Ponzi CEO, accountant
The auto manufacturers and the auto producers resolved their death grip differences during the past month and,
Did the absolute least that could have been done.
And nothing is going to change, because the world is not static.
Depending on the perspective, the current contracts – Ford’s is the last and it appears to be a done deal – are being hailed as the genesis of a new Detroit, a renewal of the American auto industry, a new understanding of economics by labor. Even Holman Jenkins, usually intelligent sage at the Wall Street Journal said so.
As usual, labor won.
But, they didn’t win the usual way.
Traditionally, labor won because the car companies caved.
This time, though, labor won by simply acceding to the plan already proposed by the car companies.
The feigned strikes? Nostalgia.
Out of this whole deal, exactly what has either side accomplished?
The answer is that both have perpetuated the same old same old, for another four years. Sure, the UAW guys will get less, sorta. Most of the cost is going to be dumped on the guys that either used to work there or are about to join: the current work force – the one that the car companies have to appease - loses next to nothing. Plus, they’re likely to get a big early retirement lump sum to go away. Good deal for them. If you have someone nearby waiting to hand you a check for six figures before the decimal point merely because they’re afraid of firing you, ask them how they feel.
The accountants rang the bell, again.
GM, Ford, and Chrysler pretend that they make cars for less money now.
You don’t believe me? Ask Jenkins. He says they’ve cut the cost of producing a car.
This whole deal is a communion of Kool-Aid.
If I owe you $1,000 payable in yearly installment of $100 for ten years and I agree to give you $50,000 now if you don’t insist on the $100 per year, then I’ve done what Wagoner did. I’ve reduced my operating expenses.
Was that small reduction in overhead worth the fifty grand. Well, no. Of course, GM didn’t pay that proportion. But they did pay a lot. This is, just as another sage, Jerry Flint from Forbes magazine said, an accounting trick.
Worse, it is a mentality.
The one thing winners and losers have in common is that they conserve cash.
Losers conserve it because they know they can’t get any more of fit.
Winners conserve it because it is what buys them opportunity, and when they can’t sell the dream to finance itself, they can push it over the edge with money. Winners always bet that the deal will come true, in time. Cash buys time.
Of course, that’s the same bet the losers make.
Sometimes they win, sometimes they lose, and sometimes they were right, but just run short of funds.
But they all believe cash is king. Even Cerberus told us they believed that.
But, that’s not the spirit at GM, or even Chyrsler – and we wondered what the boys John Snow had going were about to accomplish.
For them, “cash flow” is king.
It matters not whether you win or lose, it matters whether you can convince someone that you’re making a profit. If you’re not, juggle the books to make it so, according to generally accepted accounting principals.
GM, Ford, and Chrysler just stuck their futures into the ground, all to get the UAW off their back. And the UAW went along with it, even though it does them no good.
Scorpion and frog crossing the river, once again.
All of us.