Thursday, May 07, 2009
The reason to bail out Chrysler
As is painfully obvious, there is only one reason to bail out Chrysler, and that is to preserve an important outpost of the United Autoworkers, a powerful constituent of the Democrats. Chrysler is not systemically important, it makes no contribution to the American economy that will not be taken over handily by other car companies, and the proposed bailout does nothing important for the general level of employment. It is all about preserving the jobs of specific people without appearing to give them rifle-shot social benefits that are not available to people generally.
Chrysler employs about 60,000 people. This is a rounding error in the number of jobs that have been lost since this recession began.
To put it another way, we could have taken the $8 billion or so we gave to Chrysler and given every one of the company's employees $133,000 to start their own War on Poverty, while still providing much of their pensions through the PBGC. Of cours, the new Chrysler is going to cut many of those jobs, so the cost of actual jobs saved will probably top $200K per. For as long as the company lasts. Which most analysts do not expect to be long, given that their super secret surprise scheme for turning everything around is to have Chrysler sell retooled Fiats to a country with one-seventh the population density and almost twice the birthrate of Italy.
Megan's post - "How Do I Know That the Chrysler Bailouts are About the Unions?" begins with this:
This question was asked recently by a seasoned political reporter of my acquaintance. Frankly, I hadn't realized that anyone else seriously believed there was any other reason to bail out Chrysler. But let's go through a couple of the other stated rationales, to see why I find them so implausible.
Frankly, I find it amazing that so many journalists are so ignorant about business and financial matters. I was a freaking liberal arts major who never took a single finance or accounting course, and had nevertheless learned a lot by my mid-twenties -- certainly enough to know that Chrysler is a zombie -- simply by reading the business press and a few books. Ought it not be a basic professional requirement of paid political journalists during an economic crisis that they learn enough about business and finance to know at least that? How can they do their jobs with any credibility otherwise?
Read the whole thing.
CWCID: Glenn Reynolds.
10 Comments:
By 
, at
Thu May 07, 10:10:00 AM:
You say, "I find it amazing that so many journalists are so ignorant about business and financial matters."
I don't! Few business are as heavily unionized as newspapers and media.
The so called "journalists" and their fantasy objectivity are likely long time union members and carry what they've been told by their union stewards into their work product. They've been taught that business is bad with as much rote as they were taught that there are no WMD in Iraq.
By 
grl, at
Thu May 07, 10:30:00 AM:
Perhaps there is an interesting way to look at it:
Without the corporate cover, the UAW will run Chrysler into the ground faster. Work rules may be coercive for weak management, but they do not sway consumers.
Without cars people want to buy, Chrysler disappears, and this executive branch should be charged for this multi-billion dollar malfeasance. Nothing they will have done has not exacerbated the money and jobs lost.
By Viking Kaj, at
Thu May 07, 11:15:00 AM:
The main reason not to bail out Chrysler is that they build crappy cars.
Or perhaps Tigerhawk has forgotten the infamous Dodge Durango ?
By , at
Thu May 07, 11:43:00 AM:
I think that what they are doing is going to accelerate Chrysler into the ground. Half this country are still fiscal conservatives who are appalled at the criminality of this money grab. How many of them are going to every buy a Chrysler again? As far as I'm concerned, Chrysler and their employees can go pound sand for the rest of their lives. I'll never buy another of their cars, and I don't care if they suddenly start making the best cars in the world.
Buying a Chrysler is now immoral. It is the equivalent of receiving stolen goods.
By , at
Thu May 07, 02:39:00 PM:
grl: "Without the corporate cover, the UAW will run Chrysler into the ground faster. ... Without cars people want to buy, Chrysler disappears..."
Anonymous: "what they are doing is going to accelerate Chrysler into the ground. Half this country are still fiscal conservatives ... How many of them are going to every buy a Chrysler again? As far as I'm concerned, Chrysler and their employees can go pound sand for the rest of their lives." I agree 100%. It's a sound principle that the sooner you fail the faster you learn. But there's one problem...
Governments buy cars, too. The feds have a fleet (23K new cars last year), the states have fleets, the cities have fleets. I can imagine a scenario in which Chrysler morphs into the govt's in-house auto-maker, and thousands of employees drive around a swarm of mandated, weird little econo-enviro-boxes that you and I (and they) would never buy with our/their own money. It's sick, but it might be enough to keep the zombie staggering along and keep UAW in the money.
Mission accomplished.
-Visigoth
By , at
Thu May 07, 02:41:00 PM:
Hey, who stole my whitespace? Let's try again.
grl: "Without the corporate cover, the UAW will run Chrysler into the ground faster. ... Without cars people want to buy, Chrysler disappears..."
Anonymous: "what they are doing is going to accelerate Chrysler into the ground. Half this country are still fiscal conservatives ... How many of them are going to every buy a Chrysler again? As far as I'm concerned, Chrysler and their employees can go pound sand for the rest of their lives."
I agree 100%. It's a sound principle that the sooner you fail the faster you learn. But there's one problem...
Governments buy cars, too. The feds have a fleet (23K new cars last year), the states have fleets, the cities have fleets. I can imagine a scenario in which Chrysler morphs into the govt's in-house auto-maker, and thousands of employees drive around a swarm of mandated, weird little econo-enviro-boxes that you and I (and they) would never buy with our/their own money. It's sick, but it might be enough to keep the zombie staggering along and keep UAW in the money.
Mission accomplished.
-Visigoth
By , at
Thu May 07, 02:52:00 PM:
So does this mean that the original bailout by Bush was to court UAW votes and contributions?
There are multiple arguments for and against the bailouts. And the Obama plan did unfairly favor the the employees, union and non-union. But to lay it entirely on payback to the UAW is simplistic nonsense.
By , at
Thu May 07, 03:57:00 PM:
Yes, I think the original Bush bailout was intended to please the UAW as well.
With Dems it is straightforward: they kowtow to the unions and unions support them in return.
Why Reps kowtow to the unions is inexplicable, but there it is nevertheless.
By K. Pablo, at
Thu May 07, 09:08:00 PM:
These moves by the Administration really run roughshod over creditors' rights. What the Feds are doing, however, does not seem terribly different than what is suggested after Kelo vs. New London. They appear to be offering an "eminent domain" logic to confiscate property (in this case, money).
By Georg Felis, at
Fri May 08, 10:08:00 AM:
The federal government *already* buys all their cars from US auto manufacturers. And the car companies lose money on each of the little crackerboxes they sell. Therefore to stimulate the economy and the car companies, the Feds need to buy all SUV's.
Yeah, that'll fly....
