Manzi is on the job, deconstructing it. Bottom line:
…this is not a real business plan, but simply a political document. It exists to provide political cover to members of Congress. But if that’s the case, it’s an unintentionally beautiful illustration of why industrial policy fails. It’s both economically crucial and very hard to allocate capital well; that’s why people who are good at it make so much money. Businesses struggle to do this well, and they’re really trying. What do you think the odds are that this is a wise use of money, when the people involved are barely pretending to try?
All this is doing is kicking the can down the road, and delaying (and making much worse) the inevitable and painful restructuring that has to take place. And I’m not talking about just GM, or the auto industry.
I just glanced at the article you linked to, but one error jumped out at me. Until 2010, GM is paying UAW retirees health care. After 2010, under a currently-in-place contract, the UAW picks up that cost.
That’s probably where Jim Manzi’s “missing” $700 million of annual cost savings is at. Not to mention that under the current “two-tier” labor contract, every year that goes by, more high-wage guys retire and low-wage guys move in.
Chris:
Thanks for the comment.
The Plan is confusing on this point, but if you go to Figure 3, you’ll see the distinction between “legacy” and “active” hourly manufacturing cost. This is why I specifically did this analysis on active mfg. cost, rather than the total. They are claiming a huge productivity gain, even on the non-legacy portion of these costs.
Best,
Jim Manzi
Jim – thanks for the clarification. Now, the next questions, which are not addressed in the plan, is the ongoing impact of the two-tier wage scheme and what productivity gains can be made by reducing the nameplates to 40.
Pity nobody has asked a single question of how the Banks
have been allocating “Bailout” capital?
$800 Billion in cash, $8 Trillion in credit guarantees, and
all that is discussed is how bad the GM bailout is.
I wonder why that is not a subject of discussion.
Jack, I think nobody’s asking because the answer was known even before the bailout was approved: no strings, no oversight, and no guarantee the banks would use the money to keep making loans.
If anything, I think that has informed discussion of a proposed automaker bailout and is why everyone is talking about “how bad the [Detroit] bailout is.”