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Uncle Sam driving GM is crazy

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POSTED April 1, 2009 4:14 a.m.
I drive a Ford.

That must irritate those who are using this economic mess to push for the government seizing control of American corporations.

While the powers-that-be in DC run around saying GM and Chrysler got themselves into this mess – and Ford to a lesser degree – by turning out gas hogs they’ve got it all wrong.

The real reasons are the fully loaded Cadillac Escalade version of health benefits that cost GM over $1,600 per vehicle in 2007 for both existing and retired employees while Toyota pays $200 per vehicle. Add to that the fact GM in 2007 paid almost another $1,000 per vehicle on holiday pay, plant-shutdown-pay, and line-relief to auto workers. It is the reason why Washington, D.C., both under Bush and now under Obama were so willing to pump your tax dollars into GM. A bankruptcy would mean those benefits would come back on the table in a court more concerned about keeping the automaker afloat and paying their obligations than in keeping auto workers and stockholders whole.

Knock off $1,400 per vehicle and GM’s North America division can probably become as profitable as its other global operations.

There are two reasons why the folks in DC don’t like talking about auto worker health benefits. For starters, it underlines exactly how crippling all-inclusive health care benefits can be on American businesses. If it can take out the Big Three, just think what a federal health care mandate could do to Main Street USA.

The second reason is Uncle Sam played a role in saddling the automakers with much of the costs. How often in the past 20 years have federal negotiators interceded to get talks going during negotiations or a strike?

No one is absolving the folks who’ve been running GM of past sins or auto workers for that matter. It is unfortunate that GM and Chrysler and their workers find themselves where they are today because their quality and products are now on par with virtually every other manufacturer.

Having said that, do you want the government calling the shots for the American auto industry?

GM has a bureaucracy but they are still driven by a need to turn a profit. Uncle Sam’s bloated bureaucracy is driven by policy objectives and not profits. The bureaucrats who are posed to take control aren’t dependent on GM succeeding for their living. They live off tax dollars.

Government-run auto manufacturers aren’t exactly setting the world on fire. Would you drive a Yugo?

We’re all supposed to feel better about the government monkeying around with GM and Chrysler by pronouncing Uncle Sam will guarantee new car warranties for both manufacturers.

If Washington had stayed out of the entire mess and let GM and Chrysler head into bankruptcy last fall, the odds are both companies would be well on the road to reorganization right now.

Yes, it would have put health care benefits at risk. Yes, the government couldn’t dictate even more stringent clean car standards. And, yes, the government would not have burned through hundreds of millions of your tax dollars.

Bankruptcy may also put Uncle Sam in a bad position. Taxes are one thing in reorganization, but what has been advanced to the auto manufacturers are loans. They can’t be treated the same as taxes regardless of the contractual agreement between GM and the administration. The bankruptcy court is independent and has its own rules.

Of course, Congress could simply cover its tracks – just like with the AIG bonuses - by passing post-mortem legislation that instructs a bankruptcy court to make any firm that goes under that got a US loan to be made whole 100 percent ahead of all other creditors.

That means everyone who kept supplying GM during the past few months will probably have to eat a lot of money.

The warranty promise is simply feeding on public fear.

Kmart went into bankruptcy and came out of it and gobbled up Sears.

Bankruptcy, in many cases, is not the end of the line.

There is no reason why anyone should feel uncomfortable buying a GM or Chrysler product.

There is no overriding reason why retired workers of GM and Chrysler should get special federal protection on our dime. No one on Congress interceded when countless others over the years have lost benefits in a bankruptcy proceeding.

The American auto manufacturing industry is vital. There is, however, a system in place that will allow it to address what ails it. It’s called bankruptcy court. All Washington is doing is muddying the waters and squandering tax dollars.
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