The Litany Against GM

These ideas in the following editorial on GM make a lot of sense, and have the added benefit of punishing GM management for taking the idiotic positions in lobbying Congress.

Of course they were not "idiotic" if one's goal was to meet the next quarterly profit targets. Hence the clear outline of the capitalistic system itself comes into relief as seldom seen.

Many tasks of the corporate lawyer recognize this idiocy.


Editorial
Saving Detroit From Itself
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new_york_times:http://www.nytimes.com/2008/11/15/opinion/15sat1.html
Published: November 15, 2008
We have seen a lot of posturing, but we haven’t heard a lot of sense in the debate over whether the government should spend even more to bail out Detroit’s foundering automakers.
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Times Topics: Auto Industry Bailout
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Senator Richard Shelby, a Republican of Alabama, is wrong when he says that the troubles of the Big Three are “not a national problem.” The Detroit companies support nearly 250,000 workers and more than a million retirees and dependents, as well as millions of workers at part makers and dealerships. A messy bankruptcy filing by any of the big car companies, in the midst of this recession, would likely cost the government and the economy more than trying to keep them afloat.
At the same time, Congressional Democrats and President-elect Barack Obama, who are pushing for many billions worth of emergency aid for the nation’s least-competent carmakers, must ensure that tough conditions are attached to any rescue package. If not, the money will surely be wasted.
This goes beyond firing top management, forbidding the payment of dividends to stockholders and putting limits on executive pay — all necessary steps. The government should insist on a complete restructuring of any company it pours billions of public funds into.
All three car companies have been hamstrung by the legacy costs of providing pensions and health care to hundreds of thousands of retirees. But Detroit’s problems are mostly of its own making.
The automakers hitched their fate to gas-guzzling trucks, and they obstinately refused to acknowledge that oil is a finite resource and that burning it limitlessly is harming the planet. They lobbied strenuously against tighter fuel-efficiency standards. That wrongheadedness did them in as gas prices spiked and consumers flocked to energy-efficient cars made by Toyota and Honda.
It makes no sense at all to give these companies billions just so they can struggle on for a few more months down this disastrous path.
Before it approves any bailout package, Congress must insist that any company receiving government money must commit to a specific plan to improve energy efficiency. The average fuel efficiency of the American auto fleet peaked at 25.9 miles per gallon in 1987 and then leveled off as gas prices fell and the automakers churned out more sport-utility vehicles and pickups.
Last year, Detroit managed to extract a promise of $25 billion in subsidized loans from Congress in exchange for a new target of 35 m.p.g. by 2020. But the industry can do better. If Detroit were willing to make smaller cars, as European companies do, it could probably achieve a fleet-wide average of 50 m.p.g. by 2020.
The companies also are struggling under a mountain of debt. And any restructuring would mean that creditors would have to swallow a loss or accept equity — as under a regular bankruptcy filing. Restructuring would likely require more plant closures and layoffs.
Rescued car companies would almost certainly have to re-open labor agreements on pay and benefits. These steps would be painful for many workers. But they also are necessary.
Even then, there is no guarantee that these companies will survive after years of failed management. We are sure they won’t if they don’t make sweeping changes in the way they do business. If Congress is going to take the risk and invest billions more of the taxpayers’ money in the companies, it must insist on those changes.