Submitted by Jeff Buster on Tue, 11/18/2008 - 13:54.

Detroit is already way out on the massive pension fund “bridge” loaned to them by their employees… all of the “Big 3” are BILLIONS under-funded in their union pension accounts and have been for years. When the Big 3 go bankrupt, a large portion of the pensions that the car manufacturers have contracted to provide to their retirees will be paid for by the Pension Benefit Guaranty Corporation – and probably by all US taxpayers.


Because the problem is the Pension Benefit Guaranty Corporation, 23 billion in the red, is about to go bust itself. And when the PBGC goes under, the taxpayers will be in line to bail the PBGC out. (You can read more about what caused the economic misery of the PBGC here)


This is a rank violation of equity for several reasons.


First, while most of us have no pensions – just a few bucks coming from Social Security – the car manufactures have “negotiated” (in bad faith, in my opinion) with their union employees’ and continued to under-fund pension trust funds for the future payment of their worker’s retirement. But the government rules (read LOBBY all over it) allow big business to continue to operate – AND pay stockholder dividends - year after year with huge shortfalls in their pension trusts.


Second – While the non-union waged taxpayer never had a seat at the table in negotiations with the big 3, never had union wages or union health care, and will never have a union pension, that non-union tax payer will supply the tax money which will fund the union pensions via the Pension Guarantee Fund should the fund fail, which it is likely to do in the next few years.


THIS IS ALL WRONG. Isn’t the tax payer getting screwed? Of course!


Let Ford, Chrysler, and GM go bankrupt. They are inept with their finances, and they are inept with the production and sales of automobiles.


Their deliberate lack of engineering creativity – particularly environmental creativity - in their products makes it clear that each deserves to go.


And if someone tells you (or if you believe) that Detroit was making products that the public wanted …that Detroit had to build SUV’s and EXCURSIONS and HUMMERS because those were the cars that the public demanded…I don’t buy it.



Madison Avenue molds the consumers car desires into exactly what Detroit can produce on the same old car chassis “platform” and with the same old engine castings. Advertising money – pounded into our heads through thousands of TV and print ads – has us sucking up what is advertised. Not the other way around…car customers didn’t bring the design of the Hummer to Detroit and ask GM to build it. For example, “In 2006, the Hummer H3 SUV borrowed the same truck chassis as the GMC Canyon and the Chevy Colorado. It was just a short jump from the SUV with a truck platform to an actual Hummer truck”.


One more reason that we can’t “loan” more money to Detroit – what about the car companies like Toyota and Honda who build their cars in the US – how is it reasonable to support Detroit while not supporting Detroit’s competitors?




Simultaneously with Detroit’s bankruptcy, let the US government, as it did in the Great Depression establish a North and South Dakota Authority (similar to the Tennessee Valley Authority) and immediately issue contracts for the installation of new electrical transmission lines between the Dakotas and Chicago designed to allow new wind generated electricity to be moved out of the Dakotas and into the national grid. It is estimated that connecting Chicago and the Dakotas would cost 60 billion dollars. The 60 billion will be repaid within 7 years through wheeling charges on the new wind generated electricity – and the globe will be cleaner and our international balance of payments more sound as we defer buying oil from abroad (and ship more coal abroad).


While many of the auto workers will be out of work, there will be tens of thousands of new jobs created to build the new infrastructure.


By getting the Detroit Dinosaurs out of the way, there will be space for other manufacturers to take new creative directions in transportation.


LET”S DO IT! Let’s go in the direction of building efficient, environmentally sound infrastructure, and not in the direction of supporting inefficient, environmentally and financially un-sound legacy manufacturers.

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I agree, but think we can salvage most auto jobs too

Accepting all your observations as correct - let's stress the failure of our auto industry is the direct result of the failure of 10,000s of college and grad school educated propeller heads who have destroyed the lives and opportunities of 100,000s of Americans, by designing and planning shitty products they forced good workers to build, and good citizens to buy. Everyone involved in the processes of planning and developing most of the products at the big three auto companies - including all the board members and large shareholder representatives - should be fired and publicly humiliated. Obviously, they should not gain control of one more public dollar much less our trust.

The companies they destroyed will be much leaner without the executive failures who ruined them. The workers should nominate who among the old executive and management team should be retained.... perhaps the big three should be merged into an Airbus, of sorts.  I believe the companies should then become employee owned, and the unions should fund their redevelopment - let them have the assets and the responsibility to invest in and protect their own jobs.

The unions sure didn't create this mess, but they have the interests of their workers and retirees to protect and so have a reason to dig America out.

Too bad they trusted all the Hahvad MBAs for so long!

The old auto MBAs may be given old car-dealership parking lots to farm... they need to connect with a higher purpose than being failed "management".

Disrupt IT

Restructuring our economy

Let Ford, Chrysler, and GM go bankrupt. They are inept with their
finances, and they are inept with the production and sales of

I agree with Jeff--How can the automotive industry be restructured to meet the manufacturing and infrastructure needs for old modes of transportation (cycle/rail/water) and a new energy economy (wind/solar) ?  

We are going to one day face the reality that the personal automobile is history...sooner or later...


(Unless we continue on the path of spending the make-believe we generate off the backs of taxpayers and spend those imaginary federal dollars towards perpetuating extremes of poverty/misfortune and wealth/indulgence...A Tale of Two Cities).


We need those 100,000s skilled workers

Bankrupt can have many very different meanings - one would be to use the courts to eliminate lots of dept and responsibiities, like happened with LTV, screwing people like Ed Hauser and making Mittal the world's richest man. The fact is those companies may be bought or sold but they represent 10,000,000 square feet of factories and other facilities and infrastructure, not to mention the supply chains - all that will not go to seed. It will either go to a robber barron or it could go to the workers. I say, let's figure out ways to take this to the workers.

Disrupt IT

American auto makers feeling their bad karma

America's auto makers deserve to go bankrupt and (hopefully) all their executives will loose their jobs. They have been selling poison for the last century. As a historian, I know it is the auto industry that is responsible for much of the problems in the United States today. About 60 years ago it was the auto industry along with some bad city planners that decided that American's would have an unsustainable lifestyle. These decisions negatively impacted so many aspects of American life its too hard to list all. Here are just a few: City neighborhoods with family businesses, nurturing relationships fresh air and walkable trips were cut apart by highways. Fast food with all its negative impact on health is directly related to the personal automobile. The personal automobile began a culture of greed and consumerism that makes other countries feel disdain us today.

Thanks for these insight,

Thanks for these insight, Jeff. They do make sense to me.

What also strikes me in the entire discussion of bailing out the auto companies is the total lack of comment about mass transportation. It's as if it doesn't exist or shouldn't exist. It seems that this is the opportunity to force financing of public transportation instead of more subsidies for private (the auto) transportation.

I can't get a bus downtown after 8:30 a.m. from where I live in Cleveland Heights. The service was cut quite a long time ago.