Edmund Burke wrote that an entity "without the means of change is without the means of its conservation." For such reason do the Detroit 3 and UAW whither.
The bailout package passed earlier by the House collapsed in the Senate last evening because of the Democratic leadership's and UAW's refusal to accept some of the stipulations set out in Sen. Bob Corker's (R-TN) restructuring plan, foremost of which was a requirement that Ford, GM, and Chrysler bring labor costs into line with their foreign-owned competitors by 2009 to receive federal money.
To give a dime to Detroit without such a mandate would negate the very point of the bailout, and would be the equivalent of throwing taxpayers dollars into a flushing toilet. The reason Detroit is here is because it is uncompetitive, and it is uncompetitive because of the exorbitant union-negotiated wages and capital structuring they have in place. An infusion of cash will not alter this dynamic, but only stave off the day of ultimate insolvency for a time. Continue to refuse to alter the wage and capital structure and it will fall into destitution again sooner or later; probably sooner.
The only condition under which it could remotely be appropriate to give taxpayer money to Detroit is in the form of a "bridge loan;" as an infusion of cash following a thorough restructuring as a means to making it through a perilous short-term. As Jim Geraghty points out, the need to reduce costs is all the more essential in a deep recession with low demand for new cars.
Detroit will not survive without changing its business model to reduce labor costs and overhead. Until it does so – and demonstrates a will to live – the stewards of taxpayer dollars shouldn't throw one dollar their way.
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