Tuesday, December 16, 2008

Kudlow on Corker’s Plan to Save GM

Forgive me but I did a silly thing this morning – I ventured over to read what the National Review was saying about the automobile bailout controversy. Is Lawrence Kudlow guilty of more mendacity or stupidity or both:

“Who lost the U.S. car business?” Right after the UAW vetoed a compromise, bankruptcy-lite, Detroit-little-three rescue plan put together by Tennessee Republican Bob Corker, UAW president Ron Gettelfinger played the blame game by blasting Corker and the Republican party for “singling out” union workers to shoulder the burden of reviving the U.S. car business. In truth, the UAW is to blame. If Sen. Corker’s plan had prevailed, with UAW support, many believe it would have had 90 votes in the Senate. GM could have gone forward with a clean-as-a-whistle balance sheet under a three-part restructuring plan that included a $60 billion bond-refinancing cram-down, a renegotiation of the $30 billion VEBA health-care trust, and a pay-restructuring plan that would put Detroit compensation levels in line with those of foreign transplants Honda, Toyota, Nissan, and BMW. Average compensation for the Detroit little three is $72.31. Toyota’s average wage is $47.60, Honda’s is $42.05, and Nissan’s is $41.97, for an average of $44.20. So Corker’s idea was to bring that $72 a lot closer to that $44.

Kudlow should know by now that this $72 an hour compensation claim is a crock. Count this claim as mendacity. But 90 votes in the Senate for Corker’s plan – that is off the charts! As far as a clean-as-a-whistle balance sheet, doesn’t Kudlow know how to read a balance sheet with GM’s showing about $170 billion in liabilities exceeding the book value of its assets by about $60 billion.

The ultimate whopper in this Kudlow canard was that Corker was trying to negotiate in good faith while the “UAW refused to make concessions”. If I were a conservative, I’d be completely embarrassed with the serial garbage that gets published under the name The National Review.


jimbino said...

Isn't it a fact that the $72/hour figure represents the costs to GM of labor, present and past, that resulted from negotiations with the UAW? As a mere citizen, it doesn't matter to me that some of the figure represents pension liabilities; it's sufficient to know that it is a direct result of a premium GM pays attributable to labor, not materials, energy, rent, etc.

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Anonymous said...

You're only partially correct. The so-called legacy portion of GM's stated hourly labor cost is a cost that GM encumbered itself with ten, twenty and in some cases thirty years ago. The laborers receiving the payments of those legacy costs are no longer working. They are receiving their deferred compensation, what we so quaintly call retirement benefits, which GM guaranteed to previous employees in leiu of paying them higher wages during that past period. Yes, it gets a bit confusing. GM failed to take prudent steps in setting aside funds that would adequately assure that the promise of deferred compensation would be funded. Don't ignore that that promise was in fact a contractual agreement.

Anonymous said...

You warned us. You put "Kudlow" in the title. Why, oh why did I click?

Anonymous said...

"Is Lawrence Kudlow guilty of more mendacity or stupidity or both"?

I assume that this question is purely rhetorical....