Taxpayer Money Used to Eliminate American Jobs?!?!

October 30, 2008

http://www.time.com/time/business/article/0,8599,1855185,00.html?xid=feed-rss-netzero

It’s being reported today that the details of the GM-Chrysler merger have been settled between GM and Cerberus Capital Management, owner of Chrysler, and that the deal may be done by Tuesday. Just one small detail stands in the way – financing. GM doesn’t have the money to pull it off. That’s where the federal government comes in. The governors of six states have signed a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, imploring them to quickly provide federal assistance, without which it is feared that all domestic automakers will go bankrupt, with catastrophic consequences for the entire American economy.

Although GM is selling this merger to the government as the best way to salvage jobs in the domestic auto industry, claiming that both companies will go under without it (which may very well be true if nothing is done), its real interest (beyond mere survival) is in eliminating a competitor while increasing sales and cutting costs.

Projections are that, if this merger takes place, approximately 35,000 Chrysler jobs will be eliminated and that nearly five times that many jobs will be lost in total when parts suppliers and other ancillary companies are included in the impact – a total loss of about 165,000 jobs. Yes, GM will improve its sales volume slightly by the elimination of this competitor, but the vast majority of Chrysler’s sales volume will be lost to foreign competition. What this means is that, if the federal government provides the funding for this merger, billions of American taxpayer dollars will be used to facilitate the elimination and outsourcing of 165,000 American jobs! Then, billions more will be spent on unemployment payments and billions more will be added to the national debt when the income taxes collected from those 165,000 workers falls to zero.  So far, I’ve heard no discussion of this snake-eating-its-tail scenario, where taxpayer money is used to eliminate taxpayers’ jobs.  This should be a pitchforks-in-the-street moment!  Where is the outrage? 

GM is pushing frantically for this deal to be done by Tuesday. Why Tuesday? What’s so magical about that day? The election. If Obama is elected, as appears likely, GM fears that it will then have to deal with an administration that will take a dim view of using taxpayer money to destroy so many American jobs. An Obama administration will still do a deal to salvage the domestic automakers, but will be far less likely to do a deal that eliminates Chrysler as a separate entity. GM would much rather close the deal with the Bush administration, Henry Paulson and Ben Bernanke – people who don’t give a rat’s behind about American jobs.

There are much better ways to save all of the domestic auto industry. Loan GM the money it needs to survive a bit longer and take a stake in Chrysler, perhaps even all of it. Couple that with some new protections of the domestic auto industry, like tariffs on imports, and within a couple of years we’d have an explosion in domestic sales. The government would soon be able to sell Chrysler at a handsome profit for taxpayers. The time is past for timid steps. Without the protection afforded by tariffs, the domestic auto industry will be doomed regardless of what other measures the government or the carmakers may take.


Chrysler’s Demise Only Days Away

October 17, 2008

http://www.reuters.com/article/newsOne/idUSTRE49G20220081017?sp=true

In November of last year (see my 2008 Predictions), I wrote the following:

Long Shot Prediction:  Either Chrysler will be broken up and sold off (and thus cease to exist) to raise capital for Cerberus or Ford will declare bankruptcy. 

Believe me, I take no delight in taking credit for yet another accurate prediction.  It’s this very kind of thing I was warning of when I wrote Five Short Blasts.  But it seems that the demise of Chrysler is now only days away.  The link above is an article reporting on “merger” talks Chrysler is having with Renault and GM.  What’s not reported in this article are details that are covered by the local media here in the Detroit area:

  1. GM is pushing to close this deal by the end of the month.  So too is JP Morgan Chase, one of GM’s financial backers.
  2. This really won’t be a merger.  Cerberus wants to dump Chrysler at any cost.  GM wants the Jeep brand and will maybe keep a couple of other models, like their mini-vans.  Other than that, GM plans to completely shut down Chrysler and eliminate all those jobs.  Basically, they see it as an opportunity to eliminate a competitor and enhance their own sales in the process. 

So we’re looking at the loss of at least 100,000 jobs and the elimination of what was once one of the biggest, proudest, premier companies in our nation’s history.  It’s the end of the line for an iconic brand and a long line of historic vehicles that were often on the forefront of automotive innovation.  The day that the merger happens will be a sad, sad day for American manufacturing and the American economy – one more big step in America’s downward spiral.

I was hoping this day would never come, that they could hold off just long enough for our nation to wake up from its globalization delusion.  But it appears that, if that day ever comes, it will be too late for Chrysler and, unfortunately, it may come too late for Ford and GM as well.  In the words of Don McLean, “bye, bye Miss American Pie.”