December 11, 2008

"How is the government going to 'get its money back' if the [auto bailout] money has been spent and the firms are bankrupt?"

Mickey Kaus asks.
1) How is the government going to "get its money back" if the money has been spent and the firms are bankrupt? Only by liquidation, it would seem. So does the bailout deal eliminate the option of restructuring (as an ongoing enterprise) under the aegis of the bankruptcy court? Either the firms are saved under the "czar," or they are liquidated, apparently. 2) The big "stick" is to kill the firms, then. Isn't that too big a stick? Like a nuclear weapon is too big a stick? Come April 29th, if the choice is to approve a half-assed "restructuring" plan that has maybe a 35% chance of succeeding, or to kill General Motors, there's going to be an awful lot of pressure not to kill General Motors, no? The threat is so big it pressures the auto czar, not the executives, investors and union members. What's needed is an intermediate threat that's more credible. How about empowering the auto czar to declare the companies' labor contracts null and void? And to indefinitely delay payment of all executive salaries and bonuses? That would get the "stakeholders" attention, maybe. 3) Shouldn't there be a different "czar" for each firm? Having a single czar for the whole industry muffles what might be salutary competitive pressures. Maybe Chrysler's workers are so desperate they'll give up more in terms of pay and work rules than Ford's workers. Shouldn't that sort of choice be encouraged? Dueling "czars" would encourage this viability-enhancing reverse solidarity. ...
Good questions! As to #3, can someone explain why 3 car companies with 1 head isn't an antitrust problem?

Also, Mickey, don't say "auto czar." It's either car czar or auto autocrat. Poetry's important when everything is going to hell.

IN THE COMMENTS: AJ Lynch offers: Motor City Mogul. Campy says: Detroit Despot.


Maguro said...

I prefer auto tsar. I think it was Woody Allen who said that the Russian Revolution started when the peasants found out that the tsar and the czar were the same person.

Paul Zrimsek said...

I still want to know who's going to be the Auto Rasputin. (It's probably too early to find out who's going to be the Auto Lenin.)

Meade said...

"Poetry's important when everything is going to hell."

Ha ha! I'd put that on my banner... if I had a banner.

siyeh pass said...

Poetry's important when everything is going to hell.

Thanks for the grin.

AJ Lynch said...

How about Motor City Mogul?

campy said...

Detroit Despot?

Original George said...

As bad as a bailout might be, no bailout will have a shattering impact.

Like an asteroid hitting Michigan and Ohio. A large asteroid.

"A conservative estimate of the direct impact of the failure of all of the Big Three automakers would be the immediate loss of at least a million jobs. Thus, the direct impact of the liquidation of the Big Three would add almost a percentage point to the current unemployment rate.

The indirect but short-term effects of the collapse of the Big Three would add to this toll. Many auto parts suppliers will probably enter bankruptcy if the Big Three fail. This will hurt production of foreign-nameplate cars in the United States, because foreign assembly plants also depend on U.S. auto parts suppliers for many of the inputs that go into making their cars. Production interruptions at foreign-nameplate factories may in turn reduce employment in foreign assembly plants and in factories that supply auto parts for those plants.

Finally, hundreds of thousands of workers in retail stores, banks, and service-producing companies will lose their jobs in communities where auto assembly plants and auto parts factories are located. The workers in auto assembly and parts factories earn wages that are one-quarter higher than those paid to average production workers. The indirect impacts of auto plant closings on local employment would therefore be greater than effects that would accompany the loss of other kinds of jobs." --Gary Burtless, economics chair, Brookings.

PatCA said...

No one is proposing the Big3 be liquidated--re-organize, restructure a failing industry and it will bode well for more than the next 3 months.

Organizations tends to want to grow. We used to believe it was dangerous for a government organization to grow this way. A government that can run your industry can run your life. And will.

EDH said...

How about empowering the auto czar to declare the companies' labor contracts null and void?

By a Democrat administration.

They said if Barack Obama was elected president there would be cosmic justice, and they were right!

Also, on historical grounds Greg Mankiw prefers the term car commissar.

AJ Lynch said...

If the Big Three close, Michigan & Ohio would suffer population losses like New Orleans did due to Katrina.

Putting the misery aside for a moment, historians would have to come up with a catchy name for the cause of the exodus of people leaving those states. You know like The Dust Bowl caused the migration to California way back when.

SteveR said...

each has to have their own:

the GM MF

the Chrysler Kahuna

the Ford Lord

TMink said...

If the big three go under someone with some money will buy up Cadillac and the PT Cruiser and Ford trucks in a heartbeat. There are brands that will be saved just because they are worth so much. The new owners will be able to negotiate a reasonable compensation plan and have their pick of lots of skilled workers who will want a job.

It could be the best thing for American automobile industry. Given the success that Mercedes and Honda and Saturn and VW are having making cars in America, it is obvious that it can be done. But maybe not in Michigan.


Paul Zrimsek said...

Ford Lord is great, but Chrysler Kaiser and GM PM would be better for the other two.

Southbound Blues said...


When was the last time sensible commentary on politics (like this) ever actually changed what the politicians did? Of all the time I've tracked politics, I've *never* seen a politician actually take advice from commentors and change his position on anything.

The whole nation could be against it, Obama would still fuck us all for the unions.

Maguro said...

As to #3, can someone explain why 3 car companies with 1 head isn't an antitrust problem?

Because the Big 3's combined market share is under 50% now? Plenty of problems with the auto bailout, but I think there would still be adequate competition out there even if the Big 3 formally merged.

A bigger problem in my mind is that Honda and Toyota will be effectively subsidizing their competition, which seems very unfair.

pct said...

Seems to me that the answer to Mickey's bold-face question depends on exactly how the legislation is worded. Does it say the debt is not dischargable in bankruptcy? If not, the government can just get in line with the other creditors. Even if so, the government probably can't put itself ahead of secured lenders without running afoul of the takings clause.

Bart Hall (Kansas, USA) said...

Let us recall Reagan's trenchant -- and classic -- definition of liberalism.

a) If it moves, tax it.

b) If it keeps moving, regulate it.

c) If it stops moving, subsidize it.

William said...

If a car czar could profitably direct the activities of all three auto companies, Toyota would have hired him years ago.

SteveR said...

Well the MF is in honor of "Hot Rod" and working in my business, PM (project manager not prime minister) is identified with such lame production, it can't even be used as a joke.

Kaiser's ok though, too bad Daimler's not around.

Bob said...

"Good questions! As to #3, can someone explain why 3 car companies with 1 head isn't an antitrust problem?"

Ann, it would be someone from the government. So no antitrust issues because the government makes up the rules. Better to think of him like the Head Nurse in a nursing home. The patient may be dead but the family won't gracefully let them go. Plus there's still resources which can be billed against. So the Head Nurse's role is just prolong life till the family comes to its senses or the money runs out.

AllenS said...

The auto companies are saying the gov needs to quit Stalin, they need the money.

Original George said...


I understand.

To me, however, the question is do we want to behead the patient or put him on life support for a short period.

The beheading will be a bit messier than we might think, particularly since the global economy is teetering.

jdeeripper said...

The Michigan Money Pit stop.

The Detroit Dollar Burner.

The Grand PooBah of Pistons.

Michael_H said...

The Commander of The Cars!

The CEOs of Honda, Toyota, Nissan, et. al. have to be silently praying that Congress will pass the bailout plan that imposes government oversight on the design, manufacture and distribution of cars built by GM, Ford and Chrysler.

That bailout plan will impose even more regulation on the Big 2.8, without solving the one big reason why they are not competitive. A great gift to the Big 2.8's competitors.

Michael_H said...

The Commander of the Cars will need a Robin-like sidekick. Someone who can say things like "Holy Jeepers, Commander! The Kias are attacking the Focuses! The Accords and Camreys are kidnapping the Malibus!"

"Yes, boy wonder, I now see that. Quick! Summon the bailoutmobile!"

"You mean the Millenium Nash? Yes sir!"

Michael_H said...

And a mascot. The bailout needs a crazy, wacky mascot. With a catchy name.

Clutch McPiston

Randy Batterydown

Sparky Ignition

Crappy McQuality

Bloaty McBenefits

veni vidi vici said...

Further to SteveR @ 10:22, the three should be grouped under the title "D-town D-bags".

Richard Fagin said...

"How about empowering the auto czar to declare the companies' labor contracts null and void?"

Well, Mickey, I respectfully refer you and my fellow commenters to the following, Title 11, United States Code Section 365. Executory contracts and unexpired leases

"(a) Except as provided in sections 765 and 766 of this title and
in subsections (b), (c), and (d) of this section, the trustee,
subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor."

Bankruptcy law has express provisions to do just what the "car czar" is suggested to do. Get it over with already, GM, Ford and Chrysler. File thos bankruptcy petitions now.

Ann Althouse said...

"Ann, it would be someone from the government. So no antitrust issues because the government makes up the rules."

But these aren't the rules for the whole industry. These are 3 separate companies suddenly joined under 1 head. Quite aside from whether antitrust laws are violated -- I assume the legislation gives them any needed exemptions -- my question is why isn't it a "problem," in that why isn't something perceived as wrong.

Michael_H said...

How come the car makers didn't make a side deal to name some new models after members of Congress, just to close the deal?

The Pelosi Roadmaster, with optional lifted grille.

The Barney Frank Weinermobile, complete with squealing brakes.

peter hoh said...

Getting the money back is a huge threat.

What if the threat is too big to fail?

Michael_H said...

Or the Ford F**kyou, made only in plants located in Illinois.

EDH said...

I say appoint the Motor City Madman Ted Nugent as Car Commissar.

Musically, he hasn't been doing much anyway.

Michael_H said...

The government isn't going to get its money back. The money will float the automakers for a few months, during which the circumstances that caused the need for a bailout will not change.

There will continue to be too many dealers. The process of acquiring and closing dealerships is complicated by different laws in every state, by lengthy lawsuits to settle the value of the dealerships and their real estate

The union retirement and medical benefit plans will remain in place, and will require many of billions of dollars of funding from the car makers.

The product lines will continue to be redundant.

Management structure, especially at GM will continue to stifle change.

The "bailout" is actually diverting money already budgeted for the automakers "green car" programs. Congress has done only what it believes necessary to buoy up the voting base for the next election cycle, not actually solve the problem.

As to who should be in charge - the only person in the car business that should be put in charge of the mess is Bob Lutz, the head of product design for GM. Maximum Bob has been put in the GM witness protection program while the hearings are held because of his penchant for telling the truth.

AllenS said...


AJ Lynch said...

Michael H- I like the mascot idea! It should have a patriotic theme though. I am serious. Let's root for our American carmakers to succeed.

kynefski said...

The whole nation could be against it, Obama would still fuck us all for the unions.

'Course if you're in a union, that all there doesn't make much sense.

Michael_H said...

AJ - The idea of "American car" gets a bit confusing at times.

In NASCAR, for example, there are three brands (Chevrolet, Ford, Dodge) that are American and one brand (Toyota) that is Japanese.

Problem is that the Ford, Chevrolet and Dodge models are all manufactured in either Mexico or Canada. And the Japanese brand in manufactured in the US.

Root for the home team, you bet. But the foreign companies have substantial manufacturing facilities in the US, and employ many tens of thousands of our fellow citizens. I'd not want to root against them.

Kylos said...

I've maintained for a while that if the Big 3 are really in existential trouble, then they should tell the unions to either renegotiate or they'll liquidate. Look, they're worth alot; closing they're doors will hurt for a while, but somebody will take their place shortly. Yes, people will be without jobs for a time, but other companies will spring up quickly to replace them. I'm in Michigan, so I'm fully aware how this will affect friends and family, but continuing to prop up a failing industry that has grown too big and wasteful only makes the problem worse down the road.

The only federal interference in corporate affairs I find useful is the federal government restricting the ability of corporations to grow beyond their means. You'll notice that the smaller banks have been doing just fine during the financial crisis, while the large institutions failed after they made risky business choices. A smaller institution is much more susceptible to the consequences of bad business choices and therefore is more cautious. The market does not work when there are a few kings of commerce controlling the show. It only works when smaller interests compete against each other.

AJ Lynch said...


Agreed. So let's use your mascot idea to create a sticker that can get put on every car made substantially in America.

avwh said...

The ONLY way the $$ Congress wants to throw Detroit and their union bosses has priority for repayment is, ironically, if the condition for that money were Chapt. 11 and the U.S. then provided debtor-in-possession financing. Ain't gonna happen, but it's the only way taxpayers will be protected that they'll ever get that money repaid.

What's proposed now is throwing money down a rathole - kiss it goodbye the day the check is cut.

Balfegor said...

Detroit Despot?

Ooh, and if it's a woman, we can call her the Despoina of Detroit!

Richard Dolan said...

"I assume the legislation gives them any needed exemptions -- my question is why isn't it a 'problem,' in that why isn't something perceived as wrong."

Under the bail out plan as described in the press, the "car czar" is supposed to be in place until April at the most. His mandate is not to set prices, make decisions as to output or otherwise to dictate how the companies will operate in the short term, but instead to determine whether each has offered a sufficiently viable "restructuring" plan so that there is reason to believe the company can survive. He will also have some as yet vaguely defined power to demand changes to contracts (which may not include labor contracts), limit executive pay and other matters.

As to the restructuring bit, the "czar" is playing the role of regulator, albeit of a peculiar sort, and not market participant. As to the contracts and internal organization of the companies, the "czar" is doing what a bankruptcy court or Ch 11 trustee might have done.

In exercising his powers, the czar could have some impact on prices or output, either directly (thus making the 3 companies function in the market essentially as one) or indirectly (by causing the 3 companies to avoid actions that competitors would have taken), which as an economic matter are the traditional centers of antitrust concerns. But those concerns are somewhat lessened by the short duration of the czar's reign, and in all events the whole thing is packaged as a form of jerry-built, for-this-case-only government-imposed regulation.

While everyone understands that regulation often has substantial impacts on an industry, and can be played by sophisticated market participants to defeat the purposes of antitrust policy, it has always been deemed exempt from antitrust scrutiny. That's what Noerr/Pennington and the 'state action immunity' cases (City of Columbia, Parker v. Brown and other cases) are all about.

Michael_H said...

The Detroit Dominatrix..

Cruella "Cadillac" DeVille

Richard Dolan said...

By the way, did you notice that a pay raise for federal judges is tucked away as an add-on in the House version of the bail out bill?

I'm not sure that the Big 3 deserve the bail out, but I'm quite sure the judges deserve a raise.

chickenlittle said...

The Professor says: Poetry's important when everything is going to hell.

Rod Blagojevich says:

rcocean said...

Meanwhile at AIG:

"But so far, no one's stopping AIG from paying millions to some employees in its new retention program. The company has told 168 employees they'll receive between $92,500 and $4 million per individual if they stay with the company for one year. That angers some on Capitol Hill."

But not the Senate Republicans.

Joe said...

But not the Senate Republicans.


For you politically ignorant assholes; these bailouts are being overwhelmingly approves by liberal Democrats and some spineless Republicans. Most Republicans and Blue-dog Democrats are voting against this socialist bullshit (and are being proven right for doing. That's the news story the MSM is missing; the current bailouts have failed so why the fuck does anything think the next ones will work?)

Fred Drinkwater said...

Re: mascots
I strongly recommend "Rivethead" by Ben Hamper. He was a line worker at GM Truck and Bus. (Try to ignore the introduction by Michael Moore, though the bits about Moore's antics in the book are pretty entertaining.)

Anyway, apparently GM had a mascot at one time named Howie Makem. Howie was a guy dressed in a sort of tiger costume, and was also known as the Quality Cat. The line workers did not ... react well ... to Howie.

Joe said...

Why are people avoiding the obvious? We've known for years that US auto production exceeds demand. GM being the worse offender. To have a healthy auto industry, one of the big three has to liquidate and the other two have to shed at least one division (I vote Chrysler for chapter 7 and dropping the Mercury, Pontiac and Buick labels.) Ironically, without Chapter 11, if GM drops Buick, they'll get sued by idiot dealerships, just like when they dropped Olds.

And if the fat cats at Cerberus pointedly refuse to financially help their own company, Chrysler, why the hell should we? Democrats complain, with some justification, about how Republicans favor fat cat oil companies, but who are the ones voting for this bailout shit? Who is subsidizing ADM?

Lisa said...

Why does everyone seem to think this is a failure of the workers/unions? The Big 3's big problem is not current labor but hundreds of thousands of retirees who are on pension and health care. None of their American made/foreign owned competitors have had factories here long enough to build up that kind of retiree pool... they will eventually. Of course, most of the Big 3's foreign built competitors have nationalized health care in some form. It seems to me that this crisis is a federal policy failure... failure to fund retirement and failure to provide health care.

There is another federal policy failure we are ignoring... the financial bailout. Our gov't gave billions without question to financial institutions so that credit would not dry up. Yet, getting a loan today is very difficult for consumers and industry.

kynefski said...

Most Republicans and Blue-dog Democrats are voting against this socialist bullshit...

OK, Joe, now I want you to place your hand on this Bible and testify as follows:

"If the 107th Congress were in session today, I honestly believe that the Republicans would be opposing these bailouts."

Can you do that, Joe?

Methadras said...

It's become blatantly obvious that whenever government intrudes into the economic culture of corporations bad things tend to happen. This bailout is a joke, it was a joke from the beginning and now we are seeing the fruits of that joke. Let the automakers take a Ch. 11 route. I don't care how they reorganize, but I don't wanting them to get their shit together on my dime and I want the government to stop thinking it has all the answers by showing off it's "Do Something" disease.

Glen said...

I prefer the simple and direct title of Autocrat. This pairs nicely with the Auto de fey that is sure to follow. Autocrat's sidekick is the ever 'inquisitive' Waxman.

JohnAnnArbor said...

Pontiac and Buick could disappear without the names disappearing. What I mean is, we could go back to the way things were in the past. You bought a Buick, not a Buick Lucerne, or a Pontiac, not a Pontiac Firebird. You could revive the Oldsmobile brand, too. Just three cars, for three different markets: Oldsmobile, Buick, and Pontiac. Chevrolet would still have lots of models as normal, GMC would do trucks, and Cadillac would have two or three high-end models.

rcocean said...

"For you politically ignorant assholes; these bailouts are being overwhelmingly approves by liberal Democrats and some spineless Republicans. Most Republicans and Blue-dog Democrats are voting against this socialist bullshit (and are being proven right for doing."

Well, only 15 Republican senators voted against the Wall Street bailout. McCain, McConnnell, and Martinez all voted for. Not to mention that Bush proposed it.

But you're right, Joe, except for the President, V-P, Presidential candidate, Senate Minority Leader, Head of the RNC, a majority of senators, and 91 of 109 House Republicans, all the Republicans were against it.

Original George said...

Former GM board member Ross Perot...

The possible repercussions of a G.M. meltdown are too frightening to contemplate.

Assuming that G.M.’s numbers are correct and that they desperately need $4 billion within the next 30 days, I believe the government should provide a loan or guarantee a loan for this amount. After President-elect Obama takes office, it will probably be necessary to increase the size of the loan. At that point, I believe the government should provide enough financing to guarantee that G.M. is solvent for another 12 months. This will give G.M. the time it needs to sell or shut down the Pontiac and Saturn lines and to consolidate other operations. G.M. has already announced its plans to take these steps.

At the end of one year, if G.M. cannot continue without further help from the U.S. government, it should undertake a prepackaged bankruptcy to radically alter its business model. G.M. would, in effect, have a one-year moratorium to get its house in order and hope that the economy recovers sufficiently to stimulate sales.

One provision that should be put into any advances or guarantees is that all government-backed loans are senior to every other form of financing on G.M.’s books — now or in the future. So if G.M. does go through bankruptcy in the future, the taxpayers’ contribution to this bailout will stand first in line after a restructuring.


Chip Ahoy said...

* Buggy baron
* Jalopy genie
* Transport tyrant
* Truck Tycoon
* Van viceroy
* Wagon wizard
* Cab nabob

Maguro said...

At the end of one year, if G.M. cannot continue without further help from the U.S. government, it should undertake a prepackaged bankruptcy to radically alter its business model.

Ross Perot can't possibly be stupid enough to believe that GM can solve its problems within 12 months. Sounds like he is trying to get hired as car czar himself.

Joe said...

rcocean, you're still being an ignorant ass. You're statement was that Republicans were for bailing out AIG as though this was opposed by Democrats. In fact the opposite was true then and is true for the auto bailout--Democrats were and are overwhelmingly for both with most the opposition coming from Blue-dog democrats and Republicans. (Yes, many Republicans went against principle and voted for it, but that doesn't negate that without almost universal support from Democrats, neither plan would have stood a chance.)

This need to pin these fiascoes on Republicans is pathetic. When it comes to Washington feeding tax dollars to fat cats, Republicans at their worst (and shamefully they have been close to that lately) have nothing on Democrats. To pretend otherwise is to be intentionally stupid.

Chris said...

Lisa makes a good point. Isn't GM a health care company that makes cars? Isn't the silver lining in this crisis the potential realization by the polis that the demise of Detroit is going to teach us a lot about the problems with entitlements.

Dust Bunny Queen said...

A bigger problem in my mind is that Honda and Toyota will be effectively subsidizing their competition, which seems very unfair.

You mean like the government made AT&T subsidize their competetors?

Deja vu all over again.

blake said...


Coupe d'etat.

Trooper York said...

Hey AJ gets another tag.

Garage Mahal cried in vain.

Peter Blogdanovich said...

I can't help thinking that the survivors on the Titanic were the one's who got into the life boats first. I wonder who it will be that's told,"Sorry, all the bail out money is gone. Wear this life jacket and blow this whistle if you need help, and swim clear of the propellers when the ship goes under, undertow you know."

peter hoh said...
This comment has been removed by the author.
Zimri said...

How about "motor czar"? Or is that too Toad of Toad Hall...