Thursday, November 13, 2008

Facts DO matter and double standards don't make good arguments

Today's Toledo Blade editorial says that a bailout for the auto industry is vital, critical, necessary to avoid extinction, blah, blah, blah... It's the same story coming from everyone who wants a handout of tax dollars to save them from the bad financial decisions they've made, whether it be financial companies, mortgage companies, homeowners or, now, automotive manufacturers.

America has lost automobile companies in the past, so the first question I would ask now is why shouldn't we expect that we will have a change in the automobile companies in the future? Just like global warming alarmists - they assume that the current conditions are the best, and any 'change' will be catastrophic. Perhaps we should remind all of them that their trust in President-elect Barack Obama was that 'change' would be for the good!

But the biggest problem in their editorial is the lack of FACTS - or, rather, the blatant disregard of them in order to support their premise.

"The American auto industry has doubtless made many mistakes in the past, but in recent years has done an admirable job getting its act together. General Motors' current cash flow woes come as a result of no fault of its own. America's once-proud corporation is a victim of the Wall Street panic and the crippling credit crunch, which means consumers cannot get loans to buy vehicles."

As I've previously reported, GM has lost $57 billion since 2005. Ford has lost $24.5 billion since 2006.

Note the dates? There was no credit crunch in 2005 or 2006 nor for most of 2007. So how can the current cash flow woes of GM be 'no fault of its own'? The Blade editorial does not explain this, presumably because addressing these facts would not allow them to place the blame on someone other than the auto companies themselves. And if their problems are not their fault, they don't have to do anything to solve them.

And then there is the double standard.

In 2006, The Blade went through its own financial struggles (though rumors persist that they are still in difficulties). Their solution was to insist on cuts in wages, benefits and even employees. They publicly stated at the time that companies, in order to survive, have to make a profit and that their employee costs have to be such that a profit is possible.

They were right. But while they made such decisions for their own operations, they don't seem to expect that other companies will make similar tough decisions - at least, not when the government can save them from the difficulty of doing so.

So why the double standard? Why is The Blade so keen on giving our tax dollars to the automobile industry instead of insisting that the automakers renegotiate their union contracts as The Blade did?

It's certainly puzzling - and I don't have the answer, but I can speculate.

I think it has to do with politics - imagine that!

The Blade 'loves' the President-elect, so if Obama thinks something must be done, they are highly likely to agree.

Obama and the Democrats are tied so closely to the unions, especially the UAW, that they are falling all over themselves to preserve both those jobs and the pensions. One of the options being considered is this:

"Help Detroit carmakers with health and pension obligations. Under the most controversial idea being floated, the firms would get $25 billion to help pay the rising costs associated with 780,000 retired autoworkers and their families. The United Auto Workers is pushing this idea. The generous health and pension provisions that the UAW won when Detroit was flush are now a big part of what makes them uncompetitive against foreign rivals who don't give their workers such expensive benefits."

So here are the facts:

* The auto makers have been suffering losses since 2005. While their existing financial situation may have been compounded by the credit crunch, it only hastened the inevitable.

* Generous health and pension provisions for their UAW members are a major component of their costs, which make them uncompetitive.

* While some are calling for less remuneration to executives, no one is calling for major revisions to their union contracts, which would have an immediate impact on their bottom line.

But The Blade seems to think that Obama will save us all.

"President Bush should take the lead of President-elect Barack Obama and speed immediate emergency legislation that will enable General Motors, and Ford and Chrysler as well, to survive, at least until a coherent strategy can be agreed upon for our nation's automotive future.

Waiting till the new administration takes over on Jan. 20 would be too late,..."

Um...since when was it anyone's responsibility - other than the car makers - to develop a 'coherent strategy' for their future? I don't seem to recall anywhere in the Constitution where 'saving specific companies' is listed as part of the duties of the federal government.

I could go through this editorial line by line and provide a comprehensive, logical and factual rebuttal, but when their entire premise - that this problem is not because of decisions made by the automakers, themselves - is wrong, their conclusions are also wrong.

That's why fact matter. If you ignore critical facts when facing an issue, you will inevitably end up with 'solutions' that don't actually solve the problem - and, in some cases, make things even worse.

So here's a question: what would be so bad about a 'Big 2'?

6 comments:

Antipelagian said...

the first question I would ask now is why shouldn't we expect that we will have a change in the automobile companies in the future? Just like global warming alarmists - they assume that the current conditions are the best, and any 'change' will be catastrophic. Perhaps we should remind all of them that their trust in President-elect Barack Obama was that 'change' would be for the good!

Great point...I hadn't looked at it that way.

Great post.

Tim Higgins said...

Maggie,

The Blade proposal for moving forward "immediately" does work however, if you take into account a couple of things:

1. Having the Bush Administration do the heavy lifting now would mean that subsequent repercussions could be blamed on Bush, and not the new administration.
2. Having the government buy in to the auto industry would create a massive increase in federal bureaucracy (the new administration is already talking about a "car czar"), something never that Democrats seem to love.
3. Providing a payback for the unions is always in keeping with the principles of the Democratic Party.
4. Grudgingly doing this and the other bailouts under consideration allows an agenda which demonizes the very foundations of capitalism, something that I am afraid is very much on the agenda of those coming into power.

I am strangely reminded of the lyrics from an old Jethro Tull tune, "Locomotive Breath":

"Old Charlie stole the handle and
The train won't stop going --
No way to slow down."

skeeter1107 said...

There are a litany of changes that the American auto companies must make to be successful in the long run. We all know what they are, they are obvious. That is why the so called "bailout" is really just a loan for a few months to perpetuate a system that obviously doesn't work. It's also obvious that Congress is pandering to their political contributors, the UAW.

Now whether the company, union or government will admit it, the best thing to do is let the car companies file for bankruptcy. I think they all understand that, but for political reasons can't publicly admit to it.

Publicly they claim a bankruptcy would result in the loss of hundreds of thousands of jobs. Not so. Now all the different parties will publicly scream to the high heavens. However they would privately admit that a significant reset of the cost structure, is the only way to maintain the long term viability of the domestic auto industry.

So let them go bankrupt. Let nature takes it's course. Let's do this sooner than later. Ridding themselves of these legacy cost structures will be their salvation. It is there only hope for the future.

As a matter of fact, the UAW Management will benefit the most from the bankruptcy. They are able to tell their members, both retired and active that they are going to have changes due to the bankruptcy. Otherwise, they will continue to see their membership numbers shrink. Lower wages and benefits would actually enable the domestic car companies to hire people. Hasn't this perpetual downsizing they have been in for two decades been enough evidence for the UAW to see that things must change?

It's just crazy to continue to maintain the current cost structures. It's just nuts. It is akin to a ship of fools asking us the taxpayers, to take a long and expensive cruise on the SS Big Three. I don't want to go.

Tim Higgins said...

Maggie,

Another thought occurs in relation to the Blade editorial. There claim is that if the bailout does not happen immediately, GM will be forced to file for bankruptcy, with the implication that this would be the end of GM. I have to ask myself, if this is the case.

First, there are many forms of bankruptcy, most of which do not spell the final doom of a company.

Second, bankruptcy might get GM an opportunity to renegotiate the onerous pension and and medical plans (as well as the rest of their union contracts) that placed them in such dire straits.

Third, true reorganization may allow them to create a working business plan to move forward with. Once that does not involve taxpayer dollars.

Companies, even large ones like airlines have gone under bankruptcy protection without destroying either themselves or the economy. Many have subsequently rejoined the evils of capitalism successfully. Maybe this path would provide the impetus and opportunity for GM, Ford, or whoever to return to (pardon my bad word) Profitability.

Maggie Thurber said...

But Tim, if the problem isn't their fault, they don't have to face reoganization or bankruptcy protection to address it...

THAT'S the point...

see???

(yes, I knew you'd get it!)

Biztube247 said...

I agree completely. I do not support any bailout. I think GM's and UAW's management over the last 30 years has been unconscionable and yes, this will most affect their constituents - current and retired employees. I am sorry about that but not enough to throw good money after bad. I think it's enough we will have to pick up theadditional Medicare costs when GM gets rid of health care.

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