10 Lies About Bailing Out GM, Ford, Chrsyler & the UAW

As I have heard and read, like you, countless articles and hours of Congressional testimony and news program interviews pursuant to the question of the American taxpayer bailing out GM, Ford and Chrysler, a list of lies told by Rick Wagoner, Alan Mulally, Bob Nardelli and Ron Gettelfinger has occurred to me.


I can't link each lie with one person, in every case. But this is a list of claims made by one or more of the four which are simply untrue.



1. Bankruptcy is not an option.

Of course it is! This is something basically uttered by all four of these guys.

Ask yourself why they bothered to go to Washington first, rather than Chapter 11? Because, in Chapter 11, an apolitical bankruptcy receiver would restructure the whole mess with abandon, to truly be capable of survival. It won't be pretty, and it will make the efforts of at least Wagoner and Gettelfinger look silly and half-assed by comparison.

2. Filing bankruptcy will bring down hundreds of suppliers and cripple the US economy in the midst of a recession.

No, it won't. This is a bald-faced scare tactic. GM, for example, only has something like a 25% market share. Chrysler is even smaller. The few cars that actually turn a profit could be bundled into one unit and either spun back out or sold to another car maker. The suppliers for these cars will still have demand.

For any share lost by GM, Ford and Chrysler, other US-based, foreign-owned brands will pick up the share, and, with it, demand that feeds back to the suppliers.

This argument is just baseless on the face of it. No matter how many times CNBC auto-blowhard Phil LeBeau contends this to be true, it simply is not.

3. Nobody will buy a car from a car maker in bankruptcy.

This hasn't been demonstrated, by research, to be true in the proper context. Plus, it's never clear that the question is asked with a proviso that a third-party warranty would be provided. If anything, many buyers, assuming they even want some of the junk peddled by GM, Ford and Chrysler, merely would expect to pay lower prices.

4. This is a loan, not a bailout.

Lie. If this were merely a loan that was truly expected to be repaid, the capital markets would be handling the transaction. It's precisely because nobody expects this money to ever come back that only the taxpayer, via Congress, would provide it.

5. Without GM, Ford and Chrysler, the US will lose an important manufacturing base and be hostage to other world powers, plus become less capable of self-defense.

Nice try, but, this, too, is a lie.

First, we have a dozen or so foreign-owned auto plants in the southern US which, together, manufacture- actually, more correctly, assemble- fully as many cars as GM currently manages to sell. Losing GM doesn't lose this capability, but, merely the worst-performing, least-efficient amount of capacity.

Second, car making is more about assembly nowadays, less about manufacture. So this argument is wrong and specious on this point, alone.

Third, real defense-related production comes from companies like Boeing, General Dynamics, Lockheed and other similar contractors. Not to mention their suppliers.

Last time I checked, Wagoner, Gettelfinger, the governor of Michigan, et.al., were not Nobel-winning economists capable of credibly assuring US taxpayers that the precise capacity and capabilities of car assembly represented by Detroit-based auto assemblers is vital and necessary to a vital US economy in the future.

We've been moving to a service-based economy for over a decade. The real high-end, value-added manufacturing base is more efficient, requires fewer workers per dollar of value-added, and resides in other sectors than auto production.

6. There's light at the end of the tunnel for GM, Ford, Chrysler and the UAW with this 'loan.'

No, there isn't. Look closely at the CEO's promised dates of return to profitability. The earliest, I believe, is Ford, in 2009. Wagoner keeps babbling about 2010 and his cherished 'Volt' electric car. But his own EVP, Bob Lutz, let slip recently that green cars won't actually make money if priced so that consumers can afford them. Ooops!

Chrysler is a recurring disaster, profitable only during peak years of US economic cycles.

Republican Senator Tom Corker, among others, was correct when he noted, on CNBC, earlier this week, that none of these three companies have a plan to become truly viable and profitable in a reasonable timeframe.

No sane investor or lender would accept, today, from an existing large US industrial concern, a business plan which does not promise a profit for the next two years. It's just insane.

7. The current dire situation of GM, Ford, Chrysler and their common, primary union, the UAW, was caused by the US financial market crisis which began earlier this year.

One of the bigger lies propagated by everyone pushing for this bailout.

These three auto makers, and their greedy union, have mismanaged their situation for well over a decade. True, their situation worsened since September, when credit tightened/vanished. But that's part of running a large corporation- planning for many scenarios.

GM, in particular, has been headed for bankruptcy for nearly the entire term of Wagoner's ineffectual reign. The recent financial crisis merely offered an opportune occasion for these parties to raid the Federal Treasury and taxpayers' pockets.

8. Rick Wagoner is the best person to 'lead' GM.

Another big lie. Wagoner has misled GM for eight years. He's a major part of the problem, not any part of a solution, such as it may be.

A bankruptcy receiver would be far better and more objective for doing what needs to be done at GM to survive.

9. Bankruptcy of GM, Ford or Chrysler will be a disaster for the US economy because these companies will "go down."

Another lie, similar to lie #2.

Bankruptcy is not liquidation.

Putting GM into receivership, via Chapter 11 bankruptcy, does not mean it ceases operations. It means a trustee is in charge of reorganizing the firm to survive in the future.

Liquidation occurs when the operations, under bankruptcy, prove to be unable to be sustained, even with reorganization.

For example, the retailer Dave & Barry's went bankrupt this past summer. But it was not in liquidation until a few months later. Prior to that, the chain still operated, albeit under court protection.

See the difference?

That's why all this handwringing about GM filing Chapter 11 is a hoax. They won't stop production lines the day after the filing.

10. The UAW and the Detroit auto makers have already made a lot of concessions and done a lot of restructuring, so they deserve this Federal help.

Nice try, but the market doesn't reward efforts, only results.

Veteran auto-sector reporter and writer Paul Ingrassia, late of the Wall Street Journal, has written for months that the Detroit Three have been slow and ineffective in coming to grips with their troubles, and realistically fixing them. Bloated costs, too many brands, and too little effort spent attacking Congress' CAFE regulations have left them incapable of surviving in their current shape.

The UAW, for its part, points to concessions, but Gettelfinger badly needs to avoid his union's employers filing bankruptcy. If they do, he and his union are history.

Not because anyone is out to 'break' them. Rather, their own greed and shortsightedness has resulted in them crippling their employer.

In truth, a great deal of GM's, Ford's and Chrysler's troubles are co-owned by prior UAW rank file and leadership. Including Gettelfinger.

He, too, must go. Most likely with the decline into near-obscurity of his once-influential union.