One Step Closer to British Leyland, American Style

Evidently someone out there is reading my musings on this subject, as evidenced by this:

A key House Democrat is writing legislation that would send $25 billion in emergency loans to the beleaguered auto industry in exchange for a government ownership stake in the Big Three car companies.

House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid are pressing for quick passage of an auto bailout during a postelection session of Congress that begins Tuesday.

But the order is wrong: first you combine them, then nationalise them, finally watch them go down the tube…

The key–but unstated issue–here is the position of the UAW, the trade union. Chapter 11 is a sensible solution to this problem, and an option that they don’t have on the other side of the pond.  There, bankruptcy is a direct road to liquidation, like Chapter 7 is here.

However, if one or more of the Big Three went the 11 route, their first move would be to unload some of the long-term obligations that they have to the trade union and its workers, past and present.  The UAW can’t stand the thought of having to fight that.  For them, Chapter 11 is a no-win situation.  If they lose the benefits, they lose standing with the workers.  If they hang tough, the companies go to Chapter 7 and it’s their fault.  So they’re using their clout with Congressional Democrats to dodge the bullet.

The problem we have today is that too few people understand trade unions.  But you won’t find that problem here at Positive Infinity.

Leave a Reply