GM and Chrysler. Let Them Go Bankrupt?

There are lots of pundits, theorists, academics and people on TV in suits that say: yes.

Having had a long career with a once successful company that went into Chapter 11 and ultimately Chapter 7, I can tell you why bankruptcy for the auto industry is a painful option.

1. Bankruptcy requires “debtor in possession ” financing. There was a time when there were investors looking for a big return who would readily finance bankrupt companies that had potential to return to profitability post BK. Those investors are gone. The lender of last resort is the U.S govenrment: (you and me).

2. Bankrupt companies do not have to pay their suppliers. If they owe money they end up paying pennies on the dollar. How many suppliers could withstand the reduction in revenue withjout themselves filing for BK? Probably none. Then the government (you and me) would once again have to step in to help the suppliers.

3. Bankruptcy allows companies to throw out  their labor agreements and impose new work rules, pay and benefits. Layoffs are a part of the equation. The laid off people now have no income except for unemployment benefits. And what about health care? Someone is going to pay for it (you and me).

4. Bankruptcy allows companies to terminate retirement plans and health care benefits. Defined benefit plans go to the Pension Benefit Guarantee Cooperation which is now overloaded. Defined contribution plans (like 401ks) plans may be terminated. Employees will be forced to cash out their plans in the worse market since the Great Depression.

5. Health care plans for those already retired will be terminated. Where will these retirees end up getting health care? From the government (you and me).

6. The unionized workers in the auto industry are going to take a major it regardless of the outcome. How many government workers will take a hit? How many politicians will take a hit?

The next time your hear someone say “let them go bankrupt” think about the consequences.

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Flawed Concept:College Education for All

Should everyone go to college? Probably not. Here’s just a couple of reasons:

1. The value of a particular degree decreases as the population possessing that degree increases. Result: lots of custodians with bachelor’s degrees.

2. There are many fields and small business areas which could benefit from specific vocational training. A background in starting and operating a small business, coupled with specific vocational training could create a new class of independent, prosperous people. A two year program could provide a success path for many who might obtain little benefit from a four year college degree.

Hawaii legislature considers raising taxes

Are you kidding? Two articles in today’s Honolulu Advertiser need to be juxtaposed. One covered the aforementioned tax increase consideration and the other looked at solutions by local business folks. The business leaders had logical, business based ideas; your govenrment wants to raise taxes.

Class discrimination. Plain and simple. If you are an employee of the government, or an elected government official there is one standard. If you work in the private sector as an employee, owner or executive (not working in the financial industry) there is another standard. Economic downturns in the private sector require that you take layoffs, lose medical coverage, take pay cuts and lose your pension. The public sector solution: raises taxes. It is absurd.

Plug-in Electric Cars- No Panacea

If you listen to the media you would think that plug-ins are the answer to many of our energy and pollution problems. Not.

Pollution

Still there. It has merely shifted from the location of the vehicle to a powerplant some distance away.  The levels of pollution actually increase due to the inefficiencies of the transmission system and the fact that many of the powerplants on the mainland are coal fired. Every mile of transmission line decreases the power available at the plug. It is simply lost in heat.

Reduced petroleum consumption

Nope. See above.  In many area of the country there have been rolling ‘brownouts” during peak electricity use. What will be the effects of thousands of plug-in cars being juiced up?  Perhaps he politicians need a refresher in high school physics.

Back to the Three “Rs”

Daily headlines of violence are disturbing They detail horrific behavior: random killing of strangers,.cruel treatment of infants and the innocent.

I believe it is the result of the slow but inexorable growth of the idea that : “it’s not my fault”.  Bad parenting, abused as a child, deprived of this, deprived of that, it’s the governments’ fault.  Notes of a killer had names of those that had “harmed” him

Quite simply, if one can simplify social trauma, it is the lack of responsibility inherent in a percentage of the population of the last two generations.  My eight and ten year old granddaughters go to a wonderful rural school which teaches the “Three Rs”:

1, Respect for others.

2. Respect for myself .

3. Responsibility for my own actions.

Number three is key.  Everyone is free to succeed or fail.  All too often we hear people blame a person or an entity for their failure.

If the 3 Rs are applied and taught at a young age perhaps we can get away from the blame game.  The Eagles have a song that tells it like it is. It is titled:  “Get Over It”. The song is an excellent commentary on the blame game.

U.S. airlines and foreign heavy maintenance

Safety costs money, plain and simple.

U.S. airlines increasingly get their heavy maintenance done overseas. It’s about cost.  Ask an airline manager about it and they will tell you that they have supervisors and representatives at the foreign maintenance facilities. They will also tell you that the FAA will have a presence at these locations.

There is no way that the presence of a few Americans at a facility in a country like Nicaragua can equal the quality of work, or the worker skill level, of a U.S. based establishment.

The media has covered the Chinese produced foods and goods that have caused harm to the American consumer.

We need to take a close look at mechanical problems in U.S airliners that may be related to heavy maintenance performed by foreign facilities.

Is there a worker culture war?

Even before the current economic crises, private sector union workers in America’s industries have borne the brunt of sacrifice.  Active workers have seen pay reductions and massive layoffs.  They have seen their pensions and health care benefits disappear. Even retired workers have seen health care plans eliminated and pensions reduced.

All this has occurred while public workers have been receiving raises. Public worker’s retirement and health care benefits are unmatched in private industry and have been immune to the laws of economics.  This immunity is due to the government’s ability to to simply raise taxes to cover the costs of generous contracts. And now they can go to the Federal Government for more funding. Unlike private industry, governments do not have to compete.

This is not to say that public workers do not deserve good pay and benefits.  They do. However, the rules for sacrifice ought to be the same for both the public and private sector.

When private industry goes to Washington for help it is subject to strict scrutiny of worker pay and benefits. Those who work for these organizations are expected to grant concessions in return for government assistance.  Layoffs are the norm.

When the states come to Washington for their share of the bailout they should follow the lead of the auto CEOs and bring the public worker union leaders with them to explain how they are going to contribute to correcting the problem.  Government officials decry the possibility of public worker layoffs.  They speak as though teachers, policeman and firefighter were the only public employees when these positions only occupy occupy  a part of the total state and local payrolls.  There’s no need to lay off these essential workers, but there surely are lots of other places to trim.

If you worked for  a private company and have been laid off you have a right to be upset the next time you see one government worker on a shovel and three supervisors standing around on a public job.  What’s worse is that when you do return to work your taxes will be used to perpetuate public inefficiency.