Thursday, May 21, 2009
The Chrysler Bailout is "capitalism at work," writes private equity macher Scott Sperling in the WSJ . Here are some of the more questionable sentences in his essay:
Without a drastic restructuring neither Chrysler nor GM would have a chance for long-term success ...
These decisions include "right sizing" industry capacity by cutting many union and white-collar jobs and closing numerous manufacturing plants and dealerships; making the unions accept lower wages and benefits so that these companies can compete ... [E.A]
The cuts current union members were forced to accept were not impressive. Before the deal , Chrysler's UAW workers made $28 an hour. After they deal, they'll make $28 an hour. They gave up a scheduled increase in wages, plus a couple of scheduled bonuses. That explains why Chrysler's Belvidere, Illinois workers told TV station WIFR that "the plan is not nearly as drastic as they expected." ...
As for Chrysler's "chance for long-term success," it appears vanishingly small. Italian manufacturer FIAT is supposed to save Chrysler with new products, but according to a recent Automotive News article , "four of the six new vehicles from Fiat will enter the small-car segment," which is highly competitive but "covers only 14 percent of the entire U.S. light-vehicle market."
"The volumes need to be big for Chrysler to survive," [market analyst Tracy Handler] said. "Will they be? I have doubts about that."
See also th is BBC article ("it's madness"). Pathetically, Chrysler hopes that even if they don't save the company the new small cars will "[b]urnish the environmental image of Chrysler brands," says Automotive News . Unfortunately, the pipeline for those brands' other, larger, products--burnished or not--is pretty much empty.
If Chrysler workers were paid, say, not $28 an hour instead of $24--still not bad--the firm might actually have a "chance for long term success" through charging lower prices. But that wasn't a sacrifice Obama was ready to ask (even if Belvidere workers were apparently willing). ...
Final obvious point:
I don't want to sound like Veronique de Rugy
here, but who will pay the price
when this half-baked "restructuring" fails? In normal "capitalism at work," those who would pay the price will be those who made the deal and put up their money--the capitalists. (Query: Would Scott Sperling invest his
firm's money in this dubious proposition?) If
When Obama's plan fails, the monetary loss will fall not on Obama, but on the taxpayers. It will likely be made up somehow by the taxpayers (via higher tax assessments or inflation). That's not "capitalism at work." It's something else at work. But I'd be all for it, if I thought it really would
work. It won't, and it will be Obama's fault. (He'd certainly get credit if it succeeded.) ... 6:05 P.M.
Buried Lede of the Day: Thomas Edsall , summarizing a new Pew poll , notes the Dems have gained some support recently! While Republicans have lost ground! And voters care more about the economy than "moral values."
We knew that. What we maybe didn't know is this:
Conversely, public support for labor unions appears to be weakening: the percentage of people agreeing that "labor unions are necessary to protect the working person," has dropped from 74 percent at the start of this decade to 61 percent this year. The decline was sharper --- from 76 to 53 percent, a 23 point fall -- among independent voters than among either Democrats or Republicans. [E.A.]
Some 61% say labor unions are "too powerful," a big jump from 52% in 1999. ... Support for unions, says Pew, is at an " all-time low.". ... Also, perhaps counter-intuitively, "'the overall balance of public opinion on the government's responsibility to provide for the needy has shifted to the right' despite the onset of a severe recession." This rightward movement appears to be the result of growing fear among the above $75K set (a big set) that the poor have become too dependent on government programs. ...
Hmmm. Democratic. But skeptical of unions. And worried about welfare dependence. ... What kind of Democrats are these? ... 6:04 P.M.
There are things Don Graham won't do, and this is probably one of them. Which is why Huffington Post will always have an edge on WaPo (and the rest of the MSM). She's not scared to go there. ... 5:49 P.M.