August 01, 2008

How long before Jenny suggests a bailout?

GM posted a $15.5 Billion loss in the second quarter of this year. Could be the high cost of oil making imports more attractive, could be UAW making it unprofitable to manufacture cars in Michigan, could be the retooling needed to meet higher CAFE standards, could be a lot of things.

I'm wondering how long it will take Granholm to push for a state or federal bailout. I fully expect the state to "loan" huge amounts of money to GM and Ford, driving up the state debt even more, probably counting on revenues from the asinine "Michigan = Hollywood" plan. Why? GM is "too big to fail" in common parlance. Employs too many people, owns too much real estate, generates too much tax revenue; too big to fail. All of those are value judgments about what constitutes "too many" or "too much", and none of them are reasonable. Michigan's auto industry is dying, for a lot of reasons, and Michigan will not and cannot succeed by keeping them on life support.

In fact, I strongly suspect that GM and Ford are committing "suicide" at this point. Knowing that they are too big to fail, they're counting on the bailouts, and deliberately setting themselves up to be as unprofitable as possible... for the moment. I'm sure they aren't profitable, of course, but any legitimate accounting procedure or suboptimal plan that lets them be even less so increases the chance they'll be bailed out. The government bailed out Chrysler in 1979 (thanks Jimmy!), and look how well that turned out. The precedent is set, the fix is in. Further, the execs and GM and Ford have literally nothing to lose. If they somehow aren't bailed out, they get to declare bankruptcy, and maybe -- just maybe -- shed MI and the UAW once and for all. The real winner in all this could be Alabama, Mississippi, Louisiana, or some other Right-to-Work state.

Posted by: leoncaruthers at 08:33 AM | No Comments | Add Comment
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