WASHINGTON -- "Nothing," said a General Motors spokesman last week, "has changed relative to the GM board's support for the GM management team during this historically difficult economic period for the U.S. auto industry." Nothing? Not even the evaporation of almost all shareholder value?
GM's statement comes as the mendicant company is threatening to collapse and make a mess unless Washington, which has already voted $25 billion for GM, Ford and Chrysler, provides up to $50 billion more -- the last subsidy until the next one. The statement uses the 11 words after "team" to suggest that the company's parlous condition has been caused by events since mid-September. That is as ludicrous as the mantra that GM is "too big to fail." It has failed; the question is what to do about that.
The answer? Do nothing that will delay bankrupt companies from filing for bankruptcy protection, so that improvident labor contracts can be unraveled, allowing the companies to try to devise plausible business models. Instead, advocates of a "rescue" propose extending to Detroit the government's business model for the nation -- redistributing wealth from the successful to the failed, an implausible formula for prosperity.
Some opponents of bankruptcy say: GM must not be allowed to fail before it perfects batteries for its electric-powered Volt, which supposedly is a key to the company's resurrection. This vehicle was concocted to serve GM's prolonged attempt to ingratiate itself with the few hundred environmentally obsessed automotive engineers in Congress. They have already voted tax credits of up to $7,500 for purchasers of such cars -- bribes that reveal doubts about consumer enthusiasm for them at a price that would reflect cost.
Congress could help the Detroit Three by allowing them, when meeting CAFE (corporate average fuel economy) standards imposed by Congress, to count fuel-efficient cars they import from their overseas factories. Congressional Democrats oppose that because those imports are not made by members of the United Auto Workers. Those Democrats, their rhetoric notwithstanding, really care most about the union. "Saving the planet" comes second and last comes the health of the auto companies.
Some opponents of bankruptcy stress that it might terminate health care coverage enjoyed by UAW retirees who are too young for Medicare. Think about that. If people want to retire before 65, or 35 for that matter, that is their business. But there is no public interest in protecting the luxury of retirement in the prime of life just because in palmy days a private contract between a union and a corporation established it as an entitlement for all seasons.
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