Still, McArdle admits that the bailout wasn't the nightmare scenario she and many others envisioned.To start with, GM hasn’t shed all its legacy costs. The pension plan, which is underfunded by $26 billion, was not terminated in the bankruptcy, as such plans often are, with their assets turned over to the government’s pension insurer, and the beneficiaries frequently forced to accept a reduced payout. Instead, GM’s earnings will face a drag from that underfunding for years to come.
More worrying still is the possibility that GM’s labor woes are not over. Though the bankruptcy brought the firm’s hourly-compensation cost down to within spitting distance of what foreign-owned manufacturers pay their U.S. employees, Bob King, the new president of the UAW, already faces intense pressure to roll back some of the concessions.
Dealing with any new wage demands will be particularly sticky because starting in the middle of this decade, the automakers must comply with new CAFE standards, which raise the required fuel efficiency of cars from 27.5 miles per gallon to 39 mpg, with similar increases for trucks. The administration says the new rules will raise the cost of a car by $1,300, but data from the National Research Council suggest that the real cost could be at least twice that. With those higher costs, GM—which still has a major brand handicap—may have trouble making inroads into the small-car market.
These factors will weigh on investors’ minds as they decide what price they are willing to pay for the initial public offering of shares that GM has scheduled for this winter. For the taxpayers to get their money back, the company needs to end up valued at about $70 billion. This is theoretically possible—but doesn’t seem very likely.
The bailout wasn’t a good idea, and it will probably cost billions. But the government wastes billions of dollars every year, because for the United States, $1 billion adds up to the equivalent of less than one venti latte per American. At least in this case, we got something in return: a functional car company, resurrected from the ashes of the old GM’s bloated carcass. Americans probably won’t notice the few extra dollars they spent on the bailout. But they may eventually be glad when another shiny new Buick Enclave rolls off the Lansing assembly line, and into their driveway.Not exactly a ringing endorsement, but it was enough for Mickey Kaus to call her a "cheap date" on newsweek.com because she showed even a small level of enthusiasm for G.M.'s prospects after visiting a plant.
If libertarian Atlantic writer McArdle wants to take a trip to Lansing, Michigan, and suddenly be impressed with GM's industrial vigor, deciding that maybe the bailout wasn't such a bad idea after all--well, OK! I once visited a GM plant as a journalist and was impressed with its vigor, and the innovative new car they were about to manufacture. The name of that car? Pontiac Fiero.That prompted McArdle to clarify that she thought the bailout was still really, really stupid.
But that is not an endorsement of the bailouts, which remain an expensive boondoggle. We could have given every autoworker $100,000, offered retraining and relocation assistance to tens of thousands of employees at their suppliers, and still come out ahead on this deal. Had we done this, we would have helped eliminate some of the overcapacity in the global auto industry, and sent a clear signal to CEOs that they should not emulate Rick Wagoner's pigheaded refusal to prepare for a possible reorganization.The moral of this story? If you say something positive about G.M. or the concept of protecting U.S. jobs — no matter how tepid — you better be prepared to back it up. Or start back tracking.
