Diary

No more bailouts: Yes, this means facilitating mergers too.

So…here we go again. The Auto Industry is asking for our money…again. Well, who didn’t see this coming after the Wall Street bailout? The law of unintended consequences is taking hold with an iron fist. And now every struggling industry and Blue State is coming to Washington hat-in-hand to beg for your money. And “The One,” being beholden to all of them, is going to give them their way almost for certain.

That Chrysler bailout of our youth doesn’t seem nearly so smart an idea now, does it? Since part of the whole purpose of this bailout is so GM can merge with hapless Crysler. And of course, this merger will still cost 25% of the job force of the two companies. The math just gets better and better.The simple fact is, the best thing for both companies right now is bankruptcy. Period. Cal Thomas makes a first class cost analysis of the way Detroit does business vs Toyota in his article here.. The research shows that via lower costs on labor per hour–significantly lower ($40 per hour!) Toyota saves more than $1000 per car for every vehicle made. And that is on vehicles that are made by Toyota USA! And this despite the typical Toyota USA worker getting near 6 figure incomes.

So what exactly is the UAW giving us for their efforts? A more inefficiently financed workforce, doing the same work for twice the money, in a state where the corporate tax rate is 38.9% (and actually higher, since the auto makers trigger the higher “gross receipts” penalty for 350,000 dollar sales) here.

The bottom line, as Thomas states, is that the Big Three are unionized and operate (primarily) from traditional Democrat strongholds. So they see it as political suicide not to act on their behalf. But these bailouts of the auto industry will not save 100,000 jobs, as Nancy Pelosi repeatedly tells us.

Just the opposite. The Big Three will still have to slash 30,000 factory jobs plus “other salaried” positions (according to the WSJ article cited above). What’s more, the claim that the bailout is necessary to “save the companies from bankruptcy” is, itself, fallacious. The creditors, as Thomas notes, treated the Chrysler bailout as at least a partial bankruptcy. They will again this time. The companies avoid the pain of restructuring, and does anyone deny Chrsyler NEEDED restructuring now? And instead their shareholders will pocket our money for failing to anticipate the market while the workers get the shaft anyway.

All this is, of course, aside from the question as to whether or not businesses can ever be expected to succeed if they face no penalty for failure. The Government has shown itself spineless when it comes to Detroit already, why should they deny the “US Auto Industry” (which is much more now than the not-so-big-three, but don’t say that around anyone in a Union or a protectionista) anything.

So the bailout won’t save jobs. It won’t facilitate restructuring the companies. It won’t improve the competitiveness of our auto industry. It won’t make things better for the economy. And it won’t represent in any way, shape, or form, a benefit to the taxpayer. Other than that, it’s a perfectly good deal if you’re trying to cover your tail with the unions. The good news is once no one will take our government’s loans anymore, this insanity “will” actually end. Hopefully that will be sometime before the country actually has to declare bankruptcy and our currency tanks again due to our excessive indebtedness (among other factors).