Panic in Detroit
[Pieced together from my comments on the previous piece.]
Obama committed the tax funds to Detroit, or Congress/Bush did back in 2008? The auto makers asked for $34 billion in December. Instead they were given $13 billion with another $4 billion to come in February. So much for committing lots of money to Detroit. AIG got $85 billion, then up to $150 billion, and now up to $170 billion total. I'm happy Obama is the sole arbiter of which bailouts are systemic and which are sectorial risks, which indigent companies get to come back for more and which are stiffed, and now gets to be the decider on corporate management staffing. I'm sure he learned this teaching constitutional law.
I find it ironic that the folks in Michigan didn't get to vote in
the Democratic primaries, something that quite a few are regretting
today - no representation for the 8th most populous state, and it also
means that Obama went into the presidency without having to make any
appearance before or promises to that state. Since labor/UAW is taken
as de facto Democratic bloc voters, all leverage was gone. Elections
have consequences, and lack-of-elections have consequences too.
If you want to discuss systemic risks, discuss our over-reliance on
oil, our inability to change CAFE standards, our continual lack of
addressing the leftover burden of 1960s benefits in a 2008/2009
competitive field (i.e. all legacy companies are screwed), our
inability to confront health care which unduly affects
manpower-intensive industries, our subsidies/giveaways for defense,
agriculture, oil, big pharma, finance & housing, but our insistence
that Detroit has to play by market rules. (Laughably we do something
similar with Amtrak, while subsidizing the competition - airports,
highways, guaranteeing the low price of oil, etc.)
Venomous? No, I'm just being normally cuttingly ironic. The long knives are still sheathed. Writings on Bush & Cheney and cronies were 100x more pointed. But thanks for being sensitive - we need your type around.
From www.openleft.com -
"[White House officials] have more confidence in the leadership on the banking side - that there are people in place who understand what went wrong and the steps necessary to deal with this disaster."
....
Sirota and others point out that much of this is tied up in the
personality of Steve Rattner, the hedge fund manager that is overseeing
the auto company bailout/restructuring. I'm sure running companies into the ground for profit on Wall Street trained Mr. Rattner in how to compete with the Japanese in making next generation's cars (especially in fending off non-union Japanese plants in southern states that provide scrumptious tax benefits).
http://online.wsj.com/article/SB123845917380171771.html
Via OpenLeft: "DETROIT -- President Barack Obama's recovery plan for General Motors Corp. and Chrysler LLC appears to take aim at union retirees, a usually reliable Democratic constituency. After studying the plight of the companies, the president's auto task force concluded GM and Chrysler's survival is dependent on greater concessions from the United Auto Workers union."
Yes, the sole determinant of success in the auto industry is ending employee benefits - soon new car models will rain from the sky, at least for GM.
Just to get us back in perspective, we're talking $8 trillion in
bailout, but only $17.4 billion for Detroit (half of what they asked),
which comes to about 0.22%. Yes, zero-point-two-two percent, 1/500th of
our bailout. About 12x AIG bonuses. And I'm glad some hedge fund schmuck knows what Detroit
needs to do - screw the retired line workers. Guess that's why he pulls
down the big bucks.
http://www.politico.com/news/stories/1208/16620.html
Post-laborism. We've moved beyond all that divisive union stuff from the '60s and earlier. High esteem for wage earners (wage slaves) is so 20th century. $200 grand a year is not middle class. And where is the media or government on the fast-growing ranks of working poor, destitute and homeless besides?
March 31, 2009 12:28 PM | Reply | Permalink
Corrections: "$200 g is now considered the middle class" and scratch "besides."
I really need to start proof-reading (I just can't afford to with the recession and all).
March 31, 2009 12:35 PM | Reply | Permalink
Good cut & paste job Des. The only thing I found a tad venomous, was the cut about learning 'corporate staffing' while teaching constitutional law.
March 31, 2009 12:29 PM | Reply | Permalink
Well, it's not really just Obama - our whole society just thinks you can wander into a new field with no experience and start directing. The financial situation was partly caused by kids out of school suddenly making investment decisions worth hundreds of millions, acting like they understood it. Would be lovely if things were that simple. I think. In any case, it don't work. Now we get to sweep up. Or cause more pain.
March 31, 2009 2:01 PM | Reply | Permalink
I appreciate your comments here and elsewhere reagarding the double standard. I would like to add that at least one part of GM got help... GMAC. You can make of that what you want.
Like I said earlier, the too big to fail commercial/investment/insurance hybrid monsters have hijacked the world economy and are demanding ransom. The ransom is the financial security of future generations, who will be paying our debt bill with considerable interest and lock them into an even smaller black iron prison. The big banker threat of frozen lending is just too terrifying for politicians, so the keys to the car have been given to the FED.
The United States is being rendered into yet another third world client state for global finance.
March 31, 2009 12:33 PM | Reply | Permalink
GMAC is why GM is so much deeper than the other two.
All their cars suck just as bad. And the trucks, too, for those of you pretentious assholes who always want to correct me when I refer to your Silverado M1A1 Super B52 as a "car" or "vehicle".
March 31, 2009 1:52 PM | Reply | Permalink
Bingo! They two awful business models for the price of one.
That's another one lost to Ditech!
March 31, 2009 2:45 PM | Reply | Permalink
Actually, I have a real question for you (since you have his visage for your avatar)... I see a lot of Marx's warning in Das Kapital about the fetishization of commodities coming to fruition today... the inflation and bursting of bubbles revolves around making a particular commodity a fetish whose value inflates in correspondence to its power as a fetish, and then the resulting anxiety from having the value put into question by the commerical powers hastens and deepens the burst... and allows the commercial powers to further entrench themselves in the workings of government. In a capitalist system, the consumer gives up their faculty of discernment because the marketplace of ideas belongs to advertisers.
Anyhow, just my thoughts today.
March 31, 2009 2:52 PM | Reply | Permalink
I've never been clear about how to figure out which part of a commodity's fetish value (that is, its market price in excess of its "pure" use value) is ascribable to labor and which part to capital.
We need a blog entry. Get to it, Zipperupus!
March 31, 2009 3:29 PM | Reply | Permalink
Depends on whether the commodity in question is shoes or rubber goods.
March 31, 2009 4:04 PM | Reply | Permalink
Oh please, let's have a fetish discussion regarding shoes, rubber goods and leather. Using Marxist dialectical materialism as the basis, or at least a subcurrent, and perhaps the rough trade as a cohesive venue for analyzing the precepts of modern dialectic vs. mechanistic dystopia. Workers of the world unite, you have nothing to gain but your chains. And whips. And various other aids that we're not allowed to describe here but will be more than entertaining.
March 31, 2009 4:13 PM | Reply | Permalink
And yes, Zipperupus has a good on-line porn name with which to organize it all.
March 31, 2009 5:13 PM | Reply | Permalink
LOL :)
March 31, 2009 9:09 PM | Reply | Permalink
Also, what Ellen said. Blog please.
March 31, 2009 9:22 PM | Reply | Permalink
Good lord, I thought people were just kidding when they said it's always about Hillary for you. You really think the actual people of Michigan give a damn about the botched up primary that happened almost a year ago?
I have to admit, though, your fixation on the primary fight is kind of entertaining.
March 31, 2009 1:48 PM | Reply | Permalink
Primaries are leverage - they get the candidate to suck up to them, make promises, feel their pain, come to Jesus, kiss babies, eat bad food, and so on. 48 states got the face-to-face time, 2 didn't. And it lowers your lobbying potential. Michigan's off the map, just a bunch of old labor union types, dinosaurs, off to the scrapheap of history. Make of it what you will, but Germany gets more love than Michigan, and guess how many people are unionized there.
March 31, 2009 2:04 PM | Reply | Permalink
Sucks how their votes were blocked in the big game Nov. 4, too, huh?
March 31, 2009 2:19 PM | Reply | Permalink
So are you implying that Hillary would have been more pro-union than Obama is?
How many union folks were vilifying and lamenting bank bailouts, begging for the government to stop handing out money? I'm not saying any were, but it would be interesting to know.
The key difference here, and why I do not see a double standard, is that the auto industry is fundamentally different from the financial industry. If a financial institution 'goes bankrupt' it enters receivership, its assets are sold, creditors are paid as much as possible, and everyone else is screwed. The institution as it was is over and done.
If GM goes bankrupt, it enters court-mediated restructuring. It continues to exist as an entity, deals are reached with bond holders and labor, and eventually it exits bankruptcy a stronger organization. It lives on, and in the long run hopefully it is better off.
What are the ramifications if GM goes bankrupt? Labor probably gets screwed, which sucks. But they don't ALL lose their jobs. Suppliers may get screwed out of SOME of the money that is owed them, as will the bondholders. A judge can look at everything, though, and balance the pain.
What are the ramifications if one of the big banks goes bankrupt? Can the FDIC even meet its financial obligations in such an event? What about the ridiculous cost of shutting an entity like that down? Now imagine several big banks failing all at once like that, because we didn't prop up AIG, who funded their bad bets. Dumping money into AIG is just another way of bailing out the banks, as that is where all their losses are going. They insured the party boat, and now it's sitting at the bottom of the ocean.
While it IS huge, mechanisms exist that can allow GM to enter bankruptcy and restructure in a controlled manner. Chrysler is small enough that it could even be liquidated in a controlled manner. People WILL start buying cars again - cars don't last forever.
Our existing mechanisms and even our current legal powers for managing the shut-down of a bank simply cannot be applied to the behemoths that exist today. So we prop them up (largely with loans mind you, not all of it is free money), and change regulations to try and prevent the problem in the future.
While I personally wish that the government would help GM and Chrysler get through this very unusual situation (a lot of my customers are associated with the auto industry) I can understand why they would choose to let GM and Chrysler fail.
Some of these spinning plates are going to fall - we've got to make sure the ones that do so cause the least amount of trouble on the way down.
March 31, 2009 3:08 PM | Reply | Permalink
So because GM & Chrysler might have assets after bankruptcy, it's not worth bailing them out?
0.2% of the bailout money. Executive bonuses for AIG came to 1/10th the amount given to the auto makers.
People will start buying cars again, but once they start closing car lots and assembly lines, there's a huge question whether peopl will ever buy those cars ever again. I wouldn't care so much if the industry was just a dinosaur, but the biggest issues continue to be legacy benefits and competitor subsidies, not current competitive position. There's so much hatred for the auto industry that has nothing to do with its performance and everything to do with its union status and historical position in America's class system. East Coast hates Grosse Pointe. I don't think Chicago's much more enamoured.
March 31, 2009 4:23 PM | Reply | Permalink
The auto company train-wreck has been decades in the making. We bailed both of these companies out once already - why is giving them more money going to fix the problem?
People do not buy their cars in sufficient volume to cover the cost of running the company. The best we can do is assume the retiree burden (to some degree) and hope the companies can reorganize and start anew.
As for the rest of the "bail-out" money - that is all just covering the money we printed during the last 8 years. We were going to have to print it some time or another regardless.
I just have a hard time understanding what "more money" to the auto companies will fix?
March 31, 2009 11:37 PM | Reply | Permalink
The folks screaming the loudest about the Big Three are probably the same ones screaming about how we have to "save" Social Security, how it will "go bankrupt" in 2041 just because current projections have it going in the red.
Here are US sales for 2006 & 2007:
BMW Group 6.7% at 335,840 (2006: 313,603)
Chrysler Group –3.4% at 2,076,650 (2006: 2,142,505)
Ford Motor Co –12.1% at 2,572,599 (2006: 2,918,674)
General Motors –6.5% at 3,866,620 (2006: 4,124,645)
Honda America 2.5% at 1,551,542 (2006: 1,509,358)
Nissan North America 4.5% at 1,068,238 (2006: 1,019,249)
Toyota Motor Co. 2.7% at 2,620,825 (2006: 2,542,524)
Note Chrysler was selling over half of GM's amount in 2006, and with 2 million vehicles, certainly belies the idea that "no one want to buy their cars". The Bush Administration's mismanagement of energy costs, gas prices and taxes, the Iraq War, and the economy in general has certainly not helped our domestic makers. Blaming them and them only for the Bush screwups is misguided. Pretending that somehow these automakers will go into bankrupty and something useful will come out of their assets is delusional. And then of course there are the retirees. The younger Japanese auto companies will have their retirees to pay for later. But the Japanese government has never had a problem subsidizing Japanese industry. Hell, Alabama and Tennessee have no problem subsidizing Japanese industry. And we have no problem subsidizing ethanol & agriculture, arms suppliers, oil companies, pharmaceutical companies, bailing out banks and investment firms. But mention bailing out manufacturing and suddenly we're back in love with the free market.
April 1, 2009 5:41 AM | Reply | Permalink
Now Elana reports a $12.8 trillion bailout effort in various ways. So basically Detroit got a 0.15% share through which big demands are being made. Could $100 million (
But also to beggar the question again - who told Obama he knows what it takes to manage a corporation? Including after the last 2 months of not completely successful efforts? Oh well, all in the name of pragmatism.
March 31, 2009 5:25 PM | Reply | Permalink
As opposed to the current corporate leaders? Anyway, you're right, I'm sure it's Obama shootin' from the hip. He doesn't have advisers with field experience or nothin'. That damn inexperienced boy.
March 31, 2009 5:48 PM | Reply | Permalink
Explain Steve Rattner's pertinent experience, please.
April 1, 2009 5:06 AM | Reply | Permalink
The task force has some 20 members. By your logic, Romney would be the best president to handle intervention. And if you don't favor intervention ... man, I don't even know what to tell you.
April 1, 2009 11:12 AM | Reply | Permalink
And let's not forget that the "bailout" to the automakers is a loan. The bankers got a no-strings gift. We've come to a strange pass in this country, where we love the American worker but not if he/she belongs to a union.
When all of the manufacturing is gone, where are our workers supposed to work? What is it that they can then be trained to do? And once they're trained, where are the jobs?
March 31, 2009 8:00 PM | Reply | Permalink
They can go work for Toyota? Or in Seth Godin's imagination, each one can be opening a new mini autoplant? All of the work on the Chevy Volt can be replicated by each engineer in his garage.
Once upon a time Mao asked each peasant to make pig iron in his/her back yard. Melt down your metals, become your own smith. Production at 140% capacity!!! Millions died.
Human follies are endlessly repeated, with shifting refrains.
April 1, 2009 6:29 AM | Reply | Permalink