Holman Jenkins at the Wall Street Journal is always worth reading, especially when he agrees with me! Kidding aside, this piece is worth reading.
The GM bailout has become a political operation run out of the White House. It will stay that way. Talk of UAW layoffs already disguises the fact that UAW workers are actually offered generous buyouts and early retirement — they aren’t just sent away with a last paycheck. What about Chrysler? A few weeks ago, Fiat was saying it would consider a merger if a loan from Washington was guaranteed. Now Washington is saying a loan will be forthcoming as long as Fiat does a deal. That’s not an ultimatum — that’s a nod and a wink.
I can remember back in December, writing blog posts to the effect that, although totally disgusting, the taxpayers would need to provide a bridge loan to GM in order to avoid a then-imminent Chapter 7 liquidation. Because of the sudden collapse in North American vehicle sales that began last October and continues unabated, GM is out of cash, has no access to credit, and is out of options.
In mid-December, Congress drafted a bailout proposal, to deal with the fact that Hank Paulson was (rightly) adamant that he had no authority to use TARP funds on a 100%-wasted emergency cash injection into GM and Chrysler LLC. It’s when I read the draft legislation back then, that it became obvious this whole thing would be directed by the UAW.
Congress provided in its bailout proposal several key things: 1) Control over GM and Chrysler by an Administration-appointed “czar” who was specifically exempt from Senate confirmation; 2) a $500 million infusion for electric-car startup Tesla Motors; 3) a commitment by GM and Chrysler to build electric cars; and CRITICALLY, 4) No concessions on wages and benefits from the UAW.
It was right there in the legislation: the union was going to take no significant pain, no matter what happened to GM. UAW boss Ron Gettelfinger knows full well that he is the guy with a halo of government protection, and that takes away all his incentive to negotiate. It also means that the Obama Administration will handle the GM failure in such a way as to control the outcome to the benefit of the union. It should make every American sick.
Jenkins also makes another point that I wholeheartedly agree with: if GM is to return to profitability, it will have to start by divesting or winding down its North American operations.
But that would be a decision driven by business logic. And from this day forward, none of the decisions at GM will be business decisions. They’ll all be political decisions.
