Tuesday, December 09, 2008

Whither the cars?

There's lunacy afoot. At present, our congress is set to hand over $15 billion to the American automobile industry. This is the same auto industry that brought you the Cobalt and all things Pontiac.

Congress is making the decision to spend $50 of your money to prop up an industry that can't even figure out how to profit from the production of one of the most universally owned items in North America.

Of course, nobody wants to give GM money. Nobody does. At all. In fact, we've become so accustomed to Michigan being a den mother to the unemployed, that our eyes glaze over at the sight of blue collar workers trudging to the unemployment lines.

So here is the play. Play off the illusion that bankruptcy equals a production freeze (it doesn't, just ask Donald Trump). Pretend that a production freeze will literally cost everyone in America their jobs. Voila, you've made the case for a bailout.

Make screws? The failure of Hoffa Inc. will cost you your job. Make screwdrivers? Not if nobody is producing screws. Make movies? Not if all the screw and screwdriver manufacturers are out of work. You're a Manhattan socialite who has no employment, per se, but thrives on your family name? Well, you're probably fine, Senator.

This argument is utter nonsense.

Money isn't free, yah? Republicans are always remind you of this, and I'm no different. When you take $15 billion to keep the auto manufacturers afloat, thing happen that look suspiciously like ramifications.

In theory, everyone is chipping in $50 to help our age-old (emphasis on old) auto industry keep churning through a tough economy. In reality, your employer is paying more than ten times that much, while you chip in virtually nothing, thanks to our progressive tax code.

As such, when your employer is asked to pay several hundred dollars, they are forced to a decision. They can find the money by cutting CEO pay (not likely), or by cutting the general workforce (much more likely). When companies have money, they will invest it. When they don't, they won't.

The above paragraph is not polemic. It is not "voodoo economics". It is NOT debatable. It is empirically true. Thems the consequences. Anyone who pretends otherwise is either ignorant or lying to you.

As such, it is more than reasonable for you to ask where your money is going. If you ask the auto execs, and the UAW, they will tell you that you are investing in a game-changing automotive force that has learned from past mistakes, and is looking toward a new business model. If you look that their past mistakes, you realize that they don't learn from past mistakes.

Do you remember those President's Day sale ads from earlier in the year? The one's where an ostensibly-techno version of "Hail to the Chief" played as the Big Three advertised their entire product line? Wasn't that annoying? Did you watch those ads and think you'd like to buy into their vision? I sure as hell didn't.

And seriously, have you ever driven a Grand Prix? Only a North Korean peasant would call that thing a car.

American cars suck. They don't suck as much as they once did (I'd hold a Ford Focus up to any Japanese model, and it's half the price). But they still suck. They suck, not because American engineers are dumb, but because they are hamstrung.

At present, the big three are doling out paychecks to people who are no longer under their employ through something called a pension fund. The term "pension fund" is Union-speak, which, loosely translated, means "something nobody under the age of 45 will ever see".

Back in the Union heyday, when Toyota wasn't around to provide consumers with a sensible alternative to ugly American crap, the Union elite (aka The Mafia) had a stranglehold on the industry. They negotiated, on behalf of workers (and, of course, themselves) structured deals that were tantamount to a million golden parachutes.

As such, folks with no education to speak of could earn the equivalent of $30 an hour (adjusting for inflation) on an assembly line, plus overtime (which could be accrued without actually earning overtime, but don't get me started), and with a benefits package that you or I could only dream about, including the aforementioned pensions. As such, the average factory drone could expect to parlay a GED into a compensation package worth the equivalent of about $150k per year.

This situation was tenable until the precise moment at which competition reared its ugly head. Fast forward a few decades. Anyone with a modicum of sense buys Japanese, nobody wants to spend $26k on a Chevy Malibu, and now the UAW wants your money.

Should they get it? Of course not. A bailout simply takes money from organizations that have operated from a standpoint of integrity, and uses it to fulfill the promises made to organized crime/labor. The big three have proposed a restructuring plan that does not bear the lightest scrutiny.

You've read this in the papers, but the only solution is bankruptcy. At best. this will allow companies to extricate themselves from the sweetheart deals forged by the Hoffa clan, and to resume the business of making cars. At worst, it scuttles the ship, leaving the Japanese to take over the plant and offices that currently form the big three.

Either way, we ought not be enticed by the prospect of averting gloom and doom. Any industry that can only succeed via bailout should not exist. To think otherwise is to commit to socialism.

Don't be fooled, and stand up to the lunacy.


Blogger Memphis Evans said...

No one bailed out blacksmiths. I'm with you, TPWK.

11:44 AM  
Anonymous Anonymous said...

It's all just leading to a government bailout of the government.

12:45 PM  
Blogger Kevin Sawyer said...

The Mugabe approach. Fantastic.

4:16 PM  

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