Gentlemen, Start Your Engines

This entry actually serves a dual purpose.  Now that I think about it, every entry here serves at least a dual purpose.  The first purpose is for me to work at getting my thoughts down in some coherent form, and the second is to inform and possibly entertain others.  So, now this one has a triple purpose, since I'm going to give you a chance to learn a little something about me.

One thing that I value very highly is honesty.  In fact, the first significant thing I will say at the beginning of a relationship is that I expect honesty.  Just about anything can be forgiven as long as everyone is honest and open.  Over the years, I've become quite adept at telling when someone is lying to me.  I've also learned the value in not calling others on every lie.  I just keep the knowledge to myself and slowly start building a wall to protect me from what will eventually come.  At some point a person either has to admit to all the lies, or run away from them.  Most people choose to run.

Since I'm already on the subject of honesty, it's time to discuss the Presidential campaigns.  I've had several rabid Romney supporters spray me with claims about President Obama lying to us. The only trouble is, nobody has been able to fill me in on what the actual lies have been.  He has not fulfilled all the campaign promises from 2008, true, but trying and failing to succeed is not the same as lying.  Maybe if you can all get together, decide which specific lies are most important to you, and then present them to me, I can examine them for credibility.

Now to cross to the other candidate.  Early in the Obama administration, the President signed the now famous auto bailout, to keep General Motors and Chrysler from bankruptcy.  At the time Governor Romney opposed the bailout stating the companies should have to go through bankruptcy and then recover on their own.  Recently he has amended this to ensure he would have given government loan guarantees to the companies after the bankruptcies.  General Motors, Chrysler and the United Auto Workers consider the bailout to be very successful and credit it with saving many thousands of manufacturing jobs.  Two states that were very positively affected by the bailout, Ohio and Wisconsin, are also contested states that Governor Romney needs to win in order to become the next President of the United States.

At this time, the Romney campaign is running advertisements in Ohio (and I assume Wisconsin) claiming the bailout cost manufacturing jobs and claiming Chrysler is moving Jeep production to China.  This piece of misinformation comes thanks to a Bloomberg article in which Chrysler is noted as wanting to expand into China.  What this means is that Chrysler wants to sell Jeeps to the Chinese.  One of Governor Romney's hot points is the trade deficit with China.  Ummm...  Excuse me, but there are only 2 ways to fix a trade imbalance with China.  Either we have to sell them more stuff, or we have to buy less stuff from them.  How are we going to deal with this if you get upset at a company, which is again profitable thanks to the bailout you opposed, when they try to Sell More Stuff to China?

Just for the record, Chrysler issued a very clear and concise statement denying any plans to move Jeep production to China, and the Romney campaign was informed and aware of this before they began airing the advertisement in question.  And now General Motors has issued a statement refuting the Romney claim about the bailout hurting the auto industry.  Remember how I feel about honesty?  Sorry, Governor, but you're not going to win my heart by lying and continuing to lie after you've been caught in the lie.  All that I can assume is that the Republican party is courting the voters that are just too damn stupid to examine facts.

But, to be fair, let's look at the auto industry if Governor Romney had been in charge at the time of the bailout.  Let them go through bankruptcy, so they can discharge excessive debt and then come out as leaner, stronger companies, I believe is how he put it during the recent debate.  Time to decipher this innocent sounding sentence so we know what we are dealing with.  This could take some time.

First off, bankruptcy is a friendly way of saying, I can't pay my bills and need some help.  It happens and there are many people who have been able to turn their lives around through bankruptcy.  The downside is the "discharge excessive debt" portion.  When you're talking a corporation the size of GM, this is a very large number.  That debt is owed to 2 main groups; employees and suppliers.  When that excessive debt is "discharged" both of these groups are expected to eat part of that debt.  Does this mean that the stockholders and the corporate management have to share these losses?  Nope, even though they hold most of the responsibility for their mess, they don't have to pay for it.  That is left to the people who actually did the work.  How would you feel to find out your pension that you worked 40 years to get has suddenly been cut by 30%?  Make you happy does it?  How would you feel if you find out that the $10 million worth of parts that you made for someone is only going to pay you $4 million?  Guess what happens in all of this?  That's where "leaner and stronger" comes into play.  People lose their jobs, making the companies "leaner" and the ones remaining are expected to do more for less, making them "stronger".  Meanwhile, the stock price will rise which will benefit the stockholders and because, on paper, it looks like the company is doing great, the management that created the mess gets bonuses and pay raises.  With or without government loan guarantees, this is the best case scenario under Governor Romney's method of handling the crisis.

Of course, things don't always turn out this well.  All those pensions are protected and guaranteed by contract and it's not certain the UAW would have allowed those contracts to be amended.  This would either shift 100% of the burden onto the suppliers or cause the court to forcibly amend the UAW contracts.  If the court orders a violation of the contracts, the UAW closes the doors and the companies are just a piece of history.  After all the assets have been sold, the pension plans are funded and perhaps 250,000 GM and Chrysler employees lose their jobs.  If the suppliers are required to take all the burden, many would no longer be able to remain in business, and most would have to reduce employees in order to absorb the loss.  The suppliers would also need to raise their prices for what they supply to other auto makers, probably resulting in parts being sourced overseas, costing more jobs and increasing that damn trade deficit.

In the United  States, the auto industry is a very complex thing.  Every major auto manufacturer builds cars in the United States.  From BMW to Volvo, they all have plants here.  But, those plants don't make all the parts that go into each car.  The engines and transmissions are made elsewhere, as are the bumpers, windows, A/C systems, radiators, chassis' and, in fact, most of the parts that go into the car.  These parts mainly come from outside suppliers and the suppliers typically make parts for several manufacturers.  Because of this, any major problem with one manufacturer can affect every manufacturer.  Although Chrysler is no longer one of the biggest car makers, if it closed it's doors (about 55,000 employees, unemployed) it would indirectly result in about 4 times as many additional jobs lost.  Every Chrysler, Dodge or Jeep dealership closed.  Property owners with useless property.  Salespeople and mechanics out of work, plus the reduction in workforce at all of the suppliers.

Perhaps the reason that Governor Romney felt bankruptcy was the best route to take is because that has been a key factor in his own success.  He could have learned from Donald Trump (who has used the bankruptcy card dozens of time, always to his profit and to the detriment of others), but whatever the inspiration, his business practices have cost the United States many thousands of good manufacturing jobs.  Those same practices have created at least as many Chinese jobs, yet he wants to point the finger elsewhere?  In this case I'll make an exception and call out someone for lying:  Mr. Romney, quit lying to us.