no third solution

Blogging about liberty, anarchy, economics and politics

Comments on Comments #28: Bailing out the Auto Industry is a Bad Idea

November 7th, 2008

A few loose ends to tie up before I forget about them, I’ll respond to the more recent comments in a forthcoming edition.


Gilligan left a comment in #27, most likely in response to continued discussion about Who Owns General Motors?

I liked this statement:

“Employees could purchase the company outright in a month, if they were so inclined.”

Brings up an interesting point. If employees had total ownership of the company, they could fire the management for their decisions to produce products nobody wants. … All the benefits of ownership and vested self-interest would apply.

I worked for one of the big 3 in the late 80’s. I could write a massive post about all of the waste that ranges from comical to tragic, but to nutshell it:

Please do so, I’d love to read it. I’ve heard horror stories from some consultants/six-sigma types that used to work with the automotive manufacturers and their suppliers. Like, “Corporate Jets for everyone!” horror stories.

Management (i.e. engineering) waited for summer students to arrive to throw overdue projects over the fence at them to complete. In the meantime, they used the companies facilities to run their home businesses.

The guys who were making out like bandits were the trades folk. The employee incentive program said that an employee that came up with and implemented X would be paid 10% of what it saved the company in the first year, up to a maximum of 20K. You should have seen the size of their paychecks. Deep into the 6 figures…whew. Senior management used to get outraged and would chew into the salaried engineers, “Why don’t you guys invent this stuff?” Of course, the incentive program did not apply to the engineers…’nuff said.

Where I work, most non-managerial employees are eligible for overtime pay. Once you become a supervisor, however, the OT pay stops, which could potentially result in lower income after your promotion. If you think about it, you only need to work about 3 hours of OT per week to make 10% more than your base salary. If you average 5-8 hours of overtime per week, you’re making a lot of extra money. If you get a 15% raise and promoted to a managerial position, you’ll probably take home less money and you’ll have to work more. Needless to say, the employee churn at the 2-3 year mark (when most people become eligible for this sort of promotion) is pretty staggering.

Papa G, who also worked in automotive, left a comment on A Bailout for Detroit

I hold the Big 3 management teams as the problems for the rust belt states and in particular, here in Michigan. Now they want a bailout…they made the mistakes and they want our money. So does Wall Street . If the Wall Street bailouts work out OK, will the government put some of the profits in the hands of the citizens of the United States….probably not ! If the bailouts of the Big 3 proves to be successful..will the government put the profits in our accounts. Again…probably not !!

As the lean fad took over in the 1980s and 1990s, GM under the leadership of F. A. Smith (and the others) began reducing the number of suppliers that they used to source parts. Some were forced out by GM’s pricing power, others were bought out or consolidated. When the dust settled, where there had been many small, independent machine shops and suppliers, now there are only a few. Some of them (like Delphi) are also bankrupt.

Before, if one supplier went on strike, or couldn’t fulfill the order, there were a dozen others who would fill it. Now, if General Motors’ single supplier of widgets goes on strike, the entire company is dead in the water, wasting through millions of dollars a day. This sort of top-down management has been disastrous for General Motors, as strikes become increasingly crippling.

Bailing out Chrylser twice in the past few decades was a bad idea. Bailing out General Motors so it can buy Chrysler which needs its own bailout is an EPIC FAIL.

There are parts of both companies that are valuable and salvageable, although probably not at any price approaching book-value. The rest of the organizations are junk. You’d practically have to pay people to take them off your hands. The junk needs to be written off, not subsidized, because it’s only dragging down the few strong points these organizations have left.


Despite the fact that I thought it was probably going to be a boring post (too academic, perhaps), a number of people left comments on Entrepreneurs, the Firm, and the Knowledge Problem saying that they really liked the post and found it interesting. I’m glad to hear that, maybe I’ll do more of that sort of writing in the future.

Quick Hits

December 28th, 2007

If gold is such an anachronism, why do governments maintain such large stockpiles of it?


Who knew that the Unions are in favor of national healthcare?

Union members and outside experts said the UAW will have difficulty keeping its commitments unless the federal government has a national health care system within 5-15 years.

Always looking out for their members, everyone else be damned.


Egypt is trying to copyright pyramids “in an attempt to get paid from the sale of replicas…” Even if you are inclined to accept traditional arguments in favor of Intellectual Property (i.e., the inventor/creator’s right to profit from his time and effort), this is utterly absurd. Egypt, a sovereign country, is trying to claim a copyright on something that they basically found, which merely by accident happens to lie within their present-day borders. Could Norway claim copyright on fjords? Can Spain copyright “The Americas”? Can China copyright pork-fried rice, and earn royalties on every late-night quart served anywhere in the world?


New home sales are at a 12-year low. This is not particularly good news, especially when it is combined with the number of adjustable rate mortgage loans (this is not limited to subprime loans) which have yet to reset, and are scheduled to do so throughout 2008.


Not good at all. Looks like 2008 is going to be one hell of a year…


October 11th, 2007

Several Michigan lawmakers are now facing recall votes for their role in passing the recent tax hike. I hope they all lose their jobs, but morevoer, I hope nobody replaces them. That’s too much to ask for, though.

After learning he was a recall target, [Steve] Bieda said today: “We’re facing some huge challenges in this state. We’re trying our best to accomplish these changes. Some of them are painful and some of them are uncomfortable to do. But we have the responsibility to balance the budget and the responsibility to put the state back on sound financial footing.”

No, Mr. Bieda. You had the responsiblity to run the State with a balanced budget, a task at which you and all of your colleagues failed abysmally. These changes are only painful for you insofar as you might be recalled, or may not be re-elected next time around.

The Teamsters are, well, being Teamsters. What’s new? The current attempt to exercise unauthorized power over others is happening at the casino down the street from my Alma Mater.

The Saginaw Chippewa Indian Tribe, which owns and operates Soaring Eagle, may take the position that the NLRB has no jurisdiction.

This was my first inclination – that they’re grasping at straws if they think they can get away with this. The Casino is one of the better paying non-manual-labor employers in the entire County of Isabella. Every year, college students line up for lucrative jobs as ushers, dealers, and bartenders at the resort. And the ones who are selected are in turn, paid far more than they’d make elsewhere in town. Unfortunately, the article cites that the NLRB has usurped tribal sovereignty since 1984, effectively allowing for unionization. As if it weren’t bad enough that we gave them all smallpox, and took all their land, and killed all the buffalo…

Finally, the potential libertarian victory – however small – Michigan’s House is attempting to repeal (to an extent, and conditionally) the law which requires motorcyclists to wear helmets. Riders who want their Fabio-esque locks to trail in the wind behind you, you’ll have to pay an annual fee – in addition to your license and registration fees – prove that you carry a certain minimum amount of insurance, have attained 21 years of age, have at least two years of riding under your belt (how this is determined?) and take a safety class. Whew!

Unfortunately, it will probably be vetoed (again) by our Governess. So much for “representative” government.

no third solution

Blogging about liberty, anarchy, economics and politics