Thursday, February 09, 2012

Keep Bailing

Tim from Colorado e-mails on the Chrysler ad kerfuffle:

The Chrysler Super Bowl ad has created a lot of talk. Some of it warranted and some of it a little silly, if you ask me. This on thearticle FoxNews website misses the major point, I think; I couldn't care less if the advertising firm that created the spot had a couple people who created stuff for Obama's campaign; it could be full of Obama relatives for all I care.

I will preface my remarks from here on by disclosing that I was born and raised in a GM town in Michigan; in my home town a Ford is a foreign car, ok? Many in my family have retired from or currently work for GM.

The part of this story that struck me was at the end of the article where Jay Carney attempts to defend the administration's decision to bail out the auto makers. Mr. Carney states that the president's decision to bail out GM and Chrysler saved 1 million jobs.

No, it didn't.

Ther bail-out smells at many levels.

GM and Chrysler weren't ever in a position where they would have been forced to close their doors. Each might have been forced into one form or another of bankruptcy; as a worst-case scenario, one or both would have been sold, but neither would have been liquidated in its entirety. Might some workers have been laid off? Sure; it's a bloated industry where union landscapers get paid $60,000+ a year to mow the grass. As it ended up, a lot of people who worked at dealerships were let go as the Obama Administration dictated that some dealerships be closed; those folks were not UAW members, so tough luck for them I guess.

Bankruptcy would have allowed each to renegociate labor contracts and retirement benefits. Built-in to the sticker price of each car produced in Detroit is a few thousand dollars to pay benefits to people who no longer work for the company. Bankruptcy would have allowed GM and Chrysler to be more competitive the minute they walked out of the bankruptcy proceedings, making them competitive stateside as well as globally. As it turned out TARP money went into the underfunded pension funds for UAW retirees. I worked for ENRON up until the end; where's my federally-backed pension?

What did happen and shouldn't have been allowed to happen was the Administration pushing an unsecured creditor, the UAW, ahead of secured creditors. What does this say to potential foreign investors? What it says is "Whatever you do, don't invest in US companies; the US Govt. may decide to overlook your secured credit and reward its political cronies first."

As a side note, the Chrysler commercial was filmed in New Orleans, not Detroit. I get that New Orleans is still recovering from Hurricane Katrina, but when is the Hollywood Welfare for Louisiana going to slow down? On cable TV we have "Swamp People", "Swamp Loggers", "Cajun Pawn Stars", "Sons of Guns", ad nauseum. Couldn't the Chrysler commercial's producers throw a bone to a few Detroit neighborhoods? And if Chrysler was complicit in the decision to film the copmmercial in New Orleans, then shame on them.

If I owned a Dodge..., well, never mind, that's just crazy talk.