Thursday, November 13, 2008

Free Money!

I'd like to start this post off by saying (in a very Cher Horowitz manner), "my bad!"

Why am I making this mea culpa? Well, because I supported the original $700 billion bailout. I supported that bailout because the credit markets were frozen by fear, and that stood to seize up the entire economy faster than running your engine without oil. Little did I know that the bailout would become the biggest Matthew Lesko scheme since, well, Matthew Lesko.

Don't get me wrong. I knew that companies outside the financial industry would be lining up with their hands palm-up. But I was naive on three counts. First, I thought that the Fed and the the Treasury would use the funds specifically as outlined in the bill. Second, I didn't think that other companies would stampede the trough as they have-I expected more of a subdued rush. Third, I didn't think that even congress was so stupid as to hand the cash out in wheel barrows to all takers.

Skeptic though I am, even I did not anticipate the way this would become a Lesko book. The latest absurdity is Detroit. If any three companies ever needed bankruptcy, it was these three. They are getting their tails kicked by foreign competition for two reasons: The UAW's power over them has saddled them with uncompetitive labor costs, and the way CAFE regulations are structured, their profitability became tied to vehicles they can no longer sell in great volume. Bankruptcy can solve one of those problems and alleviate the other.

I write this as the son of a man who has been a damn hard working, blue collar worker his entire life. Yet for many years of his adult life, he made a wage that gave him a comfortable living, and he did it without a union. I don't want to begrudge autoworkers a nice life. But then again, neither have Toyota and Honda. The UAW moved beyond that though. They got greedy, all the while saying that they were doing it to protect future autoworkers. As my barber said recently, what about those future autoworkers now?

Until the U.S. auto industry solves the problem of their unions and move into line with Toyota and Honda on the labor front, they are screwed. That $25-$50 billion will be gone in a heartbeat, and we'll either need to ante up more to prop the "Big Three" up, or they'll eventually fold, leaving the remainder of their employees in a lurch-or employed by Toyota, Honda, Volkswagen, and others, where their wages will be in line with their peers. And still better than most others, I might add, including numerous white collar workers. The line on the bail out should have been drawn weeks ago, but without a doubt it needs to be drawn now.

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