LAT analyzes Big Three bailout arguments

In an editorial today, the LAT reviews the Big Three carmakers' financial situation and then analyzes some of the arguments for and against a government bailout. In doing so, the LAT assigns undeserved significance to some arguments and fails to take up others.

For example, the LAT says, "There's little difference [between the Big Three and foreign automakers] these days in the average wages paid and benefits offered to new (emphasis added) employees, or in the time spent producing each car." True but unimportant. It's wages paid and benefits offered to long-time employees and former employees that put the Detroit automakers at a disadvantage.

The LAT argues that no "large gaps remain in quality, reliability and innovation" but then laments "the public's perception that their [the Big Three's] products are inferior." The LAT thinks Detroit's cars are as reliable, innovative and of high quality but car buyers don't. It's car buyers who matter. Their perception make take years to change.

The Big Three have made a satisfactory case for temporary help from the government, the LAT believes. The foreign carmakers have suffered from lower sales in recent months too, the LAT points out, suggesting the Big Three may not be such poor marketers after all. Either way, the taxpayer is going to be on the hook for billions of dollars because of "massive liabilities for workers' pensions," the LAT says. "We think there would be less pain caused by restructuring into smaller and more efficient units without dipping into liquidation."

It's true that Japanese and German carmakers have suffered recently from lack of demand. But the Big Three have suffered for years. Because workers' pensions are guaranteed by the underfunded Pension Benefit Guaranty Corporation, a government entity, it's true that taxpayers will be on the hook whether or not the Big Three are bailed out. But the bailout alternative will be more expensive and will not force the carmakers to reorganize and restructure. No one is talking about liquidation, only reorganization under Chapter 11.

In the final analysis, no government entity, official or agency can make the Big Three competitive and profitable. Congress can't. Neither the outgoing or incoming president can. The carmakers must do it themselves. They will not until they face a "come to Jesus" moment. That moment is almost here. A bailout can only postpone the moment for a few months.

LAT admits to churlishness

In an editorial today, the LAT misinterprets and mischaracterizes remarks made by President Bush to ABC's Charles Gibson in a recent interview. In the interview, Bush said he regretted that pre-war intelligence on Iraq was wrong about whether Iraq possessed weapons of mass destruction. Rather than accept that at face value, the LAT tries to suggest that Bush really was saying he regretted attacking and invading Iraq. The LAT chastises Bush for saying in the interview that he can't now know what he would have decided in 2003 if he had known then that the intelligence was wrong.

Finally, the LAT admits it's churlish to ask Bush to confess that he made a mistake in 2003. Yes it is.

Pardons

The LAT argues this morning in an editorial that President Bush shouldn't behave like former President Clinton did as he heads out the door. Clinton handed out a slew of pardons in his final days and hours. The LAT urges Bush not to do the same.

Why do they think he would? Is there any evidence that Bush is like Clinton? Has Bush messed around in the oval office with an intern. Has he invited disreputable people to sleep overnight in the Lincoln bedroom in return for campaign contributions?

Beggin for bucks

Based on the LAT's reporting, the carmakers' business plans raise a lot of questions, such as: Were these plans developed during the last two weeks? If not, why weren't they discussed in last month's hearings? If so, why didn't the carmakers have plans before the hearings? Why are the carmakers asking for different amounts of money or credit now than they were begging for last month?

Why does GM's plan talk about things GM will do in the future -- like sell or close Saab and Saturn? Why hasn't GM already done these things? If GM needs $4 billion before the end of the year why didn't they say that last month? Can't they project cash flow more than six weeks in advance? If not, they need new management.

Chrysler says it's survival depends on finding a merger partner. Are they negotiating a merger? Have they identified potential merger partners? If so, who are they? If not, why not?

Bottom line, it appear that GM and Chrysler can't survive as currently structured. Why pour good money into companies that can't pay it back. Ford appears to have a viable plan and appears not to need a bailout.

Zimbabwe disaster

The LAT's Robyn Dixon reports in this morning's newspaper on the disaster that is Zimbabwe, describing starving people searching for food and dying infants suffering from HIV and malnutrition. Dixon deserves an award for her reporting. Zimbabwe strong man Robert Mugabe deserves to be strung up from a high place for the disaster he created. Zimbabwe was not a poor country before he made it one by confiscating productive farm land and turning it over to people who had no clue how to farm it.

Carmakers aren't the only beggars

Two state governors appeared on PBS's NewsHour last night trying to justify a federal bailout for state governments that have spent more than they take in. People need retraining, states need new bridges, airports, harbors and highways. The federal government ought to pay for these because it will put people back to work. The governors didn't seemed concerned about what to build, only that whatever is built should create jobs.

The argument sounds familiar. During the cold war, East German factories made things East Germans didn't want and wouldn't buy, creating surpluses of things people didn't want and shortages of things they did. Socialism in action.

LAT: Recession could last into 2010

Gloom and doom is what the LAT predicts, for a few years anyway. LAT reporter Maura Reynolds quotes one economist as saying the current recession will be the worst since the great one and will not bottom out until 2010, which suggests that economist thinks the recession could last into 2011 or 2012 since once the economy bottoms it must then recover.

Economist, like journalists and others, ought to stick to what they know. Reynolds violates that principle right away in her report by saying that last week's run up in stocks was "built on hope that the incoming administration of President-elect Barack Obama could turn the economy around." How does she know that stock traders were thinking that last week and who in their right mind would think any administration could "turn the economy around"?