Viewed from afar, it's lovely . . .
18 Nov 2008 05:13 pm
One of the interesting things to me about talking to other wonks about the bailout is that the wonks who support the bailout are, almost without exception, outside the beltway.
All the analysts from left to right basically agree what should happen to GM, if there is a bailout: it needs to get a lot leaner and a lot meaner: slash the number of marques and car lines it makes, concentrating on a profitable core. Smart commentators like Felix Salmon and James Surowiecki view the bailout as a way to give GM enough breathing room to accomplish that transition.
But no one inside the beltway, left to right, thinks that this kind of pseudo-LBO in any way resembles what is actually going to happen. The entire motivation for the bailout, which is reportedly quite unpopular outside the midwest and the labor movement, is to keep GM from precipitously shedding jobs. And every marque you shut down, every line you slash, means closed plants and layoffs.
Mind you, I'm talking about the supporters of the bailout. They view the thing as half Hail Mary pass to shore up a profitable sector of the labor movement, half fantasy bid for a green car that none of them has the faintest idea how to build (memo to Josh Marshall: try strapping a car seat--or a working class salary--into a Tesla roadster. Then try charging it in the natural market for such a car, the urban, street-parking environment). They emphatically do not view it as an orderly means to let GM shed 2/3 of its union workforce, which is one of the sunnier figures I've heard for a profitable firm.
The opponents, meanwhile, are considerably more cynical. They (we) think that even if Congress allows substantial layoffs, they will do so in a way that will cripple the firms; plant/brand closures will be decided based on where the cars are produced, rather than their profit margins.
By far the most optimistic estimates in the financial community come from the people who have virtually no dealings with Congress. Anyone who does, recognizes that this is not going to be bridge financing towards a massive restructuring. I'd wager even the supporters in the DC area would admit that GM is probably going to be back for more within the year. The company has the capacity to produce 17 million cars, a little more than it sold two years ago. Projected sales next year are under 12 million. Their cash burn rate right now is $2 billion a month, which could well get worse. Unless GM starts slashing jobs, closing plants, and shuttering venerable marques like Buick, $25 billion is about a year's worth of lifeline.
meganmcardle.theatlantic.com |
