Come for the Politics, Stay for the Pathologies

Sunday, March 29, 2009

So Rick, How’s That Bailout Working Out?

The O’s administration has swaggeringly demanded Rick Wagoner’s resignation as CEO of GM as a stipulation for additional bailout funds. What a surprise. This administration, made up of government bureaucrats and functionaries will certainly know how to run an auto company as well as they can run federal regulatory and oversight agencies. Maybe the O can get Bill Ayers, or an otherwise unemployed community organizer to take over for Rick.

But what did Mr. Wagoner expect? When you borrow money from your uncle, it’s going to cost you more than principal plus interest.

At this juncture, GM’s cheapest, quickest and perhaps only viable restructuring option is under chapter 11. If they had proceeded along that course last year when their illiquidity became apparent, the government would not be calling the shots now. And we would not be caught in a rip tide dragging us toward a socialist shore.

What a sorry mess the Autos created. There’s no doubt that much of it was their own fault. But a fair degree of fault can be leveled at the UAW under the leadership of Ron Gettlefinger. The destruction of this once proud industry was achieved through the complicity of the two organizations that had the most at stake, the “Big 3” and the UAW. For their part the UAW presented unyielding demands for unsustainable wages and benefits, and tactically staged crippling strikes that cost GM billions of dollars earlier this decade. This sent a clear and chilling message to Chrysler and Ford management. But it was the Autos' management teams who yielded to demands that they knew were unsustainable and would not serve anyone in the long run. In a game of “pay me now or pay me later” both labor and management chose later, no doubt hoping that later wouldn’t arrive until, well, later.

I think Wagoner should have been fired for agreeing to take bailout money in the first place. Now, not only are GM shareholders, bondholders, employees and unions screwed, but so are the rest of the citizens in this once great country. We will undoubtedly soon become “owners” of auto companies, along with banks, insurance companies and god-knows what else. Welcome to Obama’s promised land.

As an aside, does it concern anyone else that Al Jazeera was all over this story before most of the US media got a hold of it? I take it they feel it is a good sign. Why?

Again, no sleep tonight.