Monday, March 2, 2009

Not Sure It Matters

One of my favorite things to do since starting the blog is linking up to people with whom I agree, and mostly ignoring people with whom I disagree. In this wonderful tradition, I present to you a column from The Washington Post about the Detroit automakers. I think the guy is thoughtful and includes some points I had never really before fully considered - for example generations of people who strongly object to support are in their current financial and life positions as some direct or indirect result of the contributions from the U.S.-based auto industry. (here's another good supportive read, just as a reminder that not everyone outside of MI hates us)

At this point with the way the economy continues to go, I'm not sure if any of this matters. I'm reminded of last week's episode of 30 Rock when Tracy Jordan whips the world into chaos through an appearance on Larry King unfortunately timed with a major drop in Asian financial markets. It is becoming increasingly difficult to identify who deserves to be saved, who deserves to fail, and if any of it matters. As far as I know, it is impossible for the stock market to go negative, so there seems to be a natural stopping point in the destruction of the global economy. I know I reference TV far too much (never gonna change, get used to it), but Michigan right now is like that poor ambiguously foreign guy on You Can't Do That on Television who was shot to death in front of the firing squad just about every single week by being fooled into saying the word "Fire". Was that appropriate for children viewing?


Zachary said...

Man, I've gotta say I disagree w/ a lot of that Post article. Firstly... any article whose major theme seems to be a nostalgia factor is starting off on the wrong foot. Too many people all over the country are hurting for Detroit to use the 'we created the middle class argument'. Nobody is against a factory worker making an honest living. But when you are asking people to support bloated pensions for people retiring at age 55, its a little much. And even if you could clear the big 3 of these onerous debts or prop them up until a more reasonable economic environment, I think they'd still be destined for failure w/ the amount of union bureaucracy that prevents these companies from functioning efficiently today's global economy. So GM wants to close some factories or change the production floor of a plant... Why does this need to be negotiated w/ a union?? Why do they need to pay someone off for closing a dealership?? These bank bailouts.. as disgusting as they are, might at least be able to create companies that have the potential for profitability. Without major changes in the way the automakers deal w/ the unions, its questionable that these companies will ever be profitable. For that guy to say that Detroit has in reality been planning for the future is also I think is blatantly false. "It faded because executives at GM, Ford and Chrysler reached a consensus not fully embraced by Congress or the American consumer. To wit: Oil will not last forever." Oh really??? Then why has the auto-industry consistently blocked stricter gas mileage standards? Why were they also been against increases in gas taxes. So while I agree that Detroit shouldn't be portrayed as a villain... there are far more deserving people to point fingers at; its just like, enough is enough w/ all of these bank bailouts, the AIG debauchery, implicit endorsement of bad behavior, spending like it has no consequences (both administrations), and general money grubbing based on how powerful your lobby is.

Ken said...

Unions, unions, unions. The fact that anyone spends so much focus and energy on this area as evidence of inevitable failure speaks more to the ignorance of that person's understanding of the issues than facts toward guaranteed FAIL. The union has its share of opportunities for improvement, but any union that can ruin a top 5 in revenue in the world corporation will eventually have the power to rule the world.

As much as you take issue with the actual article, I take issue with your statement "These bank bailouts...might at least be able to create companies that have the potential for profitability." That is about as unfounded as anything I've ever heard. That's like saying that Enron had a viable business model - not including their mistakes - so let's give them a pass. While I disagree with your point of view, the lack of evidence for this broad statement might be the most upsetting thing you wrote.

The only evidence I see of potential profitability is 10 years of fictional money, followed by 6 months of that fiction being decimated.

Zachary said...

Dude I am not for these bank bailouts... there are much better ways to do things in my humble naive opinion. But even AIG, which just lost 60billion in a quarter, still has certain arms that have or were always profitable. Their commercial insurance I don't believe was ever unprofitable. The investment banks, now converted back to bank holding companies... I would think, at some point in the future would also be profitable. It seems pretty obvious that when selling a product like a car, there will always be tough competition. And little things like having to negotiate w/ a union for every little thing makes a huge difference over a long period of time... Enough of a problem so that when there is a global crisis they are unable to cope with it.
Also, a union (or at least bad labor relations) is thought by very many to be a big part of what brought the US Steel industry in Western Pennsylvania to its knees. I don't think is is an issue you can just brush off. The two situations are quite similar.