30 May 2009

A response to Stephen "VodkaPundit" Green's Money³ post

In which I pick nits over one small detail

so anyway, Stephen Green has a very good post up over at VodkaPundit titled "Money Money Money" discussing the pending GM bankruptcy. Stephen explores the details of the primary and secondary markets, the differences between bondholders and stockholders, and he covers some economic and market confidence issues. It's educational! Do go read the whole thing. In addition to his command of the subject matter at hand, he's the only blogger that I know of who's not employed in the Stoopid Business™ who reads Autoextremist (which is rather "inside baseball" for the auto industry), yeah, Steve's a "car guy".

He had me nodding in agreement, right up to this:

"If GM goes belly up (which it’s going to do anyway, duh - they’ll file C11 on Monday), millions of jobs will not be lost. Let me repeat: GM could disappear tomorrow, and not much would change. GM barely employs 50,000 people anymore...."

Yes, it's true that barely 50,000 people draw a paycheck directly from General Motors, but as I said back in January:
"...after all, we suppliers make the parts that the automakers merely assemble to make cars..."
Asserting that GM only employs 50,000 people overlooks the "ripple effect" that their bankrupcty will cause (and it's already started).

Case in point: my former employer was (they went Chapter 11 yesterday) a supplier to Chrysler, somewhere around 10% of their business was Chrysler work. Chrysler declares bankruptcy, and two weeks ago the downsizing at my former employer began. (Yes, I was one of the "downsized") In my division alone, 84 out of 122 people were given their walking papers: we're talkin' blood on the floor and growd men crying. And, no, these people aren't going into the UAW (Usually Ain't Workin', AKA: The Gettlefinger Crime Family) "jobs bank" and drawing 85% of their base pay. All we got was two cardboard boxes and thirty minutes to clear out our desks.

Years ago, in my rage piece about michael moore, I made the following observation:
"(in moore's view)...the evil GM Board of Directors had decided to close the Buick City facility of plants in Flint, Michigan and because of their evil and self-serving decision, you could stand on Saginaw Street in downtown Flint and literally watch the merchants go out of business in real time."
The last bit was, unfortunately, true. Dozens of resturants, dry cleaners, hair salons, hardware stores, ect., the list goes on and on, closed within weeks (if not days) of the Buick City shutdown.

Here in the Peoples' Republic of Michigan, for every one directly employed in the Stoopid Business™, there are seven people who's livelyhoods are dependant on the auto industry. If my trusty HP 12C calculator (in all of it's RPN glory) is right, those "barely 50,000" now-out-of-work GM employees ripple into some 350,000 "other" job losses. And that's just here in the Peoples' Republic of Michigan. Granted, Michigan is heavily squewed towards the Stoopid Business™, so naturally the effect is much worse here.

350,000 unemployed in the Rust Belt alone is a substantial downpayment on "millions unemployed" nationwide. A lot would change.

I'll have more on this topic soon.


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