This has to be a strong contender for Worst Idea Ever. Shovel billions at Detroit without addressing what everyone knows is the real problem, ruinous union contracts. Democrats in congress know it as well as anyone else but can't risk offending one of their prime sources of funding. So they come up with this idea of a Car Czar, who will sit in solomonic judgment of the industry's plans to reinvent itself. All in a couple of months. News flash. It took them decades to dig the hole they're in now, and nothing that they come up with in the next couple of months will change that.
It's not just a matter of quality. I happen to think GM produces some pretty decent products from a quality standpoint. Their big trucks are the gold standard. The further down the lineup you go, the worse their products stink however, if not in quality at least in terms of desirability.
Basically, Detroit has two problems. Consumers don't want what they are selling, and even if they did, they can only make money on big trucks and SUVs. Foreign manufacturers and even transplants have too big a cost advantage. They don't have to pay for hyper-expensive health care, they get export subsidies through tax rebates, they are in low wage asian locations or the southern US with no unions, they benefit from currency manipulation, etc etc. It is unrealistic to think a couple of bridge loans will correct any of this.
The only hope for Detroit is a combination of socialized medicine, a total repudiation of free trade agreements and breaking the UAW. I can't see any of these happening within a timeframe that saves them. The best alternative is Chapter 11, where union contracts can be repudiated, the viable assets transferred to capable managers and the rest ashcanned. It's called creative destruction, the capitalist equilvalent of the law of the jungle. Kill or be killed. Plewnty of domestic manufacters fell before GM, Ford and Chrysler. Now it's their turn.
It's not just a matter of quality. I happen to think GM produces some pretty decent products from a quality standpoint. Their big trucks are the gold standard. The further down the lineup you go, the worse their products stink however, if not in quality at least in terms of desirability.
Basically, Detroit has two problems. Consumers don't want what they are selling, and even if they did, they can only make money on big trucks and SUVs. Foreign manufacturers and even transplants have too big a cost advantage. They don't have to pay for hyper-expensive health care, they get export subsidies through tax rebates, they are in low wage asian locations or the southern US with no unions, they benefit from currency manipulation, etc etc. It is unrealistic to think a couple of bridge loans will correct any of this.
The only hope for Detroit is a combination of socialized medicine, a total repudiation of free trade agreements and breaking the UAW. I can't see any of these happening within a timeframe that saves them. The best alternative is Chapter 11, where union contracts can be repudiated, the viable assets transferred to capable managers and the rest ashcanned. It's called creative destruction, the capitalist equilvalent of the law of the jungle. Kill or be killed. Plewnty of domestic manufacters fell before GM, Ford and Chrysler. Now it's their turn.
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