Running in circles

There was a Burma Shave saying that went, "If you're worried, or in doubt, run in circles, scream and shout." That seems to be what is going on this week as the Big Three Automakers and the UAW head to Washington in search of cash. Lots of running in circles, screaming and shouting.

Any time that anyone goes running around, telling me the sky is falling and telling me there is no time to wait, they need my money now, I get suspicious. It seems that every time I watch a news report, I hear someone telling me that without cash from Washington right now, this minute, no time to waste, the Big 3 will go bankrupt and the sky will fall. The sky will fall argument was a falacy when the conservatives said it about Obama becoming President and it doesn't work now.

I will, however call it a half-truth. It's probably true that without Washington's money, the Big 3 are headed for Chapter 11. That's the half that's true. The untrue part is when they portray Chapter 11 as the plants will immediately shut down, nobody will make cars, all those workers will be without jobs and the suppliers will have to shut down, and the total will be 3 or 4 million people out of work. That is just not true.

First of all, reports say that Ford is only asking for a line of credit that they hope not to use. If they are even able to consider not using the bailout money as an option, they will probably survive a bankruptcy if necessary.

Here in Toledo, one of the stations had a UAW rep on who said that if there isn't a factory, there can't be concessions. True enough, but again, even if they go to Chapter 11, there will still be a plant. Again, two examples from right here in Toledo are DANA Corporation and Owens Corning Insulation. Both declared bankruptcy in recent years, both continued to produce their products and both eventually emerged from bankruptcy. I'm not saying people didn't lose their jobs and there weren't hard times, but the fact was that they didn't go to liquidation, they went to reorganization and that's exactly what the Big 3 would do if they didn't get this government money.

Even if they go to full liquidation (which they won't) someone would buy up the assets and produce cars. Why? Because people still need cars. The auto industry is still a viable industry. It's just suffering from legacy costs from some bad deals made with the UAW, as well as mismanagement by overpaid executives.

Ford's CEO says he'll work 2009 for a dollar. Good start, but that puts him at a $7.5 million average for 08 and 09. I'd like to see some more. I'd like to see that out of the other execs.

The UAW is talking about givebacks on contributions to VEBA and that working man's golden parachute called the JOBS Bank, which allows workers who are laid off and not working at all to collect 95% of their salary. Again, a good start, if it happens (which I'll believe when I see). I'd also like to see a few more concessions to bring the legacy costs down.

The problems that the Big 3 are experiencing stem from a combination of poor planning by management, a management that was willing to give away the store to the unions, and a union that was willing to bleed them dry.

Bankruptcy, not a loan or bailout money, is the way that these businesses will shed their problems and become viable, competitive businesses.