Devils Night 2.0 - Let’s Burn it all down!
Posted on November 20th, 2008
by Sean Scallon |
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Devils Night was the way Halloween was described in Detroit back in the 1980s when arsonists torced abandoned properties. Twenty years later the bonfire of the inanities returns to Motor City as Republicans begin the process of taking the “Mo” out of ”Motown”.
So people are holding it against the execs of the Big Three because they all flew their Lear jets to D.C. O.K. but then please explain to me why AIG execs can spend your taxpayer dollars and mine on weekend retreats at posh resorts and hunting lodges and give their equally incompetent management bonuses and still get an extra $65 billion from the Fed to blow right through while the rest of us are bashing the auto industry asking for $25 billion loan combined just to stay afloat?
Apparently we have reached the point in this country where making things no longer are is important as pushing money around at the click of a switch. All of us have warned that if the Big Three go under, we’re in danger of losing 3 million jobs and a good chunk of our manufacturing base and we’ll still pay with our tax money for all the autoworkers pensions the feds will now be responsible for. But apparently that’s less of a concerns, at least to Henry Paulson, George Bush II and Republicans in the Senate, than watching AIG crash and burn. Why?
Oh I forgot, AIG owes Goldman Sachs $25 billion and since this has become the Government of Goldman Sachs, God forbid we should let them take any losses.
As I said in a comments section over at Chronicles, will the last Republican in Michigan please turn out the lights? Even the lauded Michigan Republican Rep. Thaddeus McCotter supports helping the auto industry. Too bad his fellow Republicans feel bailing out financials are more important. And once upon a time Republicans carried Michigan in Presidential elections five times in a row. Now they’re determined to become a regional party.
Oh, and speaking of Michigan and the Republicans, Mitt Romney was in full campaign mode again, meaning Plastic Man was flip-flopping. After winning the Michigan primary by promsing $20 billion in subsidies to the auto companies, now he says against any kind of bailout whatsoever. I guess he’s trying to impress Republicans in Wyoming.
Anyone who thinks Romney is a serious candidate for 2012 ought to have their heads examined.
I’m against bailouts of corporation in principle and I’m all in favor of forcing the Big 3 to fire their management and engineers, reopen union contracts and retool towards green cars in order to get this money. No sense pouring down another rat hole. But burning down the manufacturing base of this country just so we can make point is the evil incarnate of ideology. Perhaps we should have Democrats in the White House and in control of Congress more often so that Republicans can find their smaller government beliefs when they’re a minority. It’s so easy to do when you have nothing to be responsible for. Besides, Republicans have no credibility whatsoever to say “Burn Baby Burn” to the auto companies (and their suppliers and component makers let’s not forget those) and reward AIG and the finanicals with more money from the federal treasury. They could have stopped the financial bailout (and some of them did to their credit) but many of them turned chicken at Paulson’s apocalyptic rhetoric. Now they want to grow a backbone when millions of the ”Joe Six-Packs” they say they love so much face the loss of their jobs?
Play with fire and you will get burned.
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Let me get this straight then. Two wrongs (or 700+25 billion wrongs) do in fact make a right?
While a PR disaster, the fact that the Big Three CEOs took corporate jets to Washington changes no fact important to this debate. The auto industry is a national asset, and other countries with auto industries know this. That is why President Sarkozy of France said today, in the midst of layoffs at Puegot, that the French government would help the French auto industry if necessary. That is why the governments of Germany and Canada have indicated to Ford a willingness to help–Ford has had significant operations in both countries since the days of Henry Ford. Only in the United States would both libertarian and environmentalist zealots join hands to help destroy a significant American industry and all the jobs, communities, and families linked to that industry.
I find that concluding paragraph confusing after the rest of the article. A few questions for Mr Scallon: Why insult Romney’s mannerisms and spin his opinion when Romney sees chapter 11 as a legal way to accomplish what Mr Scallon advocates for the Big 3? Is it because Mr Scallon prefers legislative/executive force over judicial? Does he really think that 25 billion dollars (or more) will prevent chapter 11 from happening, or will it just postpone it? Is he advocating more bailouts, because the Republican party must save face with Joe? Finally, does he think smaller federal government is just a fantasy to mobilize the minority party, but that it has no use when it comes to actual governing?
Mr. Tracey,
Some questions for you:
Can you point to a time after 1932 when the GOP produced “smaller federal government”?
Romney’s op-ed piece was superficial and unpersuasive. He considered none of the significance of Chapter 11. And, to be precise, he wanted a “prepackaged” Chapter 11 in which the federal gov’t would provide (or guarantee) the exit financing. So there’s the gov’t just the same. The only thing that would’ve happened is destroy shareholder value, threaten or perhaps destroy the customer base, and shred the contracts of dealers and suppliers–clearly much more consistent with a “smaller federal government.”
Oh, and if you’re worried about $25Bn for the whole industry, just wait until you saw the amount Washington would have to pony up for exit financing in Romney’s “prepackaged Chapter 11.” It would multiples of $25Bn (likely at least $25Bn just for GM.)
And that’s not to mention that Chapter 11 would likely foist tens of billions of dollars (or more) in pension liabilities on the PBGC.
The question is not ideology (much less “small gov’t” bromides that worked really well in the election.) It is the practical question of the significance of the auto industry and the best way for it to achieve competitiveness.
’say “Burn Baby Burn” to the auto companies (and their suppliers and component makers let’s not forget those) ‘
And don’t forget that once they lose their jobs they lose spending power which effects credit card companies (layoffs) stores (layoffs) factories (layoffs) and trucking (layoffs).
I’m usually a burn burn burn type but this economy forces me to reavaluate.
Theissue comes down to one word, repeat it with me, JOBS, JOBS, JOBS, JOBS!!
The party of the rich can/will let this happen because their base will be protected (bailout money filling their pockets) and they can just let Rush blame it all on Pelosi. And Rush listeners will believe it.
Letting the auto industry go bankrupt doesn’t mean the auto industry goes away. The Big Three will become leaner and more efficient if only the Government will stay out of it.
http://rightklik.blogspot.com/
They need to restructure so they can get out of those rigid union contracts. The bailout will only postpone the inevitable. They should have streamlined their business model thirty years ago and moved operations to Alabama, Mississippi, Georgia, or Tennesee. The Unions and the unfriendly business environment are what made manufacturing less viable in the US, and especially places like Michigan.
Whatever Romney’s motivations, and he’s certainly not shy about switching his convictions, his pointing to the labor cost differential is irrefutable. You cannot stay in business long when you have to pay twice the labor cost as your competitors.
Yes, the Wall Street bailout was wrong, and most GOP legislators voted against it–for once doing the right thing, and shame on the leadership. That doesn’t mean we should repeat the same wrong with Detroit. Should we take taxes from people who earn $20/hr to maintain those with $72/hr jobs. Bear in mind that at this moment, some 12,000 workers are sitting around in a U.A.W. “job bank” doing nothing and getting full salary.
Okay, the industry is a national asset, as Mr. Piatak points out. Fine, but that asset is going to shrink in value if we just float a check Detroit’s way. I mean, I don’t see too many Puegot and Renault dealerships around here, and they used to compete in this market. Endless subsidy is no answer.
Too, if Germans feel an obligation to Ford, don’t we have something of an obligation to Honda, Toyota, Nissan and the others who have come here and set up manufacturing in our country? My wife’s car, an Acura, is 75% American. Why should they be punished by having their competitive advantage blunted through subsidies?
The tide appears to be turning in the Republicans’ favor on this one. Don’t get in the way of creative destruction.
Mr. Copold,
Under the new UAW contract, which won’t come into effect fully until 2010, the labor differential between the US auto makers and the foreign auto makers operating here will be substantially eliminated. This is a fact largely ignored in the superficial media analysis of this issue, which has largely wallowed in anti-American sentiment instead. In any event, much of that labor cost reflected what are euphemistically called “legacy costs,” meaning Americans whose health care and pensions are being paid by the Big Three. If the Big Three disappear, those legacy costs will be assumed, at least in significant part, by the taxpayers, who will be paying for the health care through Medicare and the pensions through the Pension Benefit Guaranty Corporation. It’s unclear to me why paying taxes to support Medicare and the PBGC is good, but paying taxes to try to keep the Big Three viable, so they can continue paying those benefits themselves, is bad.
As to the foreign automakers who are here, the fact remains that, on average, the Big Three vehicles sold in this country have a domestic content of around 80%, and the imports sold here have a domestic content of around 35%. The Big Three still buy 8o% of the auto parts made in this country, and, unlike their foreign competitors, do the vast bulk of their engineering and research and development here.
Finally, there is reason to doubt how much longer the Japanese will maintain a significant manufacturing presence in this country if their domestic competition vanishes. The major reason foreign car makers have plants in the United States is political, to hedge against the possibility of American protectionism. Once the threat of American protectionism is dead, because the American auto industry is dead, why would foreign car manufactuers keep building plants here, or even keep operating the plants they’ve built? Last summer, the Wall Street Journal quoted an unnamed Toyota executive as saying, “It’s much, much more profitable to produce cars in Japan and ship them all to the U. S. right now, if it wasn’t for the political problems that might cause.” Once there is no possibility of “political problems,” what would restrain Toyota from pulling all its production back to Japan, or shifting it to such low wage countries as Mexico?
“You know what the trouble is Brucey? We used to make sh*t in this country, build sh*t. Now we just put our hand in the next guy’s pocket”
–Frank Sobotka, The Wire
‘This is a fact largely ignored in the superficial media analysis of this issue, which has largely wallowed in anti-American sentiment instead.’
Anti-americans sentiment, unless those americans are job creators. They’re a special class now.
‘Letting the auto industry go bankrupt doesn’t mean the auto industry goes away. The Big Three will become leaner and more efficient if only the Government will stay out of it.’
Leaner? It’ll be dead. In normal economic times a company might get bought by a competitor or someone else wanting to enter the market. Right now, no. No one will lend money to someone wishing to keep GM alive.
If government gets out of the way as you say (impossible since they aren’t in anyones way, they’re doing their job) the big three will be leaner. Razor thin actually. Their US footprint will be hard to find. Almost all operations will be moved to Mexico or Canada. Probably Mexico since the government there fits the conservative model perfectly, they’ll do whatever big business says and have little regard at best for it’s citizens.
Bankruptcy will help the Big Three with their pension liabilities, but those liablities won’t go away. I lean libertarian, but our shoes are already over the creek on this one. If either way the government/taxpayers will foot the bill, I prefer the $25 billion loan to the Big Three. At least Chrysler paid their loan back with interest in the 1980s.
After work today, I’m going to write a formal request to my Congressman for my tax bracket to be included in the emergency Federal funds that will be distributed in Obama’s new stimulus package. Sure, I could have made better decisions earlier in life that would have made it possible for me to be more financially sound today, but I didn’t, and we all need to be worried about the consequences of my past behavior. I’m not saying that failure to aid me in my time of discomfort would definitely lead to the catastrophic ruin of our whole economy. I’m just saying that we don’t know what the consequences would be if I was forced to reorganize my finances, re-negotiate my obligations to creditors and dependents, and trim the comfortable excesses and priveleges from my life. Certainly Starbucks and PF Chang’s would suffer, and that’s just for starters.
I’m sure my more affluent brother will object to my bailout, but he has no credibility, because his job was secured by the huge, unsolicited check from the Feds to his bank (which they promptly used to buy another bank).
Although I’m just beginning to cultivate an understanding of conservative principles, I do have some experience with dependence and debt. The two go hand in hand. Asking for help usually puts one in another’s debt. The greater and lengthier is one’s dependence on that help, the greater is the burden of the debt. (Refer to my Discover Card statement.) The corporate executives I work for would gladly take a cash infusion from the Feds to get us through this quarter, even if it meant that my company would be obligated to take orders from the federal government. They would probably do it again next quarter, and so on. Two years from now the decision-makers who “saved my job” by putting my company in the government’s pocket will have moved on with golden parachutes. Will my company be any stronger or my job any more secure? Who knows, but why take any chances today?
Romney’s plan may not be the right one for the American auto industry. Others here have made a good case that it would mean greater government involvement than just writing a check would mean. This isn’t surprising since his past successes in the private and public sectors involved large-scale, coordinated solutions to complex problems. He’s a manager, and he would have the Federal government manage our way out of the economic mess that was created by its previous meddling and neglect (i.e. FNMA/FHFA/CRA, tax breaks for heavy vehicles and ideological trade policy - thank you for your voice PJB).
I am consistently impressed and humbled by the knowledge of both the writers and the posters on this site. (Thank you, Mr Piatak.) That being said, I thought limited federal government was a conservative principle founded on practical historical insights. I’m surprised to hear conservatives on a conservative site dismissing as impractical ideology the principle of limited government and market solutions– aided, of course, by constitutional protection of our nation’s interests against foreign competitors.
Mr. Piatak,
I’m not opposed to helping the Detroit Three. I want to be clear about that.
My fear is that we’re going to just hand over the money, hoping to tide the American companies through the recession. It’s what the U.A.W. is pretty much demanding right now. That’s not going to help anyone. We will still see all the medicare and pension costs anyhow, it’ll just take a few more years to show up. Really, we should probably go ahead and assume those costs anyhow, although scaled back.
As for the union concession, they’re too little, too late. They don’t completely close the gap, and they only take effect through turnover. Moreover, any serious concessions will need to extend to workplace flexibility and modernizing. Ford, for example, has to build its showpiece manufacturing plant in Brazil for fear of the union’s response. And to be fair to the union, management has played ugly, too. Well, if the government is going to get involved, this crap has to stop.
As for the Japanese leaving the U.S., that’s not likely. We’re talking about billions of dollars in investments over decades, as well as hell of a lot of experience in their American employees. I’d want to see more than some unnamed executive leaking in the WSJ.
At any rate, if Toyota leaves, it will hand over a huge advantage in marketing to its other Japanese competitors, along with the Koreans and the Germans. It would also lose a hedge against oil prices driving up shipping rates.
The problem with going to Mexico or other cheaper countries, too, is that you simply don’t have the sort of stable business friendly environment there you do here. In addition to the corruption and endemic theft, there’s a good chance that the next election will see someone like Obrador come to power.
The Japanese and the others have been quite happy with the results they’ve gotten in the U.S. with U.S. workers. They’re not going to kill one of their golden geese, and if we want to save our geese, we’d be better off getting some serious reforms for our money
An interesting view of the automotive industry. Where do you see the future of the industry, will it ever recover or will there be major casulties?