Wednesday, November 19, 2008

Bailouts Part 2

As I wrote before, I was against the bailout of Wall Street until very close to when it passed the Senate. It is simply wrong for a capitalist company to turn to the government for assistance, especially when so un-tethered. Then the scare came into me and I wanted to see America NOT face a depression. Well, we got took, didn’t we.

Yesterday I watched a good bit of the Senate hearings with the CEO’s of the Big 3 asking for $25 billion. I was not impressed by the CEO’s. They want business as usual, promise nothing in return, and as a guy that has done business with them for the past 20+ years I can tell you we won’t get anything in return that isn’t written in stone six different ways.

Realize, please, that you could OWN General Motors for about $1 billion, that is their current market capitalization, the value of all their shares.

But I am for a bailout of the companies, pulling the money out of the amount already offered to Wall Street, IF, and this is a very big IF, we can cut management compensation and concessions from the unions.

NO! NO! NO!

I can’t write that, because it won’t work. I sure wish it would, but I don’t see any way that we can take over the companies and make them work. If there were a person to take control they would be in that position already.

It’s bad tasting medicine, but we need to take it. Let them go bankrupt, rise from the ashes in whatever form they do, and return to profitability on their own. Yes, it will be painful but to put off the pain is only to delay it. Actually, GM may bankrupt, Ford probably not, and Chrysler, who cares … they are privately held.

Daimler Benz bought Chrysler a few years ago for $36 billion. After putting billions more into the company they realized the futility and sold it for about $6 billion. The company that bought Chrysler is a hedge fund. Let them take the fall.

The simple truth is that the companies are poorly run. Management is out of control in their reimbursement. The union are contracts beyond what is affordable in their business environment. The union contracts the companies agreed to were accepted only to avoid pain at the time – they didn’t want a strike. They should have held their ground. The unions similarly took more than they should have. They were greedy and took then what they could still be getting now.

With apologies for those this may offend, assembly line workers were paid too much. I know several and they owned their homes near the plant, often on a lake, had boats and snowmobiles and another "cabin" up north. They over extended themselves and weren't paying attention. Yes, I love people but I also am compelled to point to a world environment that is leveling out the workplace. FWIW, I'm feelin' the pain myself and expect it to get worse in my house.

If you haven’t read it already, Ayn Rand’s “Atlas Shrugged” is an amazingly prophetic view of the current situation. It’s not all right, for sure, but it does have many similarities, spooky in fact. A really good read.

IF the auto companies go under there will still be factories. Some will close but some will remain open. Some will be bought by new companies that actually are fiscally responsible, have a better idea and a youthful desire to succeed from hard work, from taking a chance and winning.

In truth, they may not bankrupt anyway. Why aren’t they closing plants right now?

FWIW, right now GM is spending $300 mil on a plant in Russia, sold more Buicks in China than they did here last year, and needs to be slapped. Anyone remember Oldsmobile? They closed that division down not because it wasn’t making some of their best cars but because it’s plants had the worst union contracts. By one industry report a few years back Saturn had lost $3500 on every vehicle they sold up to that time.

Without a bailout many workers will be out of work. Much of the management ditto, but they won’t care because they’ve stashed much personal cash over the last years. Many of the workers will find jobs at the new plants. At lower wages and they'll be bitter about it. Bitter pill to swallow, but is it better than no work? If they grumble too much it lends credence to any new companies desire to build in other areas where the workers are more appreciative.

I’ve been to Flint, Michigan and many other company towns that are no longer company towns. Boarded up houses and empty retail shops are all over the place. Kind of like the strip mall around the corner here in So Cal with Shoe Pavilion and Linen’s and Things going out of business, but older, dirtier, and sad like a worn out discarded old stuffed kid’s stuff animal found on the street. Kind of like this neighborhood could look in short order.

But we’ve gotta take the medicine or we won’t get better, we’ll just get sicker when it hits again.

Oh, that Wall Street bailout? Is there any way to stop it now, pay no more, and leave the ex-CEO of Goldman Sachs, Hank Paulson, with as much egg on his face as possible? Is it not amazing that the legacy of the worst president in history won’t be what we thought it would be three months ago?

Not that I like the idea, but in this economic downturn, recession only, hopefully, there will be many opportunities for the church to serve.

Look for those starting now, they are everywhere. We'll likely have some time on our hands anyway.

8 Comments:

Blogger Mike said...

I was wondering what you considered too much for wages? I understand as responsible adult followers of Christ we need to live within our means. I am a union electrician in Toledo, Ohio. I am truely blessed to be working consistantly for my entire career. I like the high wage for a couple of reasons. 1st I can give back to God. Second my wife is able to stay home and raise our children.If the CEO's can make millions plus their annual bonuses, why can't we make a little money and not be considered overpaid.

11/20/2008 3:38 PM  
Blogger Christian Democrat said...

With apologies, this certainly wasn't meant to be personally taken, but I can see why it was.

Too much for wages (and benefits) is the point at which the product can't continue to be sold in a competitive market. For a long time the U.S. automotive market wasn't really competitive. Most folks were buyers of either Ford (like my parents) or GM, or Chrysler products. When one wore out you bought another.

I also place blame squarely on the management. They were frivolous, arrogantly stupid, and wasteful. They simply didn't care what would happen in the coming years as long as they got their bonus every year.

The fact is the CEOs shouldn't have been paid as much as they were and the working people on the line, ditto. A well run company would have put a great deal of money aside for times such as we are currently in. It's not like we haven't seen it before.

FWIW - I had an automotive project awarded to me on Tuesday and retracted today. The foreign company decided not to introduce what would be seen as a flamboyant car at this time, particularly not at the Detroit Auto Show.

So, I lose, too.

May God's peace be with us all.

11/20/2008 5:20 PM  
Anonymous shykitte said...

HI CD,

I read Atlas Shrugged, We The Living and The Fountainhead when I was a teen. Great books all, very thought provoking! And yet very disturbing too....

I think that the work environment in this country needs a major rehaul. The ways in which CEOs are given more privileges (when the actual work is done by other people~) needs to change. I was astounded that the CEOs of the Big 3 were not willing to give up their private jets and were unapologetic about shamelessly using them when so many people who work for them are facing uncertain futures!

Sometimes I think that people are blind or choose not to see what is evidently a wrong way to do things.

12/07/2008 3:07 AM  
Blogger Christian Democrat said...

Hi Shykitte -

It's all about Greed. It drives capitalism, creativity, economies and wars. Of the four, creativity is good and really drives the others to their respective ends.

I'm leaning socialist of late. The energy fiasco (Enron), big oil and the medical industrial complex all need, I like to think, to be socialized. The problem in that thinking is that socialism does take away a bit of the creative drive. So we need governmental ownership of competitive corporations within the creation and delivery of commodities. We may get that yet.

The Big 3 Car guys did give up their jets supposedly. For now anyway.

Glad you're here, not much to write about of late, just answering comments. You're down in Australia, right? How's the economy where you are?

12/07/2008 8:46 PM  
Anonymous Jonathan Wallers said...

I want to make my point effortlessly. If you claim to be a Christian and are in support of gay marriage and the act, you are not a Christian. Read your bible, "man should not lay with man" and Sodom and Gommorah was disgusting in God's sight. This is plain and simple. As for voting Democrat, once again, philosophies that are opposed to the Christian belief.

12/27/2008 8:04 PM  
Blogger Christian Democrat said...

Jonathan -

In the sermon today we studied Luke 2: 22-40. I listened with interest as to the sacrifice "a pair of doves or two young pigeons" as a burnt offering and a sin offering and to make the mother ceremonially clean. Mary couldn't afford the year old lamb, apparently.

I ask you, when did God rescind the need to make sacrifices? Or do you still make sacrifices in accordance with His law?

Will you judge me more?

Live according to your faith, please, and likewise let others live according to theirs.

12/28/2008 3:27 PM  
Anonymous Jonathan Wallers said...

Jesus has become the sacrifice for all of our sins. We do not need to sacrifice animals for forgiveness of sins. Jesus was the ultimate sacrifice.

Living according to my faith is what I do. However, there are some "laws" that the Bible put forth as a matter of faith. homosexuality is against those laws. If you don't follow those specific laws, then yo cannot be considered a disciple of Christ.

For example, if you say you believe in the laws of physics but don't believe in gravity, you cannot be called a believer in physics. It's very elementary.

6/14/2009 7:36 AM  
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