Who owns the problem?

Posted by David A. Peterson on 12. December 2008 in Economics, Issues |

Who owns this problem? On who’s shoulders does this defeat of the $14 billion auto rescue bill fall on? Should there even be a rescue bill?

There are only 5 major players. They are:

  1. The President
  2. The Big Three Automakers
  3. The UAW
  4. The Senate
  5. The House

That’s it – there is no one else hiding in the closet, so who owns the problem?

If you are watching TV or listening to the commentators on the radio  at any one moment in time you get a distorted view of the issues, the players, and last night’s outcome. Last night the $14,000,000,000 auto rescue bill was defeated 52 – 35. This was just a procedural vote (i.e. a vote that confirmed a predetermine outcome). Senators knew they didn’t have enough votes to pass the legislation, so they voted to make it official. 

This morning I turned on the TV news and at that moment in time I saw Debbie Stabenow the Democratic Senator from Michigan slinging sound bites with passion. She obviously believes in what she is saying and it appears that she can’t understand why others don’t see it her way. She was not very flattering to Senate Republicans. Here are the points I took away (you can see the complete speech on YouTube.com):

  •  “…as long as the the workers were willing  to take all of the cuts … before the negotiations…”
  • “The only thing that matters (to Republicans) is that workers get paid too much”
  • “…we are willing to sock  it to the workers…”

At another point in time, again this morning on CNBC, Senator Bob Corker (R-TN) was given his chance to tell the Republican side of the story. His points were:

  •  “…we were three words away….” from passing the bill.
  • “…we were looking for a finite date,  to get wages competitive with the other foreign automakers.”
  • The UAW was unwilling to give wage concessions even though they would be negotiated and certified by the incoming Secretary of Labor. Even though that Secretary would be appointed by President Obama.  
  • “What kills me… we had a historic opportunity to get these companies healthy.”

Senator Corker was asked, “if this goes down badly don’t you worry about owning the problem?” He replied, “Do we own the problem?”

Regardless of the soundbites that are being slung, at the end of the day, no matter who you believe, the taxpayers are being asked to own the entire problem. The President may step in soon and give $14 billion of TARP money to the automakers. Either way, if the Congress passes legislation or if the President steps up to the plate – you and I are going to pay for it.

Who owns the problem? How about the automakers? I’m an ex-enlisted Navy guy. The thing you learn when you join the Navy is that the Captain is always in charge. What ever happens to that ship is the Captain’s responsibility. If the Ship wins the battle the Captain is a hero, if the ship loses the battle it’s the Captain’s fault – no exceptions – ever.

In this case all three automakers need to step up.  They each have a Captain and that Captain is not the American taxpayer.

The automakers can’t get private financing for a reason: Their current business model is in trouble. Do you think I’m wrong? I bet Google could get a private loan right now even though its own stock price is 50% less than it was last year.

At least two out of three of the automakers will go belly up in to Chapter 11. Chrysler may have to liquidate (just a guess since they tried to sell themselves like a whore this past fall) and GM, well GM is flat out of money.

The Captains of all three automakers need to save their own ships. Getting money from the taxpayers without already negoitiating with all of the parties was and still is a silly idea. $14,000,000,000 “bridge loan.” A loan is something that gets paid back. The current business model ensures that it could not be paid back.

The Captains of the automakers should have already negotiated their respective plans before asking for a “bridge loan.” The UAW (Ron Gettelfinger – President) should have already made concessions before stepping in front of the camera’s in the House and Senate hearings over the last few weeks. The suppliers should already be banning together to ensure an orderly way out of the mess.

Note to all of the Captains involved in this mess. If you want to survive as a growing concern you need to be at general quarters now. Not in March 2009, not waiting for some “Car Czar,” not just holding on, you need to know what to do now. If not then each of you “own the problem.” Don’t drop it on the taxpayers – I can’t fix it from my laptop, you have to fix your own problems.

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