GM and Chrysler

A Different Model?

I've criticized Washington Post columnist Steven Pearlstein in the past (check out "Letter to the Washington Post, #7" and "No Bailout"), so it's probably only fair to acknowledge when Pearlstein may have gotten it right. In particular, the federal investment in GM could turn out to be a very positive intervention in the long run.

In his Post column today (read it here), Pearlstein argues, as he has in the past, that GM and Chrysler and their suppliers are too big to fail. This could be just a rationale for a bad bailout. But I think Pearlstein is correct when he says that the government's investments in Chrysler and GM aren't bailouts, at all, but a massive intervention aimed at protecting jobs and pensions and manufacturing capacity.

Pearlstein points out that the intervention wasn't mandated, the Obama administration elected to intervene. In the process, original shareholders have been wiped out, or nearly so. The management teams that presided over the collapse of the two companies have been dismissed. "Bankers and bondholders who had the bad judgement, or the bad luck, to lend money to these companies" will get only pennies on the dollar.

But Pearlstein points out "any fair analysis would also show that the net present value of wage, benefit and job-security concessions agreed to by the United Auto Workers amounts to tens of billions of dollars." In exchange, some autoworkers will keep their jobs. Pensions will be cut, but will survive. And the union, its members and related organizations will own about one-eighth of GM and, I suppose, a similar share of Chrysler. The UAW will have to find a way to make this ownership share pay off, not a sure thing, but maybe a way to pressure the still giant auto companies to operate in the interests of all stakeholders in the future rather than in the interests of a privileged few.

And though I wish to give Pearlstein as strong an "attaboy" as possible for his column, his closing sentence opens up a whole new can of worms. "If President Obama can get most of our troops out of Iraq by the end of 2010, he ought to be able to get our money out of Detroit by then, as well," Pearlstein wrote.

I don't know about that analogy, Steven. First of all, I'm hoping that the U.S. investment in GM is not based on the same lies and deceptions that framed and covered the U.S. attack on Iraq. Second, we ought to be looking for some actual success story as a result of the GM investment, not a laying waste to the company. Finally, the troops in Iraq are, in significant numbers, moving to Afghanistan. Here's hoping that there are far better uses for the GM cash when we finally get it back.

Auto execs take the train (and love it)

So, it's been a bad week (month? year? decade? two decades?) for GM, Ford and Chrysler. Depending on the time span in question, they are failing financially and politically, not to mention competitively. Should we add environmentally, morally and millenially? As it turns out, with health care, pensions, housing and employment growing ever more problematic for millions of us, there is still some truth to the notion that as GM goes, so go we all.

This past week, the CEOs of the Shrinking Three got spanked in Washington, but still couldn't get paid. Rebuked for flying their separate corporate jets to town at a cost of tens of thousands of dollars, the sound of slamming doors had barely stopped ringing in their ears when the door opened one more time so that the House Democratic majority could kick Rep. John Dingell (D-GM) to the curb. The Dear John message was obvious as the Dems replaced Dingell with Henry Waxman (D-CA) as chair of the Energy and Commerce Committee.

In a separate press conference, congressional leaders suggested that the auto companies shouldn't bother to return to Washington without a plan we could believe in. A commentator on CNN suggested that the CEOs might have gotten a better response if they'd rode a bus to D.C.

But it's time for a compromise here. How about if they'd taken the train together from Detroit? Would that be better? Imagine all that time together--the ability to both relax and focus, to plan, even.

Cynicism aside, the execs (Richard Wagoner of GM, Alan Mulally of Ford and Robert Nardelli of Chrysler) are smart and experienced people who lead huge organizations with lots of resources and, even, creativity. Surely, they saw major parts of this crisis coming. And they have groupings within their organizations who have developed and promoted programs and projects that could be part of a creative plan to save the core of the domestic auto industry.

Sixteen hours on a train together discussing the obstacles and challenges might have resulted in the three arriving at Washington's Union Station as something other than puppies due for a whipping. There might have been more "you know, we've been talking," more "we can fix some of this," more "here's an idea I love," more "this is going to be painful, but here's the beginning of a plan for a greener transportation system in the United States and for Detroit manufacturing's role in that system."

Imagine Wagoner, Mulally and Nardelli running off the train yelling excitedly at each other. "You call, Pelosi. Tell her we'll be late, but we'll be there. We gotta find a Kinko's, make 500 copies of this proposal."

"I'll do it," shouts Wagoner. "But make it 1,000 copies. The press will want their own copy."

But the opportunity has passed them by. They came. They saw. They failed. And, anyway, you can't relax on Amtrak. It almost never runs on time or on decent track. Is there even rail service from Detroit to D.C.?

Still, there's always hope. And if they do come up with a plan that Washington can believe in, maybe they'll think to put a better rail system in it.

Bailout and regulate

Not that Charles Krauthammer needs to acknowledge my existence, but I feel like he's here to nullify mine. I only wish I could swing enough weight to nullify him back. I would regard the fact of his nullification, second only to the existence of my children, as my greatest contribution to life and culture to come.

In "A Lemon of A Bailout," Washington Post, Nov. 14, Krauthammer claims that some sort of rescue of the banking industry makes sense because "...finance is a utility," like "...the electric companies." This observation comes on the way to his larger point that extending the federal bailout to include the auto companies is arbitrary and inefficient. After all, Krauthammer might claim, capitalism can't exist without a financial sector, but we could all muddle through with a shrunken and bankrupt auto industry.

If that were actually true, then exactly what would be the point of having a capitalist system? I mean, if capitalism offers nothing to the many, if jobs and products aren't the principal parts of that commitment, then 90 percent of us (at least) have no use for it, at all. Who agreed to this deal?

And, if Krauthammer's assertion that finance is integral to capitalism, but auto as a dominant industrial presence (at this point in time) is not necessary to capitalism, is not true, then it follows that not only should we rescue, but we should regulate with an eye to maximizing employment and making autos and jobs as people-friendly and earth-friendly as possible.

jde