Reaction to the Bailouts

It's been interesting to read the reactions to the automakers bailout plan. It seems to be the subject of loathing on both the right and the left.

There has been a lot of criticism on the right of the ousting of GM's CEO, Rick Wagoner. It would be warranted if the current administration had decided that Ford's CEO should be deposed, especially since Ford hasn't bellied up to the public trough. Not so however in GM's case. GM sought public funding and agreed to provide a viability plan that met the scrutiny of President Obama's automotive task force.

GM put themselves at the mercy of the financier of last resort (you and me actually) and they have to abide by the decisions being made. I suppose if they objected they could give the money back and see if they can make it on their own. But they can't and they obviously couldn't, or they would never have agreed to the public funding. And that is in large part a failure of management. So is it any wonder that a change in management has been requested.

Now onto the other side of the criticism. The unions will not like some of the drastic changes that may occur to work rules. Amongst all the buzz about wages and benefits being the problem with automakers' viability, it is partially the constraints of the contractual work rules that have restrained the productivity of Chrsyler, Ford, and GM. The transplants currently aren't union organized (just wait for 'card check' though ;-) and subsequently they do not suffer the productivity inhibitors of inflexible work rules.

Of some merit, and receiving attention, is the notion that both Chrysler and GM could go through bankruptcy to assist the reorganization efforts. And that probably should have been the tool of choice all along - it would have saved Mr & Ms U.S. Taxpayer a bunch of money (as long as they didn't hold stock or bonds in the aforementioned entities.)

Of no small importance in this whole debacle is the fate of the suppliers. Cars aren't built from whole cloth (like they used to be at Ford's River Rouge plant were raw materials came in one end and left as cars on the other.) Suppliers provide more than just raw materials, they provide entire sub-assemblies in most cases and the work they do goes largely unseen. They employ large numbers of people, not just building widgets but designing and engineering parts/sub-assemblies for the automakers. There is definitely a trickle down effect to the pain of losing a major auto manufacturer.