The Prodigal Automakers

Chuck Colson | BreakPoint | Updated: Nov 24, 2008

The Prodigal Automakers


November 20, 2008

Imagine if the parable of the Prodigal Son went something like this: After wasting his inheritance, the son returns to the father. But instead of repenting and asking the father to take him back as a slave, the son says, “Dad, I’ve made a mess of things. Could you spot me some cash so I can get out of this hole?”

Well, essentially, that’s what the Big Three automakers and the United Auto Workers are doing this week on Capitol Hill.

At a Senate Banking Committee hearing, the CEOs renewed their case for a “$25 billion lifeline.” GM chief Rick Wagoner told senators that the industry “needs a bridge to span the financial chasm that has opened up before us.”

The reception was chilly, to say the least. And rightly so. Committee chairman Christopher Dodd told the executives they were “seeking treatment for wounds that were largely self-inflicted.” And, mind you, Dodd supports assistance for the automakers!

When Wagoner insisted that the “global financial crisis” is behind the automakers’ imminent collapse, Senator Mike Enzi of Wyoming replied that the Big Three’s problems run a lot deeper. He cited “inefficient production” and “costly labor agreements” as the reason for Detroit’s troubles.

Enzi is right. As former Massachusetts governor Mitt Romney pointed out in the New York Times yesterday, “G.M. currently employs about 8,000 people who actually don’t come to work.” And those who do come to work are paid, on average, “$10 to $20 an hour more than people who do the same job building cars” in the neighboring states “for foreign [automakers] like Toyota.”

Other costly inefficiencies cited by Romney include too many brands—GM has eight—and the too many dealerships. GM, whose market share is the about the same as Toyota’s, has five times as many dealerships.

The “lifeline” Wagoner and company seek would do nothing about any of this—it would just delay the inevitable reckoning that must one day take place.

That reckoning, as Romney says, is reorganization under the bankruptcy laws—along with federal guarantees for post-bankruptcy financing and auto warranties. Only then can GM and the others get rid of agreements with the UAW that keep it from being competitive. It’s the only way it can “close plants, rid itself of unprofitable brands and shed dealerships,” and save the billions it needs to compete.

In other words, like the airlines had to do, they can make through bankruptcy the necessary changes to survive.

But if we bailed out Wall Street, you ask, why not Detroit? Simply put, credit markets were frozen, and we had to prevent a global financial collapse. With the automakers, the goal of the bailout is to perpetuate arrangements that, whatever sense they made when GM had 50 percent of the market share, make absolutely no sense today when it has 20.

No bailing out those who act irresponsibly. What economist Prabhu Guptara calls the “unbiblical culture of debt” has convinced many of us that we can borrow and spend our way out of almost anything. But that, you see, is why we’re in this mess—from subprime mortgages to banking to the plight of the automakers.

So what’s good for America is also good for General Motors—some fiscal discipline.


Chuck Colson’s daily BreakPoint commentary airs each weekday on more than one thousand outlets with an estimated listening audience of one million people. BreakPoint provides a Christian perspective on today’s news and trends via radio, interactive media, and print.

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The Prodigal Automakers