Comment & Debate
Daniel Gross. “In Defense of Detroit”. Newsweek. 13 Nov. 2008 – More significantly, Chapter 11 proceedings for GM would be far more complicated than that of a retailer, or of Lehman Brothers. Recent experience shows that for auto companies, Chapter 11 is like the Hotel California. You can check in any time you like, but you can never be able to leave. Auto parts supplier Delphifiled for Chapter 11 in October 2005, and still languishes there. Getting out of Chapter 11 can be tough when (a) the bankrupt companies are capital-intensive manufacturers; and (b) creditors are reluctant to give up on their claims. Among those with the biggest claims on the automakers, and GM in particular, are the United Auto Workers. It’s common, especially in the fever swamps of the right, to blame the UAW for the Big Three’s high cost structure and legacy costs. (Never mind that management for generations willingly entered into the labor pacts, consciously trading salary increases for longer-term liabilities like guaranteeing health insurance for retirees. Such pacts allowed the Big Three to report higher profits in the short term, and pushed the hard choices to the future.). Last year, the UAW and the auto companies set up a health-care fund that, as the New York Times writes, would “shift a $100 billion burden off the companies’ backs.” Would the UAW simply give up on the health care benefits and tell hundreds of thousands of 40- and 50-something members to just go out and buy their own health insurance?