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Pay no attention to the people behind the curtain

Sunday, December 14, 2008

Collateral Damage

By Keith R. Schmitz

Excellent piece by John Torinus in the JS Biz section about the harm caused by the attacks on the auto bailout package by southern Republicans in the Senate.

In their attempts to swing a knife at the car company unions, the caucus of Confederates will gash open the suppliers who feed parts, subassemblies and services into the auto industry.

Torinus reminds us who the real victims of scuttling the bailout will be:

Vendors produce about 70% of the parts that go into a new car, and they are almost always better managed than the automakers. In many cases, automakers outsourced parts to get away from the union and management problems of the car assemblers.

Companies such as Strattec and Johnson Controls are among the leanest and best manufacturers in the world. They are good enough to supply Asian and American car companies.

Yet top-quality vendors will suffer the most collateral damage from a meltdown in Detroit, a crisis caused in large part by mismanagement on Wall Street and in Washington, D.C., of the financial and housing industries. The same politicians wearing angel wings in the debate over the future of the auto industry were presiding when the financial crisis was being created.

It should be emphasized that many of the suppliers radiate beyond Detroit and a good number of them are here in Wisconsin. The car makers go into backruptcy and these fine companies will see pennies on the dollar for goods and services bought over the past months, blowing holes in the already fragile finances of these companies. The fresh start for Detroit would be fatal wounds for their suppliers.

This is yet another example how divorced many conservative, so-called "business-friendly," politicians are from not just from reality in general but business reality in particular.

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