Daniel Howes: Commentary

Is rebirth next after 'Dark Dec.'?

"Dark December for Detroit," intoned the headline on MarketWatch.

Really? Wouldn't have known but for Round II of the congressional inquisition, dealers struggling to find financing for fewer customers, thousands more buyouts, confirmation that Motown's Japanese rivals are losing money, too, and the holiday nail-biter -- would General Motors Corp. and Chrysler LLC get the first tranche of their $17.4-billion bailout from the Treasury Department.

"Dark December" doesn't begin to describe the past 30 days or so, particularly where real people actually live among the gloom. Nor does it adequately capture what lays before an industry reeling from collapsing sales at home and, increasingly, in markets abroad.

Already there are pay cuts and jobs losses at suppliers, with the promise of more to come. At the Detroit automakers, there will be plant closings, likely concessions on union wages and work rules, proposed debt-to-equity exchanges for bondholders and, above it all, the heavy hand of the federal government using political calculation to address business problems.

Dark, indeed.

Or the abysmal December of 2008 could be a magnificent, if painful, burning platform to use to shed two generations of accumulated bad habits -- overlapping brands and models, excess dealers, burdensome debt, unsustainable labor contracts and bureaucratic structures that don't make sense in the hyper-competitive global auto industry.

The dirty little secret of the crisis pushing Detroit's industrial-automotive complex to this existential brink is that fundamental change wouldn't be happening without it. And, second, that the prevailing culture of this place, of these companies and their primary union, needs a crisis to act, especially in its long-term interest.

I, for one, am skeptical that the grand bargaining under way this week between the Detroit automakers and such key constituencies as bondholders, dealers and the United Auto Workers will deliver the kind of "viable business plan" envisioned by Congressional Democrats or a new White House.

Awful big things to do in so little time, especially if key players believe a new, even lower bar has been set for moral hazard, that the new regime in Washington simply would not allow the likes of General Motors to slip into Chapter 11 bankruptcy. Not now, amid a deep recession.

But I'm also skeptical the politicians would know a viable business plan if it came crashing through the Capitol dome. Unless, of course, the documents carried labels of "green" and "hybrid" to mollify the left and "wage parity" with foreign-owned automakers down South to pacify southern Republicans in the Senate.

Which they probably will, in some form, because the unfolding rescue of the Detroit-based auto industry is as much an exercise in political theater as it is an economic workout intended to avert an even worse jobs calamity in the early days of an Obama administration.

It's why UAW President Ron Gettelfinger is posturing about the "unfair" actions of the Bush White House and its call for "parity" in wages and work rules by the end of this year. Never mind that, by demanding political cover from President Obama, Gettelfinger exposes his union to charges of being the poster child for labor intransigence, even now.

Dealers who perceive themselves on the losing side of this shakeout -- Saturn, Saab, Hummer and Pontiac, to name four -- will use their monied influence in states around the country (along with threats of litigation and political reprisal) to shape the outcome to their benefit.

Bondholders are likely to drive a hard bargain with a GM desperate to convert two-thirds of its unsecured debt to equity. Absent a legitimate threat of bankruptcy, incentives diminish for bondholders -- and a whole lot of others -- to cooperate.

Daniel Howes' column runs Tuesdays, Thursdays and Fridays. He can be reached at (313) 222-2106, dchowes@detnews.com or detnews.com/howes.