Fixing Detroit?
Two interesting articles comparing the current automobile industry with the steel industry of the 1970's.
From
A Brief History:
The car czar and why it won�t happen
There was considerable discussion about Obama appointing a �car czar� to solve the problems of the Big Three auto makers. That has now been canceled. Why ? This might explain it:President Barack Obama announced Monday that he will appoint, not a �car czar,� but a �Presidential Task Force for Autos� to �fix� the Detroit Three. The task force will headed by Treasury Secretary Tim Geithner, but it is the first name appointed by Geithner � �Senior Advisor� Ron Bloom � is of real interest for a number of reasons.
Ron Bloom is the UAW�s man in the administration. The only chance to solve the Big Three�s problems is bankruptcy. Not only are their union contracts too expensive, the work rules and other adversarial factors in the relationship will prevent the auto makers from restructuring and becoming competitive once again.Bloom (and Keilin) made their reputation battling steel companies which, burdened by excessive union costs, suffered through a very similar experience to the Detroit Three thirty years ago. In fact, as the New York Times�s David Streitfeld points out in this superb article, five U.S. steel companies received over $300 million in bailout loans from the Carter Administration in the 1970s.
They still ended up in bankruptcy but, in the meantime, the unions had extracted millions in additional money from the taxpayer. Mickey Kaus knows what the problem is but Obama isn�t interested. This will be another boondoggle and will cost millions, if not billions.
But what�s a billion between friends
And this article at the
New York Times:
Is Steel�s Revival a Model for Detroit?
A few years ago, an industry whose history and mythology were indelible parts of the American identity was dying. The great steel mills of Pennsylvania and the Midwest had literally built this country, but the twin burdens of competition and self-inflicted wounds had brought them to the edge of extinction.
If they were allowed to go under, their partisans warned, the consequences would ripple through the economy at a cost too high to bear. The old saying, �As steel goes, so goes the nation,� was as much a threat as a boast.
The Detroit automakers are using the same argument as they seek a $25 billion bailout from Congress. �What happens in the automotive industry affects each and every one of us,� a General Motors Web site declares, warning that the consequences of a shutdown would be �devastating.�
Yet steel�s savior was not the government bailouts it ardently sought but exactly what it so long tried to avoid: bankruptcy. Only when the companies failed were they successfully slimmed down and retooled into smaller but profitable ventures. As debate continues over what, if anything, should be done for G.M., Ford and Chrysler, the steel industry may offer a model.
And a bit more showing the infinite wisdom of my favorite president:
The steel industry was beginning its long stumble when it turned to Washington for help in the late 1970s. The Carter administration responded by committing $300 million in loan guarantees to five struggling companies. Nearly a third of the funds went to help Wisconsin Steel, a Chicago outfit that had been around since the previous century.
Thanks to a strike at a key customer, Wisconsin Steel promptly went under. The company locked its gates one winter day without even bothering to notify its 3,000 employees that their wages were history. So was most of the government�s money.
As I have said in other posts, I am not a big fan of organized labor. Back 100 years ago, when there was only one major place to work in most towns and when people did not move as often as they do today, the large businesses had a captive labor market and if someone quit over bad working conditions or poor pay, there would be twenty people lined up to apply for that job. The companies took advantage of this.
Now, the labor pool is a lot more flexible and companies have "seen the light" regarding keeping their employees happy. So why is organized labor still thumping around the landscape making things bad for everyone.
Pournelle's Iron Law of Bureaucracy comes to mind:
In any bureaucracy, the people devoted to the benefit of the bureaucracy itself always get in control and those dedicated to the goals the bureaucracy is supposed to accomplish have less and less influence, and sometimes are eliminated entirely.
President Obama, let them sink...
Posted by DaveH at February 18, 2009 12:14 PM