Column: Automakers should file for bankruptcy
The executives, shareholders and UAW are to blame for the failure.
Mar. 30, 2009
The opinions expressed by The Maneater columnists do not represent the opinions of The Maneater editorial board.
This week, General Motors Chairman and Chief Executive Rick Wagoner resigned. Since Wagoner took this job in 2003, GM's stock price has dropped 98 percent, to a historic low of $1.27. Wagoner is a failure -- he has presided over the ruin of one of America's most iconic brands. Wagoner's resignation is only the beginning of the great demise that could come.
Last year, GM and Chrysler sought $17.4 billion in loans from the federal government. Former President George Bush, in what was one of the worst moments of his presidency, made a historic decision to subsidize the failures of private industry. This week, the federal government will evaluate whether to continue taxpayer subsidies of these failing companies. In my opinion, the only thing worse than a car company run by Wagoner is a car company ran by the federal government.
The blame for this failure cannot rest squarely on the shoulders of any one group. This crisis is really the fault of three groups of people: the auto executives, auto company shareholders and the United Auto Workers labor union.
Democrats have been quick to blame the auto executives for the failure of these companies. In this case, the Democrats are right: the auto industry executives are responsible for their companies' inability to plan for future demand and refusal to cater to consumer trends.
Although the executives certainly carry a lot of the blame, we can't forget the shareholders. Investors in GM and Chrysler allowed failing executives to remain in place. These companies weren't cooking their books; everyone knew that they were failing. The shareholders should have banded together, protected their investments and threw out the failing executives.
Last on the blame list is the United Auto Workers union, which represents employees at GM and Chrysler production facilities. Republicans have been quick to blame the UAW for ruining the balance sheets of GM and Chrysler. I disagree. Unions can be good, especially for a poorly run automaker, such as GM or Chrysler. Strikes allow the automaker to eliminate most labor costs for several weeks at a time. When a company operates on razor-thin margins, the money saved while employees are on strike can prove to be profitable for the company and its shareholders. In short, the unions aren't all bad.
Now that we know who's to blame, one question remains to be answered: what's the solution? Here's the one word solution: bankruptcy. Folks, when you're in this deep, it's the only way out.
American car companies have obligated themselves to pay the increasingly expensive health care costs of their retirees. With this millstone around their neck, the American automakers cannot compete with foreign automakers. Toyota's retirees own their own market-based retirement plan and pay his or her own health care costs. Bankruptcy will allow GM and Chrysler to renegotiate their retirement system and put them on an equal playing field with Honda and Toyota.
Lastly, some have argued Americans won't buy vehicles from a bankrupt company. This is simply not true. U.S. Airways, Delta, United and Northwest have all filed for bankruptcy in the last five years, yet their ticket sales continue. Just as we buy tickets from bankrupt airlines, we'll buy cars from bankrupt automakers. Bankruptcy is the best solution -- it is a pathway to success. Just ask U.S. Airways, Delta, United and Northwest, all of which are still in business.
Marcus Bowen is a former vice president of the MU College Republicans and serves with the Jackson County Republican Party. He can be reached at email@example.com.