General Motors presents a plan worth implementing
For some, the suggestion that General Motors should “just go bankrupt” rolls off the tongue with the nonchalance of someone saying they’re going to throw away a scratched CD. It’s damaged goods, no big deal, and there are always other CDs to listen to.
Such an attitude can be seen in a column on the page opposite this by a policy analyst at the Heritage Foundation: GM and Chrysler are as good as bankrupt already, stop throwing good tax money after bad. That’s a more popular point of view in some places than others, and it is not surprising to hear it espoused by a conservative think tank that sees free trade and right-to-work philosophies as among America’s most traditional values. But even here in the Mahoning Valley, it’s easy to hear such talk in any coffee shop and almost any barroom. If an extended family sits down to dinner, at least one relative can be counted on encourage bankruptcy for General Motors, even if he knows its going to start an argument.
It’s not surprising, given human nature and the perception that autoworkers have a better deal than most blue collar workers and many white collar workers.
A two-letter answer
But the bottom line in the debate over whether General Motors should get additional government loans to enable the company to restructure is not whether or not its workers will be better off. It’s whether the nation would be better off if General Motors were forced into bankruptcy, and the answer is a resounding no.
The nation needs a domestic automobile manufacturing industry and the Mahoning Valley needs General Motors to be a part of it. It is to all our benefits to see that Congress and the Obama administration respond positively to the restructuring plan presented to the Treasury Department yesterday by General Motors and explained to the public and press by GM CEO Rick Wagoner.
Not everyone would agree. As a Los Angeles Times story reported in October, some economic analysts and industry insiders predict a financial cataclysm if GM were to go bankrupt, “but others foresee little more than a shift of the industry to foreign companies such as Toyota Motor Corp. and Honda Motor Co.” The italics are ours. It would just be a shift of production, don’t you see. Little more than a scratch on that CD we were going to throw out some day anyway.
Here’s a reality check. A nation dare not casually drop a 100-year-old company in the trash can.
In the United States alone, GM spends $31 billion on parts from 2,100 different suppliers. GM’s employees and retirees earn paychecks and receive benefits totaling hundreds of billions of dollars that are poured right back into the economy. Tinker with that economic engine in even the best of times and there would be consequences; do it in today’s economy and there’s no telling the damage that could be done.
Trickle down would be a flood
There are few things that are truly too big to fail, but General Motors is one of those things. If it defaulted on it’s pensions, those pensions would overwhelm the Pension Benefit Guaranty Corp. If it needed financing for bankruptcy reorganization, there’s only one entity large enough to provide it, the federal government. If its workers and retirees lose health care coverage, those costs will inevitably be shifted to Medicare, Medicaid or to unpaid care that ends up being passed along to private health insurance providers. GM owes billions of dollars to its dealers, suppliers and others with whom it has contracts, and the ripple effect of default is almost impossible to imagine. No one could safely say he or she is immune.
Even under the restructuring plan announced by GM yesterday, there will be pain. Some GM brands will be eliminated, dealerships will close, factories will be shut down, thousands of additional hourly and salaried workers will lose their jobs. Negotiations are continuing between GM and the United Auto Workers union over funding for the trust fund that is supposed to provide health care coverage for UAW retirees.
Returning to the bottom line, it is this: Loans provided by the federal government — estimated now at $30 billion — are far cheaper than the alternative. It is cheaper for the government, which otherwise would suffer the effects of a near catastrophic hit on the national economy. It is infinitely cheaper than the human costs that would be suffered in communities like ours.
There will be a chorus of voices aimed at President Barack Obama and Congress calling for them to let General Motors fail. Those voices must be ignored. Failure, quite simply, is not an option.