Whither Capitalism

More ranting about GM from me, so my apologies. But I can't help it. Jon Cohn at The New Republic, a proud Michiganer and a liberal's liberal, defends the proposed bailout of GM et al. :

[W]hat's missing in the tsk-tsk editorials is any recognition that the culture of Detroit has been changing, however belatedly, starting with its labor relations. Ford led the way years ago by reaching site-specific "competitive operating agreements" with locals at different plants, rather than sticking to one national agreement, thereby enabling it loosen work rules and engage in the sort of collaborative quality management on which industry leader Toyota made its reputation. Then, last year, the UAW reached a breakthrough agreement in which it granted the companies similar flexibility, agreed to a two-tier wage structure for new hires, and set up a separate trust fund to finance future retiree health benefits. The companies would provide the initial money for this trust, but, henceforth, the unions would manage it--thereby taking off the companies' books a tremendous burden that had, on its own, accounted for about half the gap in compensation between unionized workers for the Big Three and non-unionized workers for foreign-owned automakers. "I think they've shown unprecedented ability to change and transform the union," says Kristin Dziczek, who directs CAR's Automotive Labor and Education program. "They understand what is at stake."

He goes on to argue that this change is already producing positive results, including the Chevy Volt to be introduced in 2010.

With apologies to Jon, who is an excellent thinker, I disagree in the strongest way. Of course, Jon is not being inconsistent in his thinking: he is a storng advocate for using gummint resources to bail out all sorts of folk. But he is viewing his beloved industry with rose-colored goggles. For instance, here is a recent article about the chances of success for the Volt:

Producing a high-end statement car for trendsetters, as Tesla is doing, would have been pretty safe, but positioning the Volt as affordable family transportation—Chevy’s bread and butter—is an order of magnitude harder. It implies selling not thousands but hundreds of thousands of cars, and at Chevrolet rather than Cadillac prices. The battery alone is likely to cost something in the high four figures. At Chevy prices, GM can expect to lose money on every Volt it sells, at least in the early going, and possibly for years.
Outflanking Toyota makes good sense strategically, but GM’s market capitalization is less than a tenth of Toyota’s. Unless battery costs fall as quickly as GM hopes, the car could break the bank by succeeding.

And this was before the floor fell out from below the economy. As usual, Jim Manzi is able to introduce ice-cold sense in to the whole bleeding thing:

This story – look, we now see how foolish we’ve been, and finally have our act together; with just a little more time we’ll be world-beaters again – has been sold by Detroit to journalists many times over the past 20 years. Here’s the New York Times in 1992, making almost the exact same argument as Cohn makes: “Ford and Chrysler have increased the efficiency of their factories and workers so much in recent years that their basic cost of producing a car is now less than that of their Japanese rivals, according to a study published today.” Here’s Fortune in that same year saying that “For the first time in a decade, the U.S. auto industry has a genuine chance to grasp the lead from its Japanese competition. Ford and Chrysler are operating at worldclass efficiency, and General Motors has taken on a new sense of urgency with seismic shakeups at the top.” How’d that work out? This kind of coverage continued almost into the current crisis – here’s Fortune as recently as 2004 saying “GM Gets Its Act Together. Finally. How America’s No. 1 car company changed its ways and started looking like … Toyota.”

I watched Michigan Sen. Carl Levin on MTP this morning, and it nearly made me sick how intensely he was shilling for GM. I understand this is his state, and he is doing his job. But please. With this proposed bailout, I really feel like we are making a decision on the nature of capitalism and personal responsibility in this country. And I feel that all the lessons I have learned as I absorbed cuts of my own are really just a bunch of bullshit.

Welcome to the oligarchy. Maybe Sen. Levin can go to Japan and throw up all over their ministers for trade.