April 3, 2009

Shaking Hands with the Devil

by Dave Cribbin: It took Ford's CEO Alan Mulally two trips to Washington to figure out that the bailout money the government was dangling in front of him was really a pact with the Devil, fraught with peril. But figure it out he did, and so he and Ford survive to live another day. GM and Chrysler, however, weren't as lucky. They couldn't or wouldn't see the handwriting on the wall, and thus, they have been “weighed in the balance and found wanting,” and sealed their own fate.

Chrysler's CEO Robert Nardelli is now forced to negotiate a do-or-die deal with Fiat, as his partner, the Beelzebub of the Potomac, holds a gun to his head and whispers in his ear "cut a deal in 30 days or you my friend are toast". Rick Wagoner, GM's CEO, has been shown the door, and GM has been given 60 days of operating capital to conclude its restructuring. All we can say is good luck... you are going to need it!

Is it possible that GM will be able to do in 60 days what it hasn't been able to do in the last 20 years? No! It can't. And it won't. If GM wants to survive as a company and not as the host organism for the parasitic UAW, it should make the long overdo announcement that it will be seeking bankruptcy protection under Chapter 11 in order to reorganize its business. If it doesn't, it may exist for a brief period of time as a scaled down post office type operation, making tiny eco- friendly cars that won't take you very far, while providing jobs with above market compensation and benefits for a small number of politically connected autoworkers. But its days will be numbered, and when the operating losses become too great -- and they will -- for the UAW's Democratic allies to continue to provide the necessary political cover, they too will cease descend to perdition.

How is it that GM got things so wrong? They seemed to be under the false impression that because the Democratic Party was beholden to the UAW's campaign contributions afforded by its forced dues paying members, that somehow it was safe to sleep with the enemy. I hope they know now what they should have known then: it is never safe to sleep with your enemy! They failed to realize that they were never going to get a fair shake in the political arena. Without the protection of the bankruptcy laws and the threat of a court imposed settlement, the company will continue to be stuck between a rock and a hard place in its negotiations with a recalcitrant union that won't budge and bondholders who don't want to be sacrificed to placate the UAW.

There is a lesson here in dealing with a government that disdains the rule of law and thirsts for ever more power. And it is a simple one: When you shake hands with the devil, you better count your fingers! Dave Cribbin is a Contributing Writer for ALG News Bureau.

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