Naivete

Do you think the government should try to save the big 3 automobile manufacturers?

I've heard it said that a million jobs would be eliminated as direct and indirect consequences of the failure of GM or Ford. This projection seems to fuel congressional democrats in their efforts to put together a rescue plan. I think they must use a multiplier of 8 to get from 125,000 GM employees to a million total job losses. Given the car dealerships and suppliers tied to GM, then add business services like legal, consulting, auditing, advertising and insurance and banking, add in the Cintas, Snap On Tools, and Red Goose shoes people, then the roach wagon and lunchionette people, and other retailers who supply the domestic needs of the workers and their families, plus local government employees discharged as tax revenues fall, maybe you'd come to million people over a six month period. Also, there would be a severe impact on GM retirees, who are probably equal in number to current employees, as they would lose over half their retirement income as well as their medical insurance coverage. Pretty scary.

But given that the automobile companies are losing a lot of money, are already insolvent (ie they owe more than they own) even before they write down the value of their assets, won't be able to borrow money from the usual sources to pay their bills, and face big losses on their credit portfolios, they're probably doomed to failure regardless of any immediate assistance. Especially since, even assuming some economic recovery in a couple of years, they are not equipped to provide the kinds of cars consumers will desire to buy.

I'm sure auto execs have figured this all out and are prepared to enter bankruptcy, wipe out their debt, liquidate their assets, then lease back the desirable ones, stiff the pensioners and renegotiate their labor deals. Maybe they won't eliminate the unions entirely, but they'll demand wage rates and benefit costs be slashed to maybe a half of what they are now. Do I think bankruptcies inevitable? The more I think about it, the more likely it seems.

Since the labor unions are the ones who'll be most adversely affected, I assume it is they who are pushing Obama, Reed, and Pelosi to act to save the companies. But you can't save someone who doesn't want to be saved. I support organised labor, but even with a friendly president and congress I don't think the unions will be able to keep the execs out of bankruptcy court, and I think the government should hold on to the hundred billions to pay out as support to displaced workers in the aftermath.

Naivete? Because I don't think I'm half well enough informed, bright enough, or suspicious enough to divine what's really going on.

Love


PS Or maybe the government will have to give the hundred billion to AIG to buy out of the credit defauls swaps on GM's debt. Oh My!