Quote:
Originally Posted by Nate the great
This is the rant thread, so I'm going to break my rule on not posting about politics.
The US Treasury Department now owns 61% of General Motors. Could someone explain to me how we skipped right past Socialism and went straight to Communism? Shouldn't we have had a Glorious Worker's Revolution first? I'm really sad that I missed out on the looting.
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You are just now noticing this?
You might want to review the definition of Communism, first, as this isn't it.
There was a lot of discussion about this, before, during, and after the fact. It's a question of "Are some enterprises too big to be allowed to fail?, and you won't please everyone no matter what answer you come up with.
The major US automakers are all struggling to adapt to a vastly changed landscape. The salad days when GM's problem was keeping its market share under 35% to prevent anti-trust issues are long gone.
The fundamental issue is costs of production. GM spun off the Delphi automotive division some years back, and a couple of years ago, the CEO of Delphi shocked everyone by entering Chapter 11 bankruptcy. It was a wake up call for the entire industry, and observers were wondering when GM might follow suit. Delphi's problem was simple. It had a cost structure where workers were earning as much as $60/hour in salary and fringes, but had to compete with foreign suppliers whose labor costs were perhaps $10/hour. And to keep costs competitive, the "Big Three" were sourcing based on cost. Delphi had no leg up by being a US company and former part of GM.
Expand Delphi's problem to the industry as a whole. GM is hobbled by extraordinary labor costs. UAW contracts impose pension and health care costs they simply can't afford, negotiat4edf in the days before teh economy imploded. (And GM has two workers retired and collecting benefits for every one on the job. You may imagine where this will inevitably lead...)
The issue faced by the Federal Government was "Which is the worse alternative: assuming control of a large part of GM to keep it alive, or letting it fail?" "Letting it fail" means large numbers of autoworkers in areas that are already economically depressed losing their jobs. Autoworkers who
vote, and will lobby their Congress critters to Do Something to insure that doesn't happen.
I'm not particularly thrilled by the notion either, but what would you have the Feds do instead? Let GM go belly up?
I had some interesting conversations with an old friend who is a rabid conservative and felt the Feds should do just that. He's an entrepreneur, and has made his living in a variety of ways over the years. He's under the happy delusion that everyone else can emulate his practice, and letting GM go belly up would simply spawn a batch of smaller, nimbler independents filling the void it left. And so it might, but what happens to all the laid off workers in the meantime? Most would not be able become entrepreneurs and go into business for themselves, a fact that he can't seem to grasp.
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Dennis