Earlier today I wrote:
There are far too many union votes to risk losing to allow [GM and Chrysler to go tits-up]. Nor will the government allow these companies to fold which would be an admission the centralized planning and control schemes were wrong. The UAW workers will be paid with taxpayer money--probably with raises and expanded benefits--even if GM and Chrysler can't sell another car. We are not witnessing the government's destruction of a major industry, we are witnessing the creation of a massive new welfare project.And today David Brooks--who broke ranks with conservatives for being too conservative and thus voted Obama--writes:
Well, the president certainly acted tough on Monday. In a show of force, he released plans from his Office of People Who Are Much Smarter Than You Are. These plans insert the government into the car business in all sorts of ways. They pick winners (new C.E.O. Fritz Henderson) and losers (Rick Wagoner). They basically send Chrysler off into the sunset. Joe Biden will be doing car commercials within weeks.
The Obama team also raised the bankruptcy specter more explicitly than ever before. Even more tellingly, the administration moved to “stand behind†the companies’ service warranties. That lays the groundwork for a bankruptcy procedure and should be a sharp shock to Detroit.
And yet by enmeshing the White House so deeply into G.M., Obama has increased the odds that March’s menacing threat will lead to June’s wobbly wiggle-out. The Obama administration and the Democratic Party are now completely implicated in the coming G.M. wreck. Over the next few months, the White House will be subject to a gigantic lobbying barrage. The Midwestern delegations, swing states all, will pull out all the stops to prevent plant foreclosures. Unions will be furious if the Obama-run company rips up the union contract. Is the White House ready for the headline “Obama to Middle America: Drop Dead� It would take a party with a political death wish to see this through.
Furthermore, there’s no reason to think the umpteenth restructuring will produce compelling results. Cost control without a quality revolution will make little difference. There’s no reason to think Americans are going to flock to G.M. cars. (The president lauded their fantabulousness, but G.M. sales fell 51 percent during the first two months of this year while the overall market declined by 39 percent.) Politically expedient environmental demands will make the odds of profitability even more remote.
Corporate welfare rarely works when the government invests in rising firms. The odds are really grim when it tries to subsidize fading ones. (In the ’80s, Chrysler already had the successful K-car in the pipeline.)
The most likely outcome, sad to say, is some semiserious restructuring plan, with or without court involvement, to be followed by long-term government intervention and backdoor subsidies forever. That will amount to the world’s most expensive jobs program. It will preserve the overcapacity in the market, create zombie companies and thus hurt Ford. It will raise the protectionist threat as politicians seek to protect the car companies they now run.
It would have been better to keep a distance from G.M. and prepare the region for a structured bankruptcy process. Instead, Obama leapt in. His intentions were good, but getting out with honor will require a ruthless tenacity that is beyond any living politician.
http://www.nytimes.com/2009/03/31/opinion/31brooks.html?_r=3&adxnnl=1&ref=opinion&adxnnlx=1238494630-l4adAf+aGwNO0dqVYKzGJgMaybe if Brooks were as smart as the rest of us 6 months ago we wouldn't be in this mess (as deeply).
