Bankruptcy won’t save Chrysler

Bankruptcy won’t save Chrysler, it will only prolong the misery. Bankruptcy could have saved Chrysler, but the way the U.S. Government (read Obama) stepped in and structured the process, giving 55% of the company to the UAW, it isn’t likely that Chrysler will survive.  What Chrysler needed to do was a true bankruptcy that would have allowed them to get out from under their UAW contract and hopefully negotiate a better deal.

Chrysler was being crushed by its debt but worse than that for Chrysler, and all of the U.S. automakers, is the choking effect of the UAW. It is a double hit for the automakers. High salaries for the UAW workers on the line and old fashioned work rules that stifle the company’s ability to increase productivity and throughput.

Ford built a new modern plant in Brazil. It has often been referred too as “The plant that Ford couldn’t build in the U.S.” The plant is an integrated plant, meaning, the suppliers workers are located inside the plant. The automakers have outsourced many of the parts and sub-assemblies to outside suppliers. This reduces cost and increases flexibility. However, the UAW insists that these outside suppliers not be co-located with the UAW assembly people. ( I guess they are afraid they may infect them! ) An example would be the seats in a car supplied by Lear Corp. In the U.S. Lear would have a plant that builds seats near the Ford plant and the seat assemblies would be transported to the Ford assembly plant in a “Just-in-time” fashion. At the Camacari plant the suppliers employees work inside the plant right along side the Ford workers.  When there is a problem you don’t have to “call the supplier” because they are right there in the factory!  Additionally, each of the suppliers workers may perform many different jobs depending on what model car is being run, something that the unions don’t typically allow.  This reduces the number of workers required as well as providing more job satisfaction for the workers.  The link below will give you some more information about the Camacari Ford plant.

Read more about the Ford plant in Brazil.

I have never worked in a union shop, but when I was in field service and support I had several system installations in union shops.  I got to see first hand how the unions made being productive impossible due to the union work rules.  At a Rohm and Haas plant I had to wait for over thirty minutes for a union mechanic to come and take the cover off a Teletype machine.  I could have done it in less than one minute, but since it was considered an operation that required a mechanic it had to be a union mechanic.  So I waited, along with several other people, for a mechanic with a tool belt to come to take two screws out and lift the cover off the teletype machine.  When he got there I had to show him how to remove the cover and adjust the teletype machine.  Yep, that’s the way to be productive.

And, how about the Chrysler bond holders that took it in the shorts.  I heard Obama in speech the other day referring to the Chrysler bond holders as “speculators.”  The word wasn’t used in a favorable way either.    The problem is, the “speculators” as Obama called them are really investors.  These investors include Mutual funds, IRAs, and pension plans that belong to regular working people.  Here is a link to a article in the Wall Street Journal describing how an Indiana teacher’s pension fund lost $4.6 million in the Chrysler restructuring.  The Obama Administration ignored the rule of law on bankruptcy and took the bond holders which would normally be at the top of the list of creditors to be paid and put them back in line.  The bond holders got only 29 cents on the dollar, but the UAW winds up with 55% of Chrysler.  Do you think Obama is paying off some “debt” to the unions for helping him get elected? Do you think?

I also saw where the bond holders were dropping their lawsuit, it wasn’t mentioned in the articles but I suspect that the Obama Administration strong armed them into that too, probably threatening them if they didn’t drop their suit.

Businesses in this country should consider carefully before they take bailout money from the U.S. Government.  You need to be very careful when you are dancing with the Devil!

No Comment