A few weeks back I posited that GM, Ford and Chrysler would be more likely to succeed with bailout funding (in whatever forms it may be given) if they first utilized bankruptcy to shed fat. Without that avenue of remediation bailout funds would simply be squandered in the short term and they would return for more money, again to be swallowed in the mess for no purpose.
They then flew in to proclaim their needs, announcing that CEO perks, private jets and bankruptcy were not going to be subjects of discussion. They were booed out of town. This week they are back, driving to Washington in Buicks and Fords; announcing the willingness to serve without salary; willing to divest airplanes; and yesterday leaking that a packaged bankruptcy would be swallowed if necessary.
It isn’t bankruptcy that closes plants. It is the lack of marketable product in sufficient quantities that closes plants. Plants keep on operating right through bankruptcy if there is a market for what they produce.
In their return trip they also announced that had they been given what they asked for two weeks ago, it would not have been sufficient. One asks the obvious – you came here not knowing what is needed? Why did you come here in arrogance and ignorance? Did you really believe that your presentation was not a transparent hoax born of conceit? Are you that out of touch with reality?
Obviously the truth is that they are still out of touch with reality, for they continue to deny that any of this can be laid at their feet as the producing cause of the problem. They continue to insist that they are faultless. Can you leave such people in charge and expect funding not to go down a rat hole, even if there is a bankruptcy? The notion of serving as CEO for a dollar a year still represents serious overcompensation.
Nor is the union the slightest bit embarrassed by joining in this charade. Only this time they profess to be willing to accept not being paid for not working – the end of the “job bank”. How forthcoming! What a novel concept – not being paid for not working. Where outside of Detroit does one find such enlightened economics as being paid for not working? Wherever productivity is not required is where such nonsense can be found. That tends to limit the theory to Detroit, doesn’t it? Certainly if such nonsense prevails elsewhere, we will find companies there in collapse also.
This auto company fiasco so dramatically illustrates so many of the subjects I have written about in this column that, were it not for the pain it inflicts, it would be a grand experiment in how to ignite crisis. The control experiment that proves the theory is that auto companies other than GM, Ford and Chrysler seem not to be in such dire straights. Business is down for everyone, but for those who ignore reality survivability is doubtful.