Re: Let Detroit Go Bankrupt

Thumper wrote:

On Sat, 29 Nov 2008 09:18:48 -0500, Alan Lichtenstein <arl@xxxxxxxxx>
wrote:


El Castor wrote:


On Fri, 28 Nov 2008 08:58:12 -0500, Alan Lichtenstein <arl@xxxxxxxxx>
wrote:



El Castor wrote:



On Thu, 27 Nov 2008 08:18:22 -0500, Alan Lichtenstein <arl@xxxxxxxxx>
wrote:




El Castor wrote:



On Wed, 26 Nov 2008 17:12:50 -0500, Alan Lichtenstein <arl@xxxxxxxxx>
wrote:





El Castor wrote:




On Wed, 26 Nov 2008 12:33:27 -0500, Alan Lichtenstein <arl@xxxxxxxxx>
wrote:






Werner wrote:





On Nov 26, 9:01 am, Alan Lichtenstein <a...@xxxxxxxxx> wrote:






Werner wrote:






On Nov 24, 11:40 am, Alan Lichtenstein <a...@xxxxxxxxx> wrote:

mg wrote:

...

One solution is to permit GM and the auto industry to go bust

and pass the economic mantle over to China, Japan, South Korea and
Indonesia. Another is to intervene to make an effort to forestall that.
I choose the latter. It would be shortsighted to choose the former.

Did the countries you mentioned used bailouts as their business
model?

What other countries have done is irrelevant. We are only concerned
with the effect on OUR economy. A simple scenario which you don't want
to consider, as it defeats your jealous preconceived notions.



We seem to find ourselves in a time of triage, Alan. That is when the
cost of saving some is so high it threatens the survival of all in OUR
economy.

http://www.capitaldistrict-lp.org/how.shtml



Werner, you still don't have a clue as to the effect that 3.5 million additional unemployed would have on ALL our economy for ALL of us. Come back when you have a better insight. It is evident that you don't if all you can say is what you have posted above. It displays an astonishing lack of insight.


Chapter 7 -- Dissolution: "... the bankruptcy trustee gathers and
sells the debtor's nonexempt assets and uses the proceeds of such
assets to pay holders of claims (creditors) in accordance with the
provisions of the Bankruptcy Code."
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter7.html

Chapter 11 -- Reorganization: "A case filed under chapter 11 of the
United States Bankruptcy Code is frequently referred to as a
"reorganization" bankruptcy."
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter11.html

NO ONE is seriously suggesting that GM file Chapter 7. In 2005 more
than half the air miles flown on US carriers were with airlines that
were under Chapter 11. From 2001-2004, PG&E, one of the largest
electricity and gas suppliers in the United States, was under Chapter
11. No one (that was in a valid job) was put out of work, and those
airlines continued to pay their employees.

Among other things, GM needs Chapter 11 to target outrageous union
contract provisions -- provisions which make them completely
non-competitive with the US plants of Toyota, Honda, Subaru, and
Hyundai:

* $65 an hour janitors.

* "... and those, paid at the same high rate ($65), who make sure that
mixed metal scrap is separated into its components where possible.
This job also involves pushing a button, and occasionally holding it
down for a few seconds to insure task completion, and even, sometimes,
actually using a gloved hand to pick a piece of scrap off the
floor.Thanks mainly to "work rules" like these not one single foreign
owned "transplant" has built or is operating an assembly plant in any
American state that requires mandatory unionization, and so far the
attempts of the UAW to "organize' such plants has achieved precisely
nothing."

* "The work rules allow the UAW to essentially pension off older
workers who don't want to retire by giving them low-work and make-work
jobs such as janitorial and maintenance positions at full assembly
line worker pay"
https://www.glgroup.com/News/Union-work-rules-formerly-an-unassailable-and-self-destructive-bastion-of-waste-and-corruption-at-last-to-be-challeng-8751.html

* The Jobs Bank: "The jobs bank was created in 1984 at a time when it
became fashionable to worry that automation would cause robots to
replace workers on factory floors. So in exchange for the right to
introduce productivity improvements in factories, GM, Ford and
Chrysler all consented to jobs banks. The idea was that in exchange
for educating themselves, doing community service or in some cases
just sitting around a factory, workers would continue to collect pay
and benefits until the automaker could find another job for them. One
trouble is that U.S. car makers have been shrinking more than growing
in the two decades since, meaning people have stayed in the bank
longer than envisioned."
http://mjperry.blogspot.com/2007/09/anti-jobs-bank-nice-nonwork-if-you-can.html

I mentioned in a previous post that a former neighbor worked for a
railroad -- the Southern Pacific, if my recollection is correct. They
had something which he referred to as a Rubber Room. Employees whose
jobs had been eliminated stayed on at full pay, "working" in the
Rubber Room where they read manuals -- or just stare at the ceiling.
Sounds like the UAW's Jobs Bank.

That kind of crap (and there is much more) has to end if Detroit is
going to compete with foreign manufacturers. And, NO, card check is
not the answer, and neither are tariffs, duties, and quotas. US
workers in plants built by Toyota, Honda, etc. are well paid and when
allowed to vote in a NLRB supervised secret ballot election, do not
want unions -- and for good reason. BTW -- my Prius was made in Japan,
and not one Big 3 product can begin to match it. Good luck to GM and
their $40,000 Chevy Volt. Not even a $65,000 janitor could afford it.

Jeff

Regardless of which section GM files under, it will still have the effect of reducing its business to the extent that the collateral damage will cause approximately an additional 3.5 million unemployed. And that has been bandied about by any number of economists, pundits as well as those in the know in government.


Uh, what mushroom have you been hiding under? That argument might hold
some water if the precarious financial predicament that GM finds
itself in was not already known to every US citizen over the age of 9.

The mushroom that was widely reported and still continues to be given lip service in the WSJ, as well as in the other print and electronic media. The WSJ, like you, simply ignores that potential scenario, as it wants to promote its unabashed free market positions, which are blatantly anti-labor, but at least it recognizes that possibility. Even the reactionary Journal, although ignoring those circumstances, recognizes the implications on the overall economy of a GM bankruptcy under ANY of the IRS codes.

At least the Journal blames both GM management as well as the UAW for the circumstances GM now finds itself in. Probably to avoid being accused of being blatantly anti-labor( which they are ). But the problem with their position, as with yours, is that blame attaches to past actions, which cannot be undone, and somehow suggests that if we 'punish' those who are to blame, future circumstances will be better. Obviously, the illogic to that position is evident, because the solutions to current problems which will affect the future set of circumstances will, based on punishment of past actions, have nothing to do with ameliorating the circumstances as they now exist with regard to future events. So 'punishing' both GM and the UAW by allowing them to go bankrupt will have adverse effects on the future American economy, no matter how much you, and the Journal want to rationalize otherwise.




There is no doubt that this will occur, and for an economy already in recession, that will literally be the straw that breaks the camel's back. Nothing you posted above addresses that scenario, and nothing Werner has asserted does either. And he knows far less about it than do you.

I don't disagree that some portions of the collective bargaining agreement were overly generous and well beyond what other unionized workers in other industries had. That is where there is room for negotiation with the UAW, assuming government intervention now and certainly when the current CBA expires.


When Chapter 11 is filed there will be no need for negotiations -- a
judge will simply tell the UAW that the gravy train just ran off the
tracks.

And just how will that judge ameliorate the effects of the 3.5 million additional additions to the ranks of the unemployed, in an economy already in recession, that such a filing will produce? I have not seen ANY knowledgeable source state that a Chapter 11 filing will permit GM to conduct 'business as usual' and avoid having those sub-contractors continue to operate as if nothing had happened. EVERY source indicates that a even a Chapter 11 filing would very adversely affect those sub-contractors, which is the major source of the additional pain to the economy. Again, you casually dismiss that, which is why I characterize your views as short-sighted and founded more on the need to punish, rather than to assess a problem and provide a reasonable solution.

Now, if you want to discuss the 'moral hazard' of that action, why that is another topic, and then we can discuss that, along with the concept of 'too big to fail,' but as things stand right now, virtually everyone who is in the know, recognizes that a GM bankruptcy IN ANY FORM will place such severe stress on the economy that its effects are intolerable.


We will just have to agree to disagree. GM is an inefficient poorly
managed company that has allowed the UAW to get away with far too
much, and has not produced the products that it's customer's want.
Suffice it to say that it is naive to assume that they now "know what
to do". They may know exactly what to do, in which case perhaps this
thing can be salvaged without Chapter 11, but I think it's a long
shot. The fact that they flew into Washington on fabulously expensive
corporate jets while the job banks continued to flourish, $65 an hour
janitors continued to have a job, and unwanted product piled up in
storage yards, is not exactly reassuring.

Obviously, we disagree, but I do not understand why you remain fixated on 'punishing' GM, and refuse to talk about solutions and the effects potential solutions have on the 'big picture.' Punishing GM, its management, and stockholders for their poor decisions, may in keeping with the raw tenets of the capitalistic marketplace, but does nothing to address the effects of such punishment on the total economic system. IMHO, I think such shortsightedness is severely flawed.


The last thing I would want to do is "punish GM". I believe that GM
management has botched the job, made poor business decisions, and
allowed the UAW to run rough shod over the best interests of the
company.

Management made a decision that they considered 'in the best interests of the company,' when they elected to continue to produce high profit vehicles such as SUV's and trucks, while ceding the passenger vehicle market to the Japanese and South Koreans. As it turns out, they were wrong, but they might have gotten away with it if the economy didn't tank the way it did, but that too, is irrelevant.

I believe that GM management went to DC, hat in hand,

claiming that they knew what to do and had done it -- but all the
while the Jobs Bank continued unhindered, $65 make work janitor jobs
flourished, and unprofitable lines of business like Saab were ignored.
GM lost $38 Billion last year alone. How much this year? Why should
the US taxpayer pour billions more down the GM rathole when GM and the
UAW will not make the tough decisions that a bankruptcy judge will
force them to make.

There you go again, promoting what amounts to as severe anti-union animus as your underlying basis for your position. I don't understand why you seem to feel that certain people should remain a permanent underclass and not be entitled to earn a bit more. Regardless, I can't speak to those underlying biases, but only to the solution you propose. A GM bankruptcy would be devastating for the economy, and yet, you refuse to acknowledge that possibility, which virtually EVERY source which has commented on it acknowledges. It is to those ultimate effects on our overall economy why I support some kind of bridge loan for keeping GM in business. The authors of the WSJ article I cited also acknowledge that for the same reasons, and maintain that GM can only afford to repay the loans by selling assets, perhaps such as Saab. That is exactly what Ford did before the economy tanked, and that's why Ford will be the only one left standing if the *** hits the fan. I would not be surprised if Ford surpasses GM as a result of this economic climate.

Whether they file bankruptcy or not, only when the

tough decisions are made would I favor a multi-billion bailout. Can
they make those decisions, rid themselves of the Jobs Bank and $65
janitors, cut lines of business, abrogate foolish union contracts, get
rid of the golden parachutes, and toss out incompetent management
without Chapter 11? I believe the answer is clearly no, but if they
can, they should do it NOW before the taxpayer shells out a dime. What
are they waiting for?

I suspect that everything else is irrelevant to you so long as GM reduces the salaries and benefits of its employees to a level that you feel is befitting their status. However, I suspect that the overly generous privisions of the Agreement will be renegotiated by the UAW, if the alternative is substantial layoffs.



A big part of what got us into the mess we're in today is the real
wage decline since 1980. In spite of this he wants workers to rush to
the bottom with their wages to save mis-managed companies in the short
term. In the long term lower wages means fewer workers that can
afford the product they make. That is a recipe for failure.

The problem with what you say and what he says, is that BOTH of you make the same mistake. I don't mean to attack you, or him, but IMHO, the damage is done and no matter WHO is to blame, or if the blame is shared, those events of the past cannot be undone. We can only look to the future and the possible results of alternative actions taken NOW. Personally, I seem to believe that workers should be given an opportunity to join the middle class, and to purchase sufficient goods and services to permit them to stay there. IMHO, I believe that that is what made our country great, at least economically, but that balance is now lost, and needs to be reestablished. Blaming someone is unproductive, and reflects only an animus towards one group. He shares his animus towards labor, you towards management. EACH group has its excesses. So what? What's done is done. Punishing either group for past actions doesn't do much for a FUTURE solution, IMHO.

The uaw has given concession after concession and yet the companies
are still failing. They have accepted a 2 tier work force where new
hires make 50% less than senior workers.

Actually, Thumper, they have a few more concessions to go, in particular, with the Jobs Bank. Unfortunately, I agree with him on this. That clause is overly generous and a benefit not available to the working community as a whole. But even still, that won't solve the problem. The major problem are the current pension, health and legacy costs. With regard to health care, GM is not experiencing anything that the Nation as a whole is not experiencing. Government intervention is required, and IMHO, the only way to really get those under control is a single payer plan, which eliminates the middle-men insurance companies and their massive profits. GM's pension costs are due to mismanagement on the part of BOTH the UAW and GM's management, and consequently, need to be addressed by those groups, both through better capitalization by the UAW through further give-backs, and management through personnel changes, executive compensation and hiring of independent management, at GM's expense. Then, maybe the plans, as well as those legacy costs could be ameliorated for the future, the economy being what it is today.
IMHO, the UAW, by accepting a two-tiered workforce, made a serious error. YOu never do that in collective bargaining, but the UAW was forced into that because of the overly generous provisions it got which it shouldn't have in past agreements. That is an internal problem which they will have to deal with all by themselves.

GM's problems are not high wages and benefits. It's a failure of
management to restructure their antiquated dealership system for one
thing. Chevy alone offers 17 models, GMC 15, and Pontiac 9.
Altogether over 70 models and all kinds of permutations, COMPETING
with each other. They need to get focused and spend more time
figuring out what people want to buy.

I agree with what you cite as the management problems of GM. Add to that, the highly foolish sale of 49% of GMAC to Cerebus and you have a prescription for disaster that even a neophyte such as myself saw. It is simply unconscionable that GM's management and Board did not see that. I own GM stock and I vote against all those directors who approved that deal. for all their millions, they either didn't care about GM, or were so insulated by their own wealth, that they didn't care. Either way, they made a decision that even a fool, like Devil could see.

GM is two years behind Ford in its efforts to restructure and become competitive. But the short term alternative to GM's bankruptcy will be massive unemployment. The long term effects will be a declining GDP, as the pieces are cherry picked with an overall increase in unemployment and collateral contracts, to say nothing of the economic mantle passing to foreign interests. It is in the Government's interests to keep GM functioning. Our economy can perhaps withstand a Chrysler bankruptcy, but not both. IMHO, the Government should be attempting to work out some kind of a deal between GM, Ford and Chrysler, to keep the assets in the house, while they remaining two restructure with Government support.
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