Monday, June 1, 2009

The Inevitable is Inevitable for a Reason

General Motors files for bankruptcy.

Will this work?

From the Wall Street Journal's piece: "Long hampered by laws, union strife and management practices that kept it from fast action to fix problems, GM plans to eliminate almost all of its debt, halve its U.S. brands, shutter 2,600 dealers and rewrite labor contracts almost overnight."

But just how is all of that, particularly the last, going to happen? Consider the following:

  • The United States national government owns GM.
  • The United States national government is run by the Democratic Party, which controls both houses of Congress (and has a filibuster-proof proof majority in the Senate) and the Presidency.
  • One of the party's most loyal and vociferous supporters is the United Auto Workers union.
  • If the government succeeds in redoing the costly labor deals, then then the UAW would likely take the heaviest hit.
  • Damned few political parties in history have deliberately taken action that materially hurts a large and powerful constituency.

If we assume that all of the above are true, then how is the government going to "rewrite labor contracts almost overnight", or allow anyone else to do so? And can a post-bankruptcy, clean-slate GM really be competitive if it is still saddled with the burdens of pre-bankruptcy UAW labor commitments? The UAW has supposedly signed off on concessions, but will it be enough, given that the U.S. car market is little more than half what it was a few years ago and increasing numbers of people who are buying are shunning the large, gas-guzzling SUVs and trucks which have long been the company's (and industry's) most profitable vehicles?

An even better question than will this work ... why should we care? Other than that about thirty billion of our dollars are at stake?

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