So, if I understand this right, if Congress doesn’t agree to extend the bailout to the automotive companies, they may pass new unemployment laws making it easier for displaced autoworkers to collect unemployment insurance, perhaps for a longer period of time than currently allowed for… I guess that’s something.
Harvard economics professor Martin Fledstein seems to advocate for bankruptcy in today’s Washington Post. But, if we’re unwilling to do that, he feels that restructuring is possible under the following terms:
…The goal of that restructuring should not just be to require the companies to make cars that are fuel-efficient and more environmentally sound, as President-elect Barack Obama has said, although that can be included in the government’s list of requirements. The goal should be to put the companies on a course that will allow them to survive for the long term, producing cars and creating jobs.
To do that, the government should insist that the unions accept reductions in wages and benefits to levels that allow the firms to compete with imports and with nonunion U.S. auto firms. The trustees of retiree benefits should be required to accept reductions in those benefits. The government should also insist that management eliminate dividends and restrain salaries until the firms return to profitability. Even creditors should have to accept write-downs in the value of their debts.
The government has substantial leverage to ensure that these changes occur. The auto companies’ management, unions, trustees of retiree benefits and creditors would recognize that without government assistance, the firms would be forced into bankruptcy and that the bankruptcy court could require even more severe cuts in incomes, benefits and payments to shareholders and creditors…
From the perspective of U.S. autoworkers, it looks as though such concessions are off the table, at least for now. But, as the professor points out, that doesn’t mean they wouldn’t be forced to accept concessions during either government imposed restructuring or bankruptcy.
And, for what it’s worth, not everyone agrees that high worker pay is to blame for the current situation. Some think it’s more due to management’s demand that the companies crank out gas-guzzling vehicles dependent on plentiful, cheap oil.
Get ready for a bumpy ride, Michigan.