Saturday, November 15, 2008
Failure must be tolerated
Having seen financial institutions suckle at the teat of government, broken businesses, and even cities, are lining up for their share.
Even Chrysler, which is held by Cerberus, a private equity firm.
Now the mayors of various cities are getting in the queue, looking for help with their pension costs and cash flow. The cities include Philadelphia, whose pension system lost more than $650 million in the first nine months of the year.
Professor Mitchell Langbert quotes Andy Martin, whose prophetic email in 2005 called for a bankruptcy filing by GM.
GM managers did not want to file in 2005 because they probably foresaw that bankruptcy could come some day, and they wanted to protect their executive pensions by insulating them from future creditor claims. In addition, GM's astronomical executive salaries could not survive a bankruptcy proceeding...
But GM's labor costs would be slashed as well in bankruptcy. In the long run, there is no way the existing labor cost structure can be preserved in the automobile industry. If GM and others move quickly, they can still save tens of thousands of good jobs and preserve good pay and good benefits. But every day's delay will cost the economy future jobs...
...every day that bankruptcy is delayed will cost every American economic security... Today the auto industry has unsustainable wage levels and ridiculous benefits. They are the product of a bygone era in labor relations when the Big three enjoyed a practical monopoly in domestic sales.
...the end of the road has arrived for the inflated, incompetent auto industry management... I predict even more dire consequences for the economy if aid does go to the auto companies... First, there will be no pressure to cut or costs and modernize labor relations. Wage levels are still way too high in the northern UAW auto plants.
Second, resentment is already building against bailouts that preserve high wages and executive perks, and are paid for by poor and working families...
...Sadly, I can only prescribe a bitter pill for my friends in the UAW. But I also can promise them that if labor and management do not head for bankruptcy court this week, the next pill will be a suicide pill. Which is worse?
Fast bankruptcy action will save jobs and stimulate the economic recovery. Delay is death, for workers, managers and our economy.
The American auto industry is an anachronism -- these companies must be gutted and reorganized. The same holds true for mismanaged cities and businesses. A major retooling is required due to poor stewardship; this is for the ultimate health of the entire economy.
Draw a line in the sand. Call your legislator and demand that these companies file bankruptcy and reorganize -- just like companies in the airline industry. The alternative is like filling a car's gas tank when it's sitting up on blocks.
Investors Business Daily: "No UAW Bailout"
Wall Street Journal: "Nancy Pelosi's Motown Juggling Act"
Gateway Pundit: "Big Three Bailout"