Bailout Industries Still Don’t Get It

Yeah, this burned me up. Bank of America is to lay off 30,000 workers over the next couple of years, symptomatic of the terrible climate for banking right now, and these finance CEO's are getting bonuses? Where is the outrage, especially when a lot of these firms would not longer exist without my tax dollars?

Patrick,

Where in the heck are you getting your information about the auto company deals? Dig a bit deeper because most of what you wrote is dead wrong. There are concessions being made and terms being set for the loans. In fact the terms of the government loan packages include a requirement that a viable plan for restructuring to move back to profitability be presented by March 31st or the loans must be immediately repaid. The legacy costs from retired workers when the American companies had much larger market shares and therefore much larger work forces is a huge portion of their labor expenses. In addition labor costs are only 10% of the cost of cars and new hires do in fact make wages comparable to the foreign manufacturers in the South.

Rather than engage in anything long (I've done it already and posted what everyone's needed to know), I'll keep it brief. Detroit and the UAW have been given more than three months to reform -- the federal government is being surprisingly generous, and Detroit and the UAW ought to respond accordingly. On the radio today I heard Wagoner state that currently no changes are being worked on, but that this month, right now, GM is preoccupied with doing the loan paperwork and getting the money first. That makes perfect sense, for the next few days -- and that's all. After that, or as of next month, GM and Chrysler (and Ford, which may expect comparable concessions that it and the UAW must make) have three months to replace their multiple-decade-obsolete, failed-for-as-much-as-thirty-years-or-more business and labor model with something like the modern, vital auto industry located not only in the Midwest but primarily in the South.

Also on the radio I've continued to hear some continuation of the denial here in Detroit, the arrogance, worthless attempts at distraction as well as childishess regarding the financial industry bailout (even discounting the most recent arrogant statements by financial managers in refusing to divulge details of how the money is being handled, and denial of the public's right to know any details), trying to blame the economic slump for the auto makers' impending failures (we have not had a slump since 1980 or before, obviously), and the predictable idiotic defensiveness and backlash. It's as if some people still are completely ignorant (or stubbornly and stupidly in denial) about Detroit's and the UAW's failure for as much as thirty years or more, their obsolete concepts and business-labor model, their refusal to reform while the auto industry was modernized and changed often and largely without them, and their arrogance in viewing themselves as "the industry" or "the auto industry" when they do not constitute or define anything of the kind and haven't since the 1980s. They have generously been given _three_months_ to avoid bankruptcy. Let us see next year if they will finally change -- or if they will remain in denial, or underhandedly seek a better deal from Obama and a more Democratic Congress rather than reform as they long have needed.

"Bank of America is to lay off 30,000 workers over the next couple of years, symptomatic of the terrible climate for banking right now, and these finance CEO's are getting bonuses? Where is the outrage..."

Well, just to be clear here, "bonuses" is the term they all use, but it is incorrect. Regular compensation is often low in the financial industry, and the rest of it is in the form of a lump sum, which they refer to as a "bonus" even when it's not being awarded for having done anything remarkably good. The idea is still that it constitutes a kind of incentive payment. Some large payment would ordinary be due in almost any conceivable situation. (This one, with the role they played in over-extension of credit, may not be one of them, obviously!)

The other issue is that it has always been wrong, when discussing Detroit's self-made predicament (over decades, not simply being a victim of the current slump, as some misleadingly claim), to try to distract attention toward a much-larger and arguably worse misuse of tax money (Detroit does not "deserve" a bailout, obviously), even though two wrongs don't make a right, and in fact the financial bailout is _irrelevent_. (I will add that many of us were against the financial bailout as well as against the Detroit bailout, which makes mention of the bailout fail _additionally_ as any defense of Detroit's bailout.)