What the Chrysler saga should have looked like — Part 2

May 13, 2009 by Alex Epstein

Yesterday, I discussed how Chrysler’s attempt to avoid bankruptcy was not a just, free-market process, but a giveaway to the administration’s beloved UAW. The UAW, of course, loudly sheds tears over “concessions” of its own.

But let’s take a look at the UAW’s “concessions” in Chrysler’s final, pre-bankruptcy restructuring-proposal/bailout-plea. From the Wall Street Journal:

Among the cost-cutting measures that the UAW leaders have accepted are a suspension of cost-of-living-adjustments and new limits on overtime pay. Workers will only be paid for overtime after they have worked at least 40 hours in a week. Chrysler workers will also lose their Easter Monday holiday in 2010 and 2011, according to the union summary. (Emphasis mine.)

These are concessions? Only in the luxurious welfare world that is the modern auto industry could agreeing to work on two Easter Mondays (who gets off Easter Monday?) qualify as a “concession” worth mentioning. In a real, market restructuring process, an Easter Monday holiday would be about the millionth concession on the list–if it was even in the contract in the first place.  Ditto for having to work 40 hours before getting overtime.

Properly, many of the creditors rejected this sham of an agreement — refusing to take a gigantic financial hit so that Chrysler could create some UAW-run workers’ paradise — only to be lambasted by the President. “I don’t stand with those who held out when everyone else is making sacrifices,” Obama said, denigrating the holdouts as “a small group of speculators.”

Fortunately, Chrysler had to declare Chapter 11. Unfortunately, the Administration is every bit as involved in the bankruptcy process, in which (as the Executive branch) it has no Constitutional role whatsoever.

It has already used mafia-like tactics to force many of the creditors, who have been recipients of TARP money, into supporting its plan. And because it is offering billions more dollars for a “new” Chrysler, which no market deal would have the benefit of, it may be able to convince a judge that its (bailout) plan is best — and that the creditors wouldn’t be able to get more than $2 billion in liquidation, anyway.

Instead of market participants, with rightful claims on Chrysler and GM, rebuilding a new auto industry and stripping away the incredible inefficiencies of the old one, the administration is dictating how industry should be run — the market and the law be damned. We are rapidly reaching a state where there is no market, and there are not laws — there are only government-sponsored power grabs justified by the “public interest.”