Karl & the Car Company Crisis

Via Sullivan: John Cohn thinks we’re all either dumb or insane:

One reason for the casual support for letting GM fail is the assumption that bankruptcy would be no big deal: As USA Today editorialized recently, “Bankruptcy need not mean that the company disappears.” But, while it’s worked out that way for the airlines, among others, it’s unlikely a GM business failure would play out in the same fashion. In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can’t build cars without parts, and it can’t get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That’s why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation. The company would close its doors, immediately throwing more than 100,000 people out of work. And, according to experts, the damage would spread quickly. Automobile parts suppliers in the United States rely disproportionately on GM’s business to stay afloat. If GM shut down, many if not all of the suppliers would soon follow. Without parts, Chrysler, Ford, and eventually foreign-owned factories in the United States would have to cease operations. From Toledo to Tuscaloosa, the nation’s assembly lines could go silent, sending a chill through their local economies as the idled workers stopped spending money. (emphasis mine)

So, though all of the “big three” US-based auto makers are in financial trouble, one in particular has so much else depending on them that their collapse would be the economic equivalent of a nuclear bomb.  Thousands, whether directly or at length, effectively have the Politburo Detroit deciding their fate on a regular basis.  Because of this, the company is taking up begging (albeit with a veiled threat), various pundits are talking it up, and Mr New Politics is toying with a very old idea.

Left unspoken, of course, is how such a poorly run company lasted this long at such a size…

I say the following not as a serious recommendation, as 1) it would be a compromise of principle since it allows for state involvement, though one that would work differently than the current ones thrust on us all the time, 2) I don’t know how it would actually work if done, & 3) I know it has no chance in hell of being done anyway, but consider this scenario: instead of a straight bailout, the company is seized from management and broken up, with the pieces controlled by groups of the employees,  w/ the aid of the suppliers on logistics.  From there, the inevitable state assistance goes to the workers, with the ones that ran the company into the ground deliberately left holding the bag.  Obviously, this would be much more justified than what is going to happen…

Karl (Hess, not Marx) once asked, within the realization of the degree of government favortism behind their status, what should happen to General Motors in a liberated society.  Increasingly, it’s looking like it’ll have to be asked what to do with them within a corporatist society that it has, somehow, still managed to fail in.


About b-psycho

Left-libertarian blogger & occasional musician.
This entry was posted in economics. Bookmark the permalink.

One Response to Karl & the Car Company Crisis

  1. Pingback: Psychopolitik 2.0 » Almost REALLY doesn’t count…

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s