Comments on: Take Responsibility For Your Actions

By: Dave

Dave — Wed, 07 Jan 2009 01:55:58 +0000

You say "I'm not against government involvement and financial support in the broad business ecosystem." But isn't it pretty obvious that this sort of involvement is exactly what leads to "bailouts"? To think that it wouldn't, you would have to imagine that the government will be consistently run by long-term rational, benevolent, non-pandering individuals. You cite Atlas Shrugged, but the lesson there is that the situation we are in doesn't just happen – it happens because people like yourself (strong, competent leaders) acquiesce to the mediocrity that is the essence of government involvement. I'm not a hardcore Objectivist but this does seem to be a case where the dictum "check your premises" is appropriate.

By: alan_shimel2002

alan_shimel2002 — Wed, 07 Jan 2009 01:55:58 +0000

I have to disagree. This is not about bailing out the execs at GM or the unions at all. What this is about is national security. The repercussions of an industry wide failure of the auto manufacturing sector would have ripples and implications across the entire country. Further losing that manufacturing capability would be a national security threat to our ability to compete in the global market. The government has an obligation to do what is right for the "common good".
The argument that bankruptcy can fix these problems in naive. We need a concerted effort from the government and industry to chart and execute a strategy for success in a critical area for this country to compete. There are no guarantees what a bankruptcy proceeding winds up with here.

By: John Ball

John Ball — Wed, 07 Jan 2009 01:55:58 +0000

I usually find common ground with your posts Brad and often fall into the daily involuntary head nodding. Today is an exception – sort of.

I too hate the term bailout and I am ashamed at the number of "American Institutions" rushing to for the teat of government subsidy. This really pisses me off.

However, I am reminded that Ayn wrote fiction, which history proves can easily be converted into life guides.

Nearly 1 in 10 jobs in this country is tied to the auto industry. If we simply allow the automakers to implode (which they very well may deserve), we may see the long reaching effects of Chapter 11 touch more Americans than has ever been witnessed. Remember the renegotiated pensions brought about by UAL Chapter 11? Employees with 20+ years of service, who were once courted to an industry in need of skills, are today receiving less than 1/3 of what they had planned for their pension and retirement. Those pensions are nowhere near the top of the list of secured creditors. UAL's pension shortfall in 2005, when it was allowed to default totaled $9.8 billion and it only employs 100,000 people. GM employs nearly 300,000, Ford 250,000, etc.

Allowing the auto industry a soft landing via Chapter 11, probably means that taxpayers will be footing the bill for lost pensions in one form or another. I don't have my hands on the facts, but my rough back of the envelope efforts suggests the cost could be more than $1 billion/month for what; 8, 12, 20 years?

I suggest we provide low interest, government backed financing or "venture" type funding to the auto industry while simultaneously forcing immediate salary reductions in exchange for "equity" and a wholesale revamping of executive leadership. Kind of like being forced to ask your dad (or your friendly VC!) for an advance on your allowance; a price must be paid. (no real snarkiness intended!)

John

By: bfeld

bfeld — Wed, 07 Jan 2009 01:55:57 +0000

Yeah – this one seems to be a polarizing issue, especially among the people who think Ayn Rand writes philosophy!

I think “bankruptcy” is misunderstood. There’s a huge difference between a liquidation (Chapter 7) and a controlled Chapter 11 where the US government provides the DIP financing, wipes out the value of the common stock, provides capital for a real restructuring, and preserves the appropriate pension liabilities. I’d never suggest that we should liquidate these companies. Nor do I really think I know the answer. However, I do believe that “just giving them $10 billion per company” isn’t likely to solve much of anything the way things have played out in the past.

That was what really prompted my “Take Responsibility For Your Actions” comment. I’ve been an investor and an entrepreneur in a number of companies that have failed. Whenever they failed, there was pain and I lost all the money I had invested in them. I recognize this is on a smaller scale, but I take every failure personally and try to learn from it. It doesn’t seem like any of the current leadership of these companies really understand this, especially when they are – in the words of someone I heard today – totally “tone deaf” about things like flying from Detroit to DC on private planes. It’s a picky detail, but a symbolic one.

By: Wallen's

Wallen's — Wed, 07 Jan 2009 01:55:57 +0000

Fully agree! Bail out of a financial system can arguably be justified under certain conditions because it's the "blood system" of an economy but car producers??? It feels like kids running after a bag full of candies. To make the matter worst, it's not as if car producers didn't get warnings and government support several times already.

By: lou_paglia

lou_paglia — Wed, 07 Jan 2009 01:55:57 +0000

Love the Atlas Shrugged reference, complete match to some of the issues we are facing. (great book btw, except for the 80 page soliloquy by Galt). Galt and Reardon would have a field day with this UAW situation.

By: karyn_germ36961

karyn_germ36961 — Wed, 07 Jan 2009 01:55:57 +0000

Ah, talks of Objectivism…this sure does bring back memories. :'} I've noticed a lot of anger and cynicsim among my colleagues in discussing the bailouts. The term has become an over-used metaphor for everything from picking up after someone in the kitchen to software development lifecycle management practices. Then again, we are a feisty crew at NewsGator.

Thanks for the kind words on my blog post – you can't imagine how much better it made me feel to write it. Of course, now my employees are watching me like a hawk to see if I screw up…they probbaly won't have to wait too long.

By: Vinod

Vinod — Wed, 07 Jan 2009 01:55:57 +0000

Interesting..I also thought about Atlas Shrugged while wondering about the consistent pounding of words such depression, crisis and bailout in CNBC. I was wondering what Hank Rearden would think about this long line-up for bailout money.

well …. Who is John Galt ?

By: craig24

craig24 — Wed, 07 Jan 2009 01:55:57 +0000

I agree. Send the automakers' mgmt Atlas, let them declare bankruptcy and re-organize w/a new business model.

By: john

john — Wed, 07 Jan 2009 01:55:57 +0000

Amen brother!! And we all know that the only way the car industry will figure out how to succeed is to allow them to fail. They won't get creative until they are backed into a corner.