Cronyism Run Amok

Some commentators have suggested whether a company receives the beneficence of the Federal bailout or not depends on who they know. Was Lehman Brothers allowed to go under while other investment banks were spared because Lehman had no particular connection to the Bush family? Did the Cerberus ownership stake in Chrysler with its chairman John Snow being Bush's second Secretary of Treasury militate toward the company being saved? Did it help that the chairman of global investments for Cerberus Capital Management, L.P., was the first President Bush's Vice President Dan Quayle? Michael Savage suggested it had everything to do with it on his font of information radio show last night. I can't say with certainty, but close connections to the Bush family sure don't seem to hurt.

Can Chrysler Survive

Chrysler may not survive even with the bailout money. It could be absorbed by another company. Speculation was that GM might be interested in merger, but GM denied any interest in consolidation. One unique solution might be for Chrysler to become an employee-owned corporation which has proven fruitful for a steel company and airlines. I wonder if the new employee-owners if this happens will be as concerned with the generous pension and health care benefits of their retirees as they demanded the company be in its previous incarnation. Will there be a large labor pool where laid off employees still collect 80% or so of their salaries? Not if the new owners want to stay in business.

Bad Management Practices

Obama reveals himself once again today to be the enemy of the capitalist economic system that has allowed America to flourish. He said he supported the $17.4 billion bailout of GM and Chrysler but wanted them to reform "their bad management practices". This places the entire onus of the companies' difficulties on management. The executives running the car companies have certainly not been sterling, but Obama, who has absolved labor which commands a much higher salary and benefit package than their foreign-owned competitors and who have demanded and received (some might say extorted) pension and health care benefits which simply make the companies unsustainable, is not credible. Obama will be the greatest ally labor has ever had in the White House, but measures like the Card Check Bill which will end the secret ballot and create nothing but closed shops will be the death knell of industry and cripple private enterprise in the US. Open shop and right to work states will have no meaning and unemployment will soar. Walmart which has advanced prosperity and literally saved consumers billions will be forced to unionize which will engender enormous increased cost of operation which will have to be passed on to the customers. Obama's economic plan will take America from recession right into depression.

Job One Bankruptcy

President Bush is evidently directing Secretary of Treasury Paulson to forestall the collapse of the US automotive manufacturers and allow Obama to ultimately solve the problems of the Big Three with a socialistic rescue of the UAW. Our Republican President has embraced the socialist tactics of French or Swedish leadership. At least there are enough capitalist Republicans left in the Senate to have prevented a bailout that would not have solved the structural deficiencies of the companies with their overwhelming legacy costs. There is a widespread misconception that all the jobs would cease to exist if GM or Chrysler took bankruptcy. Under Chapter 11, many of the positions would have been preserved and the corporations could have negotiated new labor contracts that would make their operations more sustainable. Chrysler may have been absorbed by another vehicle manufacturer. The court(s), judge(s), and receiver would not simply have padlocked plants and denied hundreds of thousands their income. As it is now, Obama will, probably in conjunction with a car czar, act by fiat and direct these companies to produce enviro-friendly compacts that few people will want and large families will find impractical. Tariffs and trade barriers will be imposed to prevent the importation of more desirable foreign models. Older vehicles will be legislated off the roads by strict emission/pollution controls that will force drivers to buy the new gas-savers or into mass transit. Fossil fuels will be saved, but freedom will be sacrificed.

Car Crash I

Obama has not the slightest interest in advancing the interests of US auto companies. He and the Democrats are only concerned with the automotive workers union. The bailout they craft will be a sop to the UAW. If they wanted to help the companies, they would have advocated relaxing CAFE standards and eased other regulation. Democrats have in the event done the exact opposite. The legacy costs and capitulation to UAW demands have created a situation where the bailout will only forestall the reckoning, and either the Big Three will be absorbed by foreign auto makers with union contracts ended, socialized outright, or owned by the workers.