(re-post from my other blog, the now-defunct Facile Nation, 12/11/2008)
I understand the dilemma for people who normally would say to GM and Chrysler (and kudos to Ford for not actually being in this equation), “sink or swim – if you’re not competitive, you’ve no one to blame but yourselves and your contracts and your choices.” But in late 2008, considering the global economic crisis, many of those market-driven folks think that America just can’t take the additional hit that these two companies would deliver, in total collapse.
But I respectfully point out that a bailout is only a bailout if it succeeds in turning these companies around. Without teeth to renegotiate the elaborate UAW contracts, all this money can do is delay the inevitable – or, worse, become the initial trickle in a massive ongoing stream of tax-payer funding to enable GM, Chrysler, and the UAW to continue “business as usual.”
Face it, the legitimate sense of outrage from the American people regarding the AIG bailout is that they did, indeed, carry on with business as usual. Junkets, salaries, bonuses – no. A company receiving a tax-payer bailout must immediately begin to operate in a different reality. Radical reduction in salaries, particularly at the top, from which the failure stems. Bonuses come back into the bail-out fund to help other companies, as needed.
Taking federal assistance needs to be painful to a company; they need to be motivated to look for every other possible alternative to dependence upon the American taxpayers because dependence on us is going to so radically change the way they do business.
Otherwise how do we succeed? How does anything turn around if we subsidize failure?