Right Wing Nut House



Filed under: Bailout, Financial Crisis, Government, Liberal Congress, Politics, Too Big To Fail — Rick Moran @ 11:28 am

With all this free money floating around and every CEO worth his salt lining up at the government trough ready to bury their faces and feed heartily on the taxpayer’s generosity, I think it’s time we began to look around and see what other companies - past and present - we should also claim to be “Too Big To Fail!”

For instance, a prime candidate for a government bailout would have to be John Jacob Astor’s American Fur Company. Sure it’s been bankrupt for 160 years but I didn’t see any limitation attached to that bailout bill, did you? Hell, if the Medici’s had an American subsidiary we could probably bail out that Renaissance era company too.

The fact is, the American Fur Company failed and it’s your fault. Tell the truth now, when was the last time you bought a beaver hat? Don’t you realize that thousands of fur trappers have been thrown out of work because you selfishly decided to be a slave to fashion rather than thinking of those trappers, trading post managers, export facilitators, dock workers, and ship captains who lost their jobs as a result of the switch from beaver pelts to silk in hat making?

And, of course, you know where that silk is coming from, right? This may have been the first instance of a Chinese attack on our economy. Haberdashers, seduced by cheap imports of silk, ought to be ashamed of themselves. The American Fur Company must be saved else we will lose our competitive edge in the world’s fur trade. Then there are the national security implications which are just too horrible to contemplate.

So we should give some of that $700 billion in bailout money to the descendants of John Jacob Astor and power up the fur trading business again so we can all buy a stinky, misshapen, butt-ugly hat made from the skin of cute little beavers who are trapped in steel jaws that, when sprung, clamp down on their leg, forcing the helpless creatures to either gnaw off their own limb or die a slow death by starvation. But if it will save American jobs, it will be worth it, right?

Similarly, we could save the “Big Three” American automobile manufacturers who have run into a skein of bad luck recently. Of course, that streak of bad luck has lasted 35 years and for all practical (and aesthetic) purposes, the US auto industry has been dead since then. But if we’re going to save The American Fur Company, we might as well try and pump some life into the moribund car manufacturing sector, right?

Actually, this might prove to be a bigger trick than trying to make beaver hats all the rage again. This is because there is a reason that Detroit has lost its positions as the Mecca of car manufacturing; they make sucky cars that no one wants to buy.

The Big Three can complain all they want to about the high cost of union benefits, unfair competition (Translation: It is unfair the Japanese are smarter, more innovative, and more quality conscious than we are.), and “green” regulations that add cost to their products. They are basically calling the American consumer stupid for actually wanting nice looking, trouble free, fully functional, safe, and adequately serviced autos. The gargantuan salaries paid to auto execs have not produced one single model that can outsell the Toyota Corolla.

For all their redesign, retooling, rethinking, and re-inventing the “corporate cultures” in Detroit, they have accomplished nothing in their efforts to compete with Japanese manufacturers. The excuse used to be that their plants were so much newer than ours. That is no longer the case as the average American auto assembly plant is almost just as recently built as the average Japanese plant. It’s not the age of the plant that matters anyway. It’s how the cars are built. And the Japanese have embraced new techniques, new technologies that give them a leg up in the competition.

Then it was the excuse that Japanese workers make much less than American unionized workers. That may have been true at one time but today, it is very close and getting closer all the time. The difference today is almost entirely due to health and pension benefits. But instead of losing market share because of this, the Japanese have been steadily increasing their sales numbers.

Face it. Detroit is in a fix of its own making. Shortsighted managers, unions who still believe that benefit packages should reflect 1970’s realities, a stubborn resistance to higher CAFE standards that would allow them to compete with the fuel efficient Japanese cars, and an inability to figure out how to make a decent profit on smaller cars. The fact that the enormous falloff in sales of SUV’s and other big car, high profit models was entirely predictable, the Big Three got caught with their pants down when gas prices got so high, people were paying a third of their weekly paycheck to fill up.

Despite all - failure at every level including executive, manufacturing, marketing, and labor - we are now supposed to rally around the cry “Too Big to Fail!” and hand these incompetents $25 billion (for now - more later, I promise you).

I say no way.

President-elect Obama wants to nationalize the auto industry:

Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an auto czar who could ensure the money was being used wisely.

Aides said Obama is also open to an oversight board that would perform the same function as one individual. The proposals come as the estimates of the cost to fix Detroit’s three largest automakers continue to mount.

“Certainly he wouldn’t believe in it being a blank check,” said an Obama adviser, who spoke on condition of anonymity due to not being authorized to speak publicly on the topic. “He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns.”

Let’s be clear here. This would not be a “temporary” solution. Government “ensuring the money is spent wisely” sounds an awful lot like being able to approve or veto business decisions. If that’s the case, why shouldn’t the government be able to fire the boobs who are currently in charge and replace them with people they think could do a better job?

The point isn’t how much money they need or how much government control would be involved. The fact is that these companies are as dead as John Jacob Astor’s American Fur Company and for similar reasons; an inability to adapt to changing market conditions and create a product that enough people want to buy in order to make the companies profitable. There’s a reason no one buys beaver hats anymore. And its the same reason that no one wants an underpowered, ugly, cramped Chevrolet Aveo.

I feel sorry for the thousands of workers who would lose their jobs if these companies went belly up. But the fault does not lie with the American taxpayer who those representing the workers and executives of failed companies want to saddle with their inadequacies.

We aren’t going to start the fur trading industry again by asking taxpayers to fund a rebirth. Neither should we try and restart the American automotive industry by asking taxpayers to save something that’s already dead.


  1. A more apt comparison would be the dozens of failed automobile manufacturers over the last century that has left us with three remaining manufacturers. Where was the lovin for Stanley Steamer, Winton, Studebaker-Packard, Nash, ….

    Comment by M. Wilcox — 11/15/2008 @ 12:21 pm

  2. Well, Chevy and Ford each make a vehicle that outsells the Corolla - the F150 and the Silverado (at least thru 2007).

    I don’t want to get into the business of defending the Big 3, but I will point out that the direct labor costs per hour for the Big 3 are 73 dollars, for Toyota and Honda - here in America - the direct labor costs are $48.

    The Big 3 did what they had to do in the mid 1990s to survive, push to larger vehicles with bigger margins to absorb those costs. Had they not done so, we’d probably just would have had this conversation in 1997 rather than now (although the Japanese makers probably didn’t have the same infrastructure here that would ahve allowed the to absorb the Big Three market share, if they were allowed to fail).

    I’d also like to see your stats on the unionization levels for Toyota and Honda here in the US. Those companies had only one rule when they started building plants here - they would not hire anyone who worked for the Big 3.

    Comment by headhunt23 — 11/15/2008 @ 12:46 pm

  3. Thanks Rick I needed a laugh, this puts it into perspective! Shame on us for not buying beaver hats. lol

    I wish Washington would examine why our auto industry is failing in comparison to other country’s instead of throwing money at the problem to ease the pain of reality. I have a hunch it’s due to unions and higher taxation.

    Comment by Shelby — 11/15/2008 @ 3:26 pm

  4. PS: And, of course, the death of the SUV.

    Comment by Shelby — 11/15/2008 @ 3:29 pm

  5. I am in general agreement that badly run businesses deserve to be allowed to fail. However, I believe when the net results of a business failure cause greater harm to society, then the government should step in to help. I believe this is the case with the US auto industry.

    So many other American businesses (and their employees) are dependent on their business alliances with the Big 3, that the ripple effect throughout the country would do lasting and serious harm. The Big 3 have been badly run. No doubt. When economists were predicting gas over $5/gal years ago, these companies kept pumping out gas hogs, all to the delight of much of the buying public.

    I am not for giving these companies a blank check. I am not for the government managing their companies either. However, I would expect some required plan that the companies would have to become solvent again and a realistic repayment plan for American taxpayers before the government aid would be made available.

    Comment by Roger Bell — 11/15/2008 @ 4:22 pm

  6. wow the fur companies are cruel beavers are so adorable and i personally don’t think tehy should be killing animals at all

    Comment by wendy tyson — 11/15/2008 @ 5:22 pm

  7. Once the door has been opened to Govt. bailouts it’s hard to then set limits. Bush will be in the unenviable position of explaining why the Financial sector (heavy Republican contributors) should be saved but Detroit and the UAW (major Democratic contributors) should not.
    I would argue that AIG and the rest were just as poorly run as the big 3 automakers and also deserve to go belly up.

    Comment by gregdn — 11/15/2008 @ 6:12 pm

  8. Lets see, thousands of unemployed workers with little chance of getting another job any time soon in this economy. Add to that many more thousands of unemployed people who work in the companies that either sell to the big three or serve the communities where the auto workers live. What do you have? One huge group of very pissed off people who, rightly or wrongly, see themselves as victims to sinister business forces outside their control. If you think the left is bad now just wait until you give them this number of new followers to demagogue. The left would be handed a golden opportunity to make themselves not only the permanent ruling party but also the permanent ruling political philosophy for a generation. If you look at the history of Socialism these are the situations they feed off of, if you want to hand them a case of ammunition to use against you go ahead, but the smart thing to do is bite the bullet keep these people employed, the alternative is much much worse.

    Comment by grognard — 11/15/2008 @ 7:25 pm

  9. #8
    Do you recall the 73-74 recession or the 81-82 recession? From the ashes of the first came a lot of more gas efficient vehicles and a wake up call to the auto industry that smaller fuel efficient cars really had a market.
    From the ashes of the second came the information/tech industries.

    People will adapt and the economy will be stronger with a big 2. At the turn of the last century there were dozens of auto companies that eventually morphed into the big 3.

    Comment by Brad — 11/15/2008 @ 8:20 pm

  10. Brad, Yes I remember the recessions, and I also remember wage and price controls and an agreement with Japan to hold off on auto imports so the US industry could redesign and retool. We didn’t let the market take it’s course in the past, the government stepped in both times. But we are not talking about recession, we are talking depression. Something like 974000 jobs are directly affected if you include parts suppliers, more if you take into consideration the jobs lost in the communities where the plants are located. I am talking about massive and very ugly labor unrest along the lines of the Bonus March and the Wobblies.

    Comment by grognard — 11/15/2008 @ 11:50 pm

  11. Much of today’s dialog about a government bailout/loan to the Big-3 concentrates on the labor union, and derision of these companies’ management, and Detroit’s product.

    But let us be clear. Detroit has been building cars and light trucks that the market wanted; to be sure Detroit built a different mix compared to the transplants and imports; that is called market segmentation along with product differentiation, a perfectly defensible strategy and business model. But no futurist or planner, even the widest outliers foresaw the dual shock .. an alarming run-up of oil prices, and the collapse of the global financial structures that have led to staggering losses of wealth .. impacting virtually everyone with a pulse, both, here in America and abroad.

    If we are to look for culprits precipitating this calamity, they are several. But the root for the financial crisis is the Democrat Congress aiming to buy the vote of the lower income (and no-income) masses by mandating relaxed mortgage terms to facilitate home ownership of these groups; this in turn became the seeds for abuse, fraud and securitized mortgage bundles with insufficient or wholly fraudulent assets backing them. To add to the injury, the elections just past returned a Congress even more Democrat .. so much for the due diligence of our electorate mesmerized by the empty slogan of “CHANGE”. This election also amended our vocabulary .. no longer Republican vs. Democrat, but Republican vs. Marxist-Socialist. Change that we shall rue.

    But I am digressing.

    There are issues that are critical but not yet discussed relative to the Big-3’s plight. High profile industries such as auto, primary metals, aerospace, machine tools, other heavy manufacturing .. as well as less visibles such as the highly fragmented ‘tool and die’ are essential manufacturing sectors of our economy as well as vital to our national security now and into the future. Tool and Die, now rapidly outsourced to Asia-Pacific suppliers, is an essential intermediate manufacturing support activity that is involved in virtually all product manufactures .. and once the last shop has closed its doors there is no quick recovery possible, as the chain of experienced, skilled craftsmen is broken. (And at this point derisive put-downs about ‘buggy whips’ spring from the minds of simpletons or malcreants, I suggest.)

    While we are likely to find alternate foreign supplies of a commodity such as sugar, where would we procure our military hardware if we were to abandon our domestic industries, including autos. Would we turn to China, whose intentions toward us are adverse, or Russia, or Japan, or the European Union? We must not slide down the path to become reliant on foreign sources for our strategic needs.

    A second point not discussed is that he who manufactures might license the technology today but owns the innovation into the future; and the corollary is that he who manufactures generates real wealth .. directly by their own activities, and indirectly by the multiplier effects of their primary manufacturing jobs. We have been reassuring ourselves that we are still the leaders of technology .. as measured by the number of patents granted to American residents. But in our globalization rush we are likely to see our advantage erode here as well.

    Allow me personal note .. for some 20 years I worked in the international arena for two major American manufacturing firms. My specialty was business development at senior levels working with high volume OEM technical products, both export and import oriented. From that perch I was watching in dismay as the USSR was playing our machine tool industry for suckers as they were shopping equipment for their Kama River project to manufacture ‘civilian’ vehicles using Fiat licensed technology. I was there during the ‘opening to China’. My employer was joining other American firms rushing to China to set up operations. During a dining room conversation my president ventured “to be on the ground when demand there develops”. We have not only setup the most modern factories and exported valuable technologies and know-how, but have trained the Chinese in the use of these. The Chinese add the low cost labor, account for few social costs (health, retirement, environment, worker safety, working conditions) .. and we have now perhaps 9 of 10 items in any big-box store imported from China. Chinese manufactured cars in US showrooms are just around the corner .. at prices that will likely shock.

    Under WTO China has now an absolute labor cost advantage, and a labor pool to overwhelm our domestic manufacturing base. India, with a college educated ‘middle class’ that is nearly as large as the US population, while not hostile to toward us at this time, is on the path of economic development to become a manufacturing powerhouse, likely to look to us as a prime export market. Like China, India is also likely to enjoy an absolute advantage in labor.

    For years I cringed when I heard George Will and other pundits pontificate that the American consumer benefits from more competitively priced import goods on the shelves. But as these imports are crowding out our domestic offerings is an ever widening array of goods … with resultant waves of American workers displaced, it may be time to ask if our policy makers in Washington are party to a national suicide pact or just too dense to see the currents eroding our nation.

    So, what are we to do with our ailing industries .. whose fortunes have been adversely impacted by our trade policies, policies that resemble more the laboratory experiments of free-market economists than balanced policies of state .. serving our geopolitical and domestic economic goals while avoiding de-industrializing our country? We are at the threshold of agonizing decisions .. are we going to nurse ourselves back to some semblance of economic health while protecting the relatively free enterprise model that has been the engine of our becoming the leading economy, or are we going for the ‘rescue’ under a socialized model, and thereby kill the goose that lays the golden egg. To paraphrase Margaret Thatcher … socialism inevitably fails once they have run out of other people’s money.

    On our current course by the next presidential election we may well be past our zenith as a nation and the prime world power. Beyond that point our world starts to look very ugly.

    “CHANGE” that we can believe?

    Comment by Frank K-F — 11/16/2008 @ 5:23 am

  12. Let me think about this. I by a car under a GM or Ford lable that is made in Canada, Mexico, China, or South America and I am buying an American car. I by a car made in Montgomery Alabama under a lable owned Hyundi and I am buying a Foreign car. The American worker making an average wage of $50,000 a year or less is expected to bailout a UAW worker whose average wage is $152,000. per year Explain it to me!

    Comment by Fearless — 11/16/2008 @ 9:10 am

  13. Being older than many of you that post I remember a comment made in the early 1950’s America had a trade surplus a great farm surplus and we sold quality products world wide. One of the business leaders at the time was discussing the farm surplus and the beginning of the government program to take farm land out of production. He said and iI paraphase. We have a farm surplus the communist have a food shortage. This indicates that government does not know how to run a business. The Congress , wheather it is Republican or Democrat, should take a hard look at the regulations and taxes that it has placed upon American business the causes them to be non competitive and outsource production. Notice to Congress “Businessess do not pay taxes, they pass them on to the American buyer making them non competitive.”

    Comment by Fearless — 11/16/2008 @ 9:27 am

  14. I’m doing my part Rick, every time my Dalmatian acts up I sing the Cruella Deville song… maybe one of these days…..

    Brilliant! Keep up the good work.


    Comment by Jenn — 11/16/2008 @ 12:03 pm

  15. [...] Read the rest of the article at the Rightwing Nuthouse. [...]

    Pingback by SAVE THE AMERICAN FUR COMPANY! « Conservative Thoughts and Profundity — 11/16/2008 @ 7:59 pm

  16. [...] Rick Moran has more on his own blog. [...]

    Pingback by Auto Industry to be all but nationalized if bailout goes through « Conservative Thoughts and Profundity — 11/16/2008 @ 8:08 pm

  17. “Too Big To Fail!”

    After seeing that pic of you at Sadly, NO, I’m thinking this description applies to you!

    Heh - good thing I’ve lost 45 pounds since that was taken in sept. catch my radio show and you’ll notice.


    Comment by HyperIon — 11/17/2008 @ 1:57 pm

  18. Have you read Niel Young’s posting on this topic?

    Comment by Pan_theFrog — 11/17/2008 @ 3:42 pm

  19. One of the best comments I heard was on a call in radio show where UAW President Ron Gettlfinger was the guest. A caller suggested: “Mr. gettlefinger, why don’t you assemble a coalition of partners, buy the auto companies, maintain the workforce in place at existing wages & benefits, comply diligently with all the madated regulations; local, state and federal, and find out for yourself how easy it is to make a profit”.

    Mr. Gettlefinger was…quiet.

    Comment by P. Aaron — 11/17/2008 @ 8:16 pm

  20. If the government and the ‘Big 3′ were honest: they would outlaw imported cars and mandate that we junk the imports we currently and buy American. At least that way we woulg get something for the financial screwing they’re proposing to give the US Automakers via the US taxpayer.

    Comment by P. Aaron — 11/17/2008 @ 8:22 pm

  21. [...] So, the only question remains… who’s next?  Rick Moran has a good idea! [...]

    Pingback by Auto Bailout — I told you so! — 11/18/2008 @ 4:07 pm

  22. Just like to point out that beaver skins were not used for hats–the fur was. It was removed, boiled to form felt, and that was used to make the hat.
    See: http://www.desertusa.com/mag04/jun/hat.html

    The beaver trap was placed in the water, so that when caught, the beaver drowned. I don’t know, but highly doubt the beaver would be able to bend itself around to gnaw off a leg caught in a trap.

    Comment by Sam L. — 11/19/2008 @ 9:32 am

  23. I bet the Democrats will ensure the union-heavy American auto manufacturers will get a piece of the bail-out pie, even if, ironically, it’s mainly BECAUSE they’re so heavily unionized that they are not competitive. “Thousands” out of work? Quite an understatement considering how many businesses rely on the auto industry. Mistakes? Like producing the best-selling vehicles in the nation — for decades? What morons, huh?

    They did try too hard to squeeze every last penny out of their mainstream cars. Every time I saw an ad claiming how much less their cars sold for than, say, a Japanese brand, I practically screamed, “WHY is your main selling point that your cars are crappier than the competition?” How much de-contenting do you have to do to save $1000? In that respect, they’re idiots.

    Comment by DoorHold — 11/19/2008 @ 1:40 pm

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