Wednesday, November 19, 2008

Auto Industry Bailout

The big news of the day is the auto bailout being debated in Congress and the effect it had on the markets (Down below 8,000 for the first time in over 5 years). Senator Vitter has made up his mind that he wants the auto industry to burn or if they are given a bailout, it should screw over the workers as much as possible.

I wrote my only useful congressperson (Vitter and $Bill being more useless than a condom dispenser in a convent) on some of my thoughts:

Dear Senator Landrieu,

I write to you because I've read that you haven't made up your mind on the Auto industry bailout proposal being finalized. I ask that you vote for this measure when it is finalized.

Not many Louisiana jobs are at risk. It's mostly taking our money to pay for others. There are very good reasons not to vote for a bailout for the auto industry. They've had many problems over the years. The quality control through the 1980's was non-existent. They've built gas guzzlers. Their CEO's are tone-deaf, out of touch, and make horrible business decisions. They've failed to embrace change.

But I think that that's overlooking recent changes. In 2007, there was a major breakthrough in labor costs. They got a new union contract. They've brought their quality in line with Toyota (don't take my word on it, ask The Truth About Cars). It's going to take a while to work undo the damage they did with their previous cars, but they were on the road back.

Then the Wall Street Crisis hit and they were unable to get loans to put their plans into practice. They're running out of cash. If they run out, they'll be forced to file bankruptcy. A company as complex as GM doesn't stand a good chance of coming out of a bankruptcy. It will probably be sold at pennies on the dollar with hundreds of thousands (millions?) added to the unemployment rolls in the middle of the biggest economic disruption since the Great Depression.

Make no mistake, if this bill fails, the repercussions will snowball through not just the auto industry, but the entire economy. Can the financial crisis get worse? Absolutely. Remember that the Great Depression wasn't fully felt until well after the 1929 crash. This bill failing could deepen the crisis like what happened after the Smoot-Hawley Act of 1930.

It will probably be cheaper in the long run, when you factor in unemployment payments, crime, pension fund guarantees by the government, bond ratings of the state of Michigan and Detroit, etc. The worst thing that happens is some money is lost and they go under in a few years. Even then, the economy will probably have recovered enough to take the dynamite blast of a GM bankruptcy reverberating through the markets. The best scenario is you give the auto industry a fighting chance to recover.

That's all I ask for: give them a fighting chance.

Thanks for your attention to this issue,
Clay __________

I was also going to include another thought of mine: the ones most strenuously opposed to the bailout are the ones most ignorant about the industry. Yeah, Rick Wagoner and Bob Lutz are assholes (especially for that "crock of shit" comment), but it's hard to imagine someone else doing appreciably better given the hand they were dealt. They are far and away better than Roger Smith, whose catastrophic tenure GM still hasn't recovered from. Yes, that is the same Roger Smith as Roger and Me fame.

As a side note, I've been pretty interested in the auto industry for a while. Every year at Tulane, I worked on the Mini-Baja car. When I was a sophomore, I almost went to Dresden for a semester abroad that could have ended with an internship at BMW's engine design department. Had things broken a little differently for me, I might be working in the auto industry right now. As it is, I've stayed a member of the Society of Automotive Engineers, just out of interest, even though I have nothing to do at work in the auto industry. My best wishes go to my fellow mechanical engineers in the auto industry, whatever company they're with. I fear they're going to need it.


Anonymous said...

I am paying for my own heath insurance. I don't want to pay for auto workers health insurance. Why doesn't the govt. pay for everyone's health ins. and then bail out?

Schroeder said...

Actually, I think the inhabitants of a convent might actually figure out what to do with a condom dispenser. Vitter never strays far enough away from the Republican manual to think for himself.

Clay said...

If you want to find those responsible for the decline of the auto companies, look no further than Kaiser Permanente and pals. The health insurance costs have eaten them alive.

Providing them with national health insurance might just do the trick.