IBD: No givebacks, no bailout
posted at 6:11 pm on November 18, 2008 by Ed Morrissey
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When would anyone expect Investors Business Daily to agree with Robert Reich? On the issue of auto-industry bailouts, IBD commends Bill Clinton’s Commerce Secretary. If Congress passes a bailout, which IBD adamantly opposes, it should get treated like Chapter 11 — and force the automakers and the unions to completely restructure to regain their competitive posture and repay the loans:
Credit this idea to Robert Reich, the former Clinton administration official. We’ve had lots of disagreements with Reich in the past, and no doubt will in the future. But on this he’s right: If a bailout is to be given, the Big Three and their unions must thoroughly revamp their businesses, almost as if it were a bankruptcy. Call it a Chapter 11 Bailout.
Above all, the companies’ poisonous contracts with the United Auto Workers union have to be torn up. The problem is that the UAW, under President Ron Gettelfinger, remains adamant: No givebacks. This is financial lunacy.
Thanks in part to managerial incompetence, but mostly due to pricey union contracts, it costs American carmakers too much to build cars here; they can’t compete. When you fold in health care, pensions, hourly pay, vacations and the rest, average total compensation for a Big Three autoworker is $73.21 an hour, according to data cited by University of Michigan economist Mark Perry.
Toyota, Honda and Nissan pay a still-generous $44.20 an hour in total compensation — a cost edge of nearly 40%. Is it any wonder that Ford, GM and Chrysler can’t compete? Or that, after paying their workers, they never have enough cash left to retool?
Today the total market capitalization of the Big Three has fallen to about $7 billion. Is it better for the owners of those companies to suffer a total loss or for taxpayers to lose $25 billion? The answer is obvious. As such, the only case for a bailout is if it would force major changes on the industry. That won’t happen with current management in place or with giveaway union contracts that make the companies unviable.
These are the reasons why the bailout won’t help anyway. The problem the Big Three face has nothing to do with an inability to get loans, but with a fundamentally flawed business model that ensures that they cannot compete. They spend too much to produce cars that cost more without any extra added value to the consumer. Buyers select cars with better value and lower price instead.
Until GM, Ford, and Chrysler fix that problem, they won’t succeed regardless of how much they can borrow from Washington. Until unions realize that they have created an untenable position, they will put the jobs of their members at continued risk. Either they will have to become niche manufacturers, producing only high-quality, expensive cars that outperform the less-expensive competition, or they have to figure out a way to lower unit cost while improving quality on lower-cost products.
This isn’t exactly brain surgery. Markets exist to weed out the inefficient and overpriced. The Big Three and their shareholders should have made adjustments years ago to reduce costs and improve quality. Instead, everyone kicked the can down the road, coasting on a booming economy. When times got tough, it became too late to improve.
Management needs to change, and the unions need to adapt. Taxpayers should not subsidize failure out of some notion that private enterprises cannot be allowed to fail. A good Chapter 11 reorganization is what Detroit needs, and a bailout will only delay the inevitable — and toss taxpayer money down the drain in the meantime.
There shouldn’t be any bailout at all, but one seems inevitable in 2009, with or without the Republicans. But if Congress wants to invest in the automakers, then they had better demand a Chapter 11 reorganization as the price for it.
Update: Commerce Secretary, not Treasury. My apologies for the error.
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I said it before and I’ll say it again: NO BAILOUT!
It’s chemotherapy for the auto industry. The body will get sick but the cancer that is the UAW will be gone.
Rogue on November 18, 2008 at 6:15 PM
But when Congress and the idiot messiah put their draconian global warming/enviro-nut measures into effect no car companies will be able to survive in the US, anyway. So what’s the point?
progressoverpeace on November 18, 2008 at 6:15 PM
I agree, no bailout for the UAW thugs. Let “dumb 3″ slip into chapter 11.
Zorro on November 18, 2008 at 6:17 PM
Agreed 100% Boards of directors should be sacked – without any severance whatsoever, and unions should give back or at least have benefits and salaries frozen for a period of time, tied to cost of living increases.
Then there are the idiotic CAFE standards that cripple the big 3’s competitiveness from the outset. Detroit has been a self-screwing pooch since the 1973 oil crisis.
J.J. Sefton on November 18, 2008 at 6:17 PM
Also, don’t forget that the automakers were in deep trouble BEFORE the economy tanked. They have to pay so much extra money to meet all these insane regulations. They’re losing to foreign auto-makers because the foreign companies do not have as many regulations.
Don’t get me wrong; cars definitely need some regulations to keep drivers safe, but you really can’t save stupid people because stupid people will always find a way to get hurt.
Achilles on November 18, 2008 at 6:17 PM
UNIONS SUCK. Let them go Chapter 11 without the perks…
ParisParamus on November 18, 2008 at 6:18 PM
I just hope Dems don’t turn around after 20 Jan 09 and bail them out anyway.
mindhacker on November 18, 2008 at 6:18 PM
But, but, but ………….. Democrats are beholding to the union vote. Will they are won’t they do the right thing?
SC.Charlie on November 18, 2008 at 6:18 PM
Hmm, interesting concept. Dissolve the UAW. Heads will explode.
J.J. Sefton on November 18, 2008 at 6:18 PM
No bailout and the union thugs are insane, do they really believe that no jobs are better than jobs under a restructured contract?
Bishop on November 18, 2008 at 6:18 PM
One of my hopes is that as Americans watch the vapid unfolding/rollout of the Age of Obama, sane Americans will realize how much danger was voted into office, and calling your Congressman, especially House Representative, will become a new habit. CALL YOUR CONGRESSMAN: THEY NEED TO GET REELECTED EVERY TWO YEARS. PUT THE FEAR OF 2012 IN THEM NOW. BLOCK OBAMAMERICA BEFORE IT’S TOO LATE.
ParisParamus on November 18, 2008 at 6:21 PM
Unions and management need to thrown out. Managerial decisions have been just as disastrous as the UAW has been. Let someone else purchase the plants after bankruptcy.
The US needs automotive production but it doesn’t need to say Ford or GM on the side.
sharrukin on November 18, 2008 at 6:22 PM
Well, the non-union companies are doing OK, but the UAW shops are failing. The contracts have got to be back on the table.
The Dims and Super-Urkel may think that they can resurrect the manufacturing unions in this country, but 1.4 billion Chinese and 1.3 billion Indians are saying: “no way!”.
TexasJew on November 18, 2008 at 6:23 PM
does my employment at a honda dealership disqualify me from making a comment?
YIIIIIIIIIIPPPPPPPPPEEEEEEEEEEEEEEEEEEEEEE!!!
UNREPENTANT CONSERVATIVE CAPITOLIST on November 18, 2008 at 6:24 PM
If the Board of Directors get the axe (and that would have to be part of the conditions of the bailout dictated b Congress),will Congress agree to get out the way themselves? As per J.J. Sefton: Axe CAFE and let the new BOD negotiate or strip away those huge legacy costs that the UAW imposed on the Big Three with the complicit help of the Democrats for decades starting with the1930’s National Labor Relations Board? Tell OSHA to go do something else;something constructive perhaps for once? Tax credits?
And what do you think the chances of any of that happening are?
Amendment X on November 18, 2008 at 6:24 PM
Robert Reich was Clinton’s Secretary of Commerce, not Treasury.
ddh on November 18, 2008 at 6:25 PM
Unfortunately, there is an about -3000% chance that in an Obama administration the UAW would be defanged. The odds aren’t much better in the average Democratic or Republican administration either.
JDPerren on November 18, 2008 at 6:25 PM
And the reason the Dems like the bailout? The UAW retirees get all those legacy benefits…until the Big Three come back in 3-6 months to ask for more.
And the UAW members and retirees shower the Dems with votes in 2010 and 2012-votes bought with your hard earned money.
Amendment X on November 18, 2008 at 6:28 PM
What we need to do is bring in the Energy companies, Gas Station owners, the UAW, and the Big Three and get everyone to convert to Compressed Natural Gas.
It’d be cheeper, cleaner, and the technology already exists to make cars that can burn either gasoline, or CNG (already on sale in Europe).
Tell the UAW its either renegotiate, or die.
Tell Detroit we’ll LOAN you the money to stay afloat, but you have ONE year to make the engineering changes (possible if difficult).
Tell the Gas station owners that the Government will give a ZERO PERCENT LOAN to put in CNG pumps.
Its a win win situation, that will save Detroit, AND get us off of a large amount of dependence on foreign Mid East Oil.
Romeo13 on November 18, 2008 at 6:31 PM
My dad works for GM and is a proud UAW member.
A few years ago, there was a strike and the union promised to pay anyone that showed up to work the picket line a certain amount.
When the strike ended (I believe it only lasted 2 days), the union decided that since not everyone had a chance to picket (since the strike was so short) it wouldn’t be fair to pay some people and not others so they just didn’t pay anyone.
Basically, they cheated my dad out of 2 days worth of wages without blinking an eye.
Unions are only interested in wasting the employer’s money, not their own.
If you need a second example, look at the health plans. GM worked out a plan with the unions that left the unions responsible for covering a certain portion of the health care costs. Suddenly, the plans my dad was eligible for covered a whole lot less and had a much higher deductible and copay. As long as the Union had no money in the game, they were perfectly content to scream and fight any time GM even mentioned scaling back the health coverage.
Unions may have started out trying to protect workers, but, like many other groups before them, their only goal now is keeping power.
JadeNYU on November 18, 2008 at 6:31 PM
Chapter 11 Bailout or NO Bailout
I’d also require as part of the Chapter 11 Bailout fuel efficiency on top of the UAW giving stuff back. If not, fillibuster baby. Have Sen. McCain talk endlessly and reenact his great convention speech, set to “Eye of the Tiger”. Have Sen. Grahamnesty or whomever his name is demand amnesty for American taxpayers. Have Dr. Coburn, US Senator (I read in Townhall Magazine he prefers being called Doctor to Senator) prescribe some reform. You get my drift. STAND UP AND FIGHT. FIGHT FOR A BETTER AMERICA!
HotAirJosef on November 18, 2008 at 6:35 PM
Really, now! I mean, c’mon! The people of this country just voted to install a bunch of communists to run the government. Don’cha kinda think that the Jackasses will throw the money at the B3s anyway? Any delay is just PR b**ls**t. What I can’t get is why does anyone even use the lingo of “capitalist tools”, like “profitability” and “market efficiency”. Who gives a d**n about such things anymore? Certainly not any member of the Jackass Party. Particularly not a skunk like Reich.
blackelkspeaks on November 18, 2008 at 6:36 PM
Reich was the Secretary of Labor. He’s also about as far to the left as they come, so it’s surprising that even he thinks an non-bankrupcy bailout is a non-starter. I think anybody not bullied by the unions would agree.
phronesis on November 18, 2008 at 6:36 PM
Romeo13, CNG isn’t going to deal with union perks that aren’t affordable.
ParisParamus on November 18, 2008 at 6:37 PM
Damn, I chose the wrong profession–should’ve been an auto worker. Apparently they’re now a national asset, like nuclear submarines and aircraft carriers.
m064404 on November 18, 2008 at 6:39 PM
Miss that part?
Romeo13 on November 18, 2008 at 6:39 PM
My first car was a new 1980 Honda Civic, but I’ve essentially been a Toyota man for most of my adult life. The closest I ever came to buying American was my 1988 Chevy Nova, which was built at the GM/Toyota plant in Fremont, CA, and was essentially a 1987 Toyota Corolla with a different label. If they build them in the USA, what difference does it make except to tell the unions to take a hike? And if the UAW goon squads go down south to force the issue on the new plants down there, they won’t be on home territory, and I hope those gorillas get sent packin’ back up north, to the ghost town Detroit where they belong.
manwithblackhat on November 18, 2008 at 6:43 PM
Romeo13, sorry about that.
“Less importantly,” how is it that my initial comment was #1 when I first posted it, and then it dropped down to #6?
ParisParamus on November 18, 2008 at 6:44 PM
just freezing the wage rates won’t save them, becasue their overall wage and beneifts package cost is so much higher than their comeptitors. I believe the article said their competiros labor coast was about 60 % of the Big 3 s. Who could compete with such a disparity?
Red State State of Mind on November 18, 2008 at 6:44 PM
Well, I guess the UAW has accomplished its mission ahead of BO
The workers have demanded so much that the company will now cease to exist, effectively killing both
UNREPENTANT CONSERVATIVE CAPITOLIST on November 18, 2008 at 6:47 PM
My mother is now retired from IBEW. She worked at their HQ in Washington, DC. She said they were very aggressive with their attempts to get the most for their union locals all around the US, but were very stingy when it came to the benefits packages for their own workers at HQ.
Red State State of Mind on November 18, 2008 at 6:49 PM
This is a prime, glowing example of Capitalism. If you can’t compete you won’t stay in the market long. Management as well as Employees need to realize this.
PappaMac on November 18, 2008 at 6:49 PM
Are y’all watching the live testimony? Who was the Senator with the drawl?
riverrat10k on November 18, 2008 at 6:53 PM
One Senator just said to the UAW ass “you implemented the generous no work benefit package overnight, you canchange it back or dilute it overnight. Not an exact quote. That guy of course did not answer the question.
riverrat10k on November 18, 2008 at 6:56 PM
With all that has been going on in this country the last few years, does anyone hear really think that there will be no bailout?
BierManVA on November 18, 2008 at 6:57 PM
no bailout, it would be poisonousness. I wish no ill on workers who might lose their jobs, but pumping 50 billion into companies will only result in a greater disaster.
rob verdi on November 18, 2008 at 6:58 PM
One thing I notice is the workers with total benefits of 44 build higher quality autos than those getting paid 72. One is non union the other union.. correlation?
theblacksheepwasright on November 18, 2008 at 6:59 PM
A British Lesson on Auto Bailouts
PARIS — A faltering auto giant whose brands are synonymous with the open road. Hundreds of thousands of unionized workers with powerful political backers. An urgent plea for the government to write a virtual blank check.
This is not the story of Ford and General Motors, but British Leyland, a car company that went through £11 billion of inflation-adjusted British taxpayer money, or $16.5 billion, in the ’70s and ’80s before going out of business. All that is left of the company now are memories of cars like the Triumph, and a painful lesson in the limited effectiveness of bailouts.
rob verdi on November 18, 2008 at 7:01 PM
What’s to stop the companies from declaring bankruptcy, opening shop under a new name, and hiring all previous workers back, but without the union’s involvement. Is there some law that says auto workers must be unionized?
rayvet on November 18, 2008 at 7:01 PM
The “givebacks” have already been given. The current UAW contracts have essentially leveled the field in terms of cost with Asian and European competitors. The problem is that most of the significant savings, and those savings are huge, thousands of dollars per vehicle, won’t kick in until 2010. It takes time to go through the process of setting up the VEBAs for health care.
That $73 figure has been passed around the internet faster than photos of Britney’s privates. The way it comes up so frequently also reflects what I perceive to be substantial class bias (from those on the right as those on the left), as though there’s something wrong with a factory worker making a good living. Sure, UAW members didn’t go to Harvard or Columbia like Obama or live and work in NYC and DC like the writers of National Review, but they actually do make things. They help create wealth. Service industries don’t create wealth, they just move it around. Wealth is created in agriculture, mining and manufacturing.
So UAW workers and the Detroit 3 contribute to the growth of GDP.
There are more than 1.6 million non-postal civilian Federal employees. Over 18%, nearly a fifth, are ranked at GS-11 or higher. That means there are almost 300,000 federal employees making more than $77,000 a year in salary. Since public employees, particularly of the federal variety, have benefit and pension packages that the UAW would love to have. We all know that if the Detroit 3 fold, those federal pensions will be paid in full, not like the UAW pensions. The total cost to taxpayers of those GS-11s and above probably approaches $50 billion a year – $23.2 billion in salaries and at least the same in benefits.
UAW workers are supported by the voluntary purchases of Detroit 3 customers. Those federal employees sucking at the taxpayer teat are supported by taxes coerced from all Americans. They contribute nothing to GDP. One might argue that they contribute nothing at all, except for perhaps some scientists at the CDC.
My aunt is a retired administrative law judge for Social Security, so she has a bit of experience with federal employees and the federal bureaucracy. When I told her about those 288K GS-11s and above her reaction?
“What do all of them do? I’ll tell you. They sit on their tuchases!”
The UAW isn’t the enemy.
rokemronnie on November 18, 2008 at 7:02 PM
Even if you bail them out, who’s going to have the money to buy their cars? Invest the $25 billion in small entrepreneurs and get something.
Dan Collins on November 18, 2008 at 7:03 PM
Just a thought, why not give every American 1 million dollars to do with what they want. According to the U.S. Bureau of the Census, the resident population of the United States, projected to 11/19/08 at 00:00 GMT (EST+5) is
305,687,255. That is a far cry from the 700 billion they are dolling out now. Now, if half of them go out and buy a new car think of the tax revenue that would create. Not only that but think about all of the people who are facing foreclosure on their homes that could pay off or bring current their loans. Retail numbers would skyrocket and everyone would have a very Merry Christmas.
Give the American people a chance to fix (again) what the government has screwed up. Like I said, just a thought.
milwife88 on November 18, 2008 at 7:05 PM
If the bailout goes through i am seriously considering buying a toyota. I am the grandson of a dealer. In New Mexico they have a gm dealership. 21 miles away in Colorado they have a Toyota dealership. My Aunt told my mom if it wasn’t for the Toyota store they would have folded up years ago!! I’ve always bought GM and I love Chevrolet, but…….
gringo69 on November 18, 2008 at 7:11 PM
Sorry, rokemronnie, but the UAW absolutely IS the enemy. Your comparison with government employees is apt, but that’s a whole separate conversation. The Big 3 are private companies who, at this point, through their own efforts, deserve to fail.
califcon on November 18, 2008 at 7:12 PM
rokemronnie wrote:
“My aunt is a retired administrative law judge for Social Security, so she has a bit of experience with federal employees and the federal bureaucracy. When I told her about those 288K GS-11s and above her reaction?”
“What do all of them do? I’ll tell you. They sit on their tuchases!”
“The UAW isn’t the enemy.”
At this point in time, I couldn’t disagree more! BOTH of these groups are the ENEMY. For it is such as these that will be the death of this country. Indeed, they already may have killed the US as a viable nation. And now, with Hussein as our Messiah, hold on to your hats; just wait until next year for the s**t to REALLY hit the fan!
blackelkspeaks on November 18, 2008 at 7:12 PM
Reich was Labor, not Commerce nor Treasury.
And F*** the UAW.
Kid from Brooklyn on November 18, 2008 at 7:13 PM
BTW, since 1981, Michigan has averaged getting $0.81 in federal spending in the state for every dollar of taxes we send to Washington. Two USAF bases were closed here and they stopped building the M1A1 tanks in Warren. Most of that money has flowed to the sunbelt, paying for water infrastructure for people living in the desert in Arizona and on the edge of the desert in southern California, paying for new military bases and defense plants.
We’re spending $200-$300 billion to rebuild New Orleans (and LA is already in the top 10 in terms of federal spending, about $1.14 in per dollar out). While the Detroit 3 have not been managed particularly well, and there is a legitimate issue about rewarding bad decisions. Is rebuilding a city that’s already below sea level a good decision with a chance of success? Is Bourbon Street more important to our national interest than our manufacturing base? If we are threatened or challenged militarily by China, Iran or whomever, will we throw beads at them and tell them to show us their tits?
The total tax drain on the Michigan economy since 1981 is close to $200 billion dollars. Since 2000 alone it’s over $38 billion, 50% more than the Detroit 3 are requesting.
Why shouldn’t Michigan get back a fair share of tax dollars?
I’m not a fan of bailouts and believe in free (and fair) markets and competition but Michigan and the rest of the industrial midwest has been getting screwed by Washington for years.
We’ve seen an enormous transfer of wealth from this region to the south and southwest. It’s about time some of that wealth came back to Michigan. If it’s the form of assistance to the Detroit 3, so be it.
I think an argument can be made that the bailout is strategically vital to national interests because ultimately the defense industry uses the same manufacturing base as a supply chain as the domestic auto industry. Kill the Detroit 3 and we’ll kill our ability to build F-22s, let alone F-150s.
rokemronnie on November 18, 2008 at 7:15 PM
No Bailout?……..Yeah Right, what kind of odds is Vargas giving on this?
I got some oceans front, real cheap.
try again later on November 18, 2008 at 7:17 PM
Government workers aren’t the gold standard to measure anything by. Trying to show that some workers are more efficient (or whatever) than government workers is not like arguing for someone’s intelligence by pointing out that he is smarter than a small pebble.
The UAW is most certainly an enemy. Unions are destructive forces to everything outside of their own petty interests.
P.S. Labor doesn’t create wealth. It’s just labor. Union people, and your standard lefties, have a hard time understanding the difference.
progressoverpeace on November 18, 2008 at 7:18 PM
I tink many would tell you they don’t consider the UAW “the enemy”, but might question why the guy who changes my oil makes $ 10 / hour with no benefits in his ’service industry’ and requires a set of skills to do so, while the UAW worker who attaches that Bosch machine (saw it on the News) to the hub cap that automatically screws on the lug nuts makes 4 or 5 times more.
And bringing up over paid USPS workers really isn’t helping your argument.
I suggest we ’spread the wealth around’ and follow Hillary’s suggestion about Oil Company profit. We’ll take it!
Then I’d like to give it to the guy at Burger King who always gets my order right, and makes each burger individually. You know the jingle…”hold the pickle, hold the lettuce, special orders don’t upset us…”
I wonder how well our cars would be asembled if the UAW worker had to actually do something different with each car that came down the line?
Personally, i am not against Unions, but I have heard many compare them to tapeworms, or other such parasites, and opine that sometimes parasites kill their host body.
Red State State of Mind on November 18, 2008 at 7:20 PM
Its time to PRIVATIZE the unions.. lol
That was my most recent posting on my own blog.
Michigan has a hard road to travel, and the industrial complex REQUIRES significant restructuring as stated here.
Jason Gillman on November 18, 2008 at 7:21 PM
Where are we going to get $305.687 trillion dollars to hand out? Not that $1 million doesn’t sound good at this point :)
Dawnsblood on November 18, 2008 at 7:21 PM
I’m a free marketeer, but unions are a necessary evil, the only way that an individual worker has any kind of economic leverage. Are they saintly, no, as I said, they’re a necessary evil. Sort of like bankruptcy (which hurts creditors) and bailouts.
The idea that a bloated federal bureaucracy has nothing to do with deficits, debt, the value of the dollar etc. is absurd.
And yes, labor can produce wealth. It depends what the labor is doing. If the labor is pushing paper in a government agency, it’s not creating wealth. If the labor is converting raw materials to finished goods, it’s helping to add wealth and increase GDP.
rokemronnie on November 18, 2008 at 7:23 PM
That is an insult to both chemotherapy and cancer. At least chemo has a chance of success, and cancer isn’t sentient. (I’ll concede that the union goons might not qualify either). The union will not go away, and when card check passes, that “cancer” will just spread.
At least we agree on NO BAILOUTS!
Laura in Maryland on November 18, 2008 at 7:23 PM
So, the question is,
How is it a “fundamentally flawed business model” if it’s the Communist Extortionist Unions demanding more and more money and benefits?
It appears to me, the “fundamental flaw” is the lack of regulations of Unions.
franksalterego on November 18, 2008 at 7:25 PM
Why not pay Honda and Toyota to take over the plants and let them negotiate new contracts with the UAW based on what Americans from Alabama and Kentucky get?
Lot cheaper and removes the management problem as well as the union problem.
sharrukin on November 18, 2008 at 7:28 PM
Dawnsblood on November 18, 2008 at 7:21 PM
The U.S. Census bureau states that the population is projected to reach 439 million in 2050,[4] which is a 44% increase from 2008.
I think you added a couple of zero’s. I got this information from the Census Bureau web site. And I totally agree. 1 million would make a great Christmas.
milwife88 on November 18, 2008 at 7:28 PM
You see, here’s your problem. Labor doesn;t “decide” what they do. Those decisions are made by the people who create wealth.
You confuse ‘work’ with ‘wealth creation’. If I use a pen to write a novel, or design a new windmill, did the pen ‘create wealth’? No. I did. I used a pen. Labor is such a tool that is used by those who create wealth. Labor, on its own, does nothing. Why is that so difficult to understand?
progressoverpeace on November 18, 2008 at 7:29 PM
Amen. According to Time, the STARTING wage for UAW people is $29/hour PLUS full benefits. I am evil for writing this, but it is hard to feel sorry for workers who have underperformed while pricing their employers out of business.
Every time my Buick POS breaks down, I curse GM (and myself for not buying another Japanese car). Pep Boys has made a pretty penny off of me lately, and I think of the overpaid twits at GM every time I have to shell out to repair what their incompetence caused. GRRRR!
Laura in Maryland on November 18, 2008 at 7:30 PM
Part of the problem with this is the reason for the Unions saying no givebacks.. There are a lot of promised monies out there.. Good logic though.. might help.
Jason Gillman on November 18, 2008 at 7:31 PM
Excellent point Rob.
Many aspects of our current “crisis” have shown their ugly head in the past. The “soak the rich and big business” populist card is the same one pulled by Hoover and FDR (or at least one of them, that part of history makes my head explode).
Historically, intervention has proven to further skew economic variables causing capital malinvestment. See new comments that the housing bubble contributed to Detroit’s problem. Folks bought new cars with home equity that is now upside down. Now they can afford neither.
The law (theory?) of unintended consequences is supported by the fact that by promoting economic growth and social justice through poor lending practices, rather than let the market decide such things, Government policy has contributed heavily to our current situation.
My view is to let the markets sort it out as much as possible without intervention. Perhaps repeal a lot of laws. Reduce or eliminate the IRS. Ya know, if you cut the corporate tax rate to that of Ireland’s, I believe 10%, millions or billions could be applied to operating costs. There is plenty of capital available; what is required is a field of play where the rules are little more predictable and less political, where the Government is less parasitic.
Follow the Constitution and get out of the way? Hmmmm. Hasn’t been tried lately.
riverrat10k on November 18, 2008 at 7:32 PM
Good idea Let honda and toyota take over management of the big 3. That’s all they can do. They would never consider buying these big messes.
gringo69 on November 18, 2008 at 7:32 PM
I like how you both think. I’ll start spending my “million” at the TOYOTA dealership.
Laura in Maryland on November 18, 2008 at 7:33 PM
Not bothering to pay attention to what I actually wrote doesn’t help your argument either.
What part of “non-postal civilian Federal employees” didn’t you get? USPS workers are not part of the GS classification system and based on my experience as a shipper, the USPS is one of the better functioning parts of the government. With many kinds of shipments they are a much better deal than the commercial carriers like UPS and FedEx.
You can still custom order a car from the Detroit 3 if you don’t like what they have on the lot. It was the Japanese who started making them all the same. With the first generation Accord, Honda didn’t sell a stripper or base model. They decided that because of economies of scale, putting a stereo radio in every car reduced the cost per unit of that option and gave them a marketing advantage.
Those of us close to the auto industry know it’s flaws better than just about anybody.
Are you the only American who works hard? When was the last time any of you visited an assembly plant? If you want, many of the companies offer tours. I know that when I toured the Dearborn Truck Plant I didn’t see anyone sitting on their ass drinking coffee and smoking cigarettes.
rokemronnie on November 18, 2008 at 7:34 PM
Then give the Japanese leave to hire other workers and let the UAW become a Democratic lobby group.
sharrukin on November 18, 2008 at 7:34 PM
I think there is plaenty of blame to spread around between management, the Unions, the politicians, the environmentalists, et al….
Someone earlier suggested that we dissolve the Big 3 and let Honda and Toyota take over; if the biggest concern of the politicians is truly the workers, this may be the course of action that truly benefits them (the workers) the most, now and into the future.
Red State State of Mind on November 18, 2008 at 7:35 PM
Smoking cigarettes? Smoking is allowed in those plants? Damn! I’m not even allowed to smoke at my local bar. I’m not allowed to smoke anywhere outside of my home and on the street, basically. They have it really good up there.
progressoverpeace on November 18, 2008 at 7:37 PM
the USPS is one of the better functioning parts of the government. With many kinds of shipments they are a much better deal than the commercial carriers like UPS and FedEx.
Well, the USPS just ended their fiscal year $3 billion in the red, so I don’t know if you want to use them as an example, either.
califcon on November 18, 2008 at 7:40 PM
rokemronnie on November 18, 2008 at 7:23 PM
Unions were a necessary evil, but OSHA and child labor laws have made unions irrelevant. I’m not a big fan of big government, but the issue isn’t whether workers create wealth, it is whether the value of their work exceeds their pay. If all of the inputs (intellectual,material or overhead) exceeds the amount anyone is willing to pay for it, the organization cannot succeed.
The Detroit Three cannot produce vehicles for a price and in a quantity that customers are willing to purchase. I mentioned in a previous post that the STARTING hourly rate under UAW is $29/hour plus full benefits (they don’t worry about contributing to 401k plans or to insurance premiums). When a guy is guaranteed $60,000 to start and it goes up from there, he doesn’t worry too much about quality or output because the union keeps him working and getting raises whether he works well or not. The business model just doesn’t work in any industry.
Laura in Maryland on November 18, 2008 at 7:43 PM
I’m not making an argument with you. My comments were for other readers here.
Who forced Detroit to follow suit? plus, you aren’t addressing how my Wendy’s burger can have hundreds of different permutations regardless of when it rolls off the asembly line.
I would be prone to agree with you. And those of us who have management experience with Union shops know how they stifle creativity, teamwork and initiative.
Nope
Today I dropped by a Wendy’s where they assemble hamburgers. I wish the UAW (Union of Assemblers at Wendy’s) would insist that their people show up on time,but their union conract has some clause allowing them a 15 minute grace period, so now EVERYONE comes in 15 minutes late.
My experiences in management , as a past worker in a Union warehouse, and as a family member of a long time union member, have been very different than yours.
Red State State of Mind on November 18, 2008 at 7:45 PM
With all due respect, that was a remarkably stupid comment and makes me want to think that guys like David Brooks are right about the conservative movement (even though I think they’re wrong).
Walter Reuther was as fierce an anti-communist as they came. He fought tooth and nail to keep communist influence out of the UAW at a time when organized labor was at its peak of power. As American unions go, the UAW is pretty capitalist, realizing that they are in partnership with a for-proft enterprise. If you don’t believe me, look at how much more frequently the Canadian Auto Workers have gone on strike and how much more socialist the CAW’s perspective is compared to the UAW.
The American labor movement has never been nearly as socialist as in Europe. Sam Gompers, the father of the American labor movement, and founder of what would become the AFL-CIO, said that the biggest sin a company can commit against its workers is to not make a profit.
Like I said, I’m no big fan of organized labor but the truth is still the truth.
Has overgenerous compensation for their employees put the Detroit 3 at a competitive disadvantage? Hell yeah. But then so have currency manipulations and trade barriers to US products by our “trading partners”.
Go ahead, scream about commie unions and your dad’s POS 1986 Taurus, but when unemployment hits 15% nationally because of the collapse of the Detroit 3’s supply chain, and they start laying folks off at Microsoft because all those computers at GM, Ford & Chrysler no longer exist or need software, and when your own livelihood is threatened, don’t say you weren’t warned.
The sunbelt has effectively stolen $200 billion from Michigan over the past 25 years. We just want some of it back.
rokemronnie on November 18, 2008 at 7:48 PM
That makes the most sense of anything I’ve heard (which means it won’t happen). I loved my Honda and my Mazda, and my husband’s Toyota is 14 years old and going strong. I’d like to see our fellow American’s keep their jobs and a reasonable, livable wage. I’ve yet to hear complaints from US employees working for foreign auto makers.
Laura in Maryland on November 18, 2008 at 7:48 PM
I said nothing about their operating as a deficit, just that they do their jobs well and perform a service at a reasonable price. You think that UPS will deliver a letter to Alaska for 42 cents?
rokemronnie on November 18, 2008 at 7:50 PM
Riverrat, you can’t say that. Don’t you know that it’s all the fault of greedy auto executives and lazy UAW workers? The government had nothing to do with the current problems on Wall Street and in Detroit, doncha know?
/sarc
rokemronnie on November 18, 2008 at 7:54 PM
Why not pay them and the Chinese to build our tanks and bombers too?
rokemronnie on November 18, 2008 at 7:56 PM
I utterly despise Reich. He is a frustrated Communist. Nevertheless, like Paul Wellstone, I respect him for the consistency of his positions. Compare to Bob Barr who is all over the place depending on the polls and who is paying the bills (oohhhh I just trashed Barr!).
In this case Reich is right but I just don’t see the UAW willingly coming to the table and work in a collaborative manner to save these companies and the American auto industry. That just isn’t how these organizations have evolved. They are the defender of $80 (including benefit costs) for unskilled labor. The UAW will implode if they don’t continue to make unrealistic demands and force disproportionate labor costs on the American auto industry. I just don’t see the UAW being part of the solution here- especially after they were instrumental in electing Obama just so they could further destroy the concept of real collective bargaining.
highhopes on November 18, 2008 at 7:57 PM
“In partnership”? Whoa!
Uh huh … Maybe the unions can call a crippling strike to drive this point home? That would help. They’re pretty good at that sort of economic terrorism.
“Stolen”? You certainly have a way with words, if the ideas are kind of skewed. You want the business back, earn it back.
progressoverpeace on November 18, 2008 at 7:57 PM
The sunbelt has effectively stolen $200 billion from Michigan over the past 25 years. We just want some of it back.
rokemronnie on November 18, 2008 at 7:48 PM
They didn’t “steal” it, they made a better deal with more successful manufacturers and, guess what, everybody’s happy, they made a huge positive impact on the local economies and, more important, they are building cars that people actually want to buy. The UAW’s main contribution to Detroit is that nobody wants their cars and a house recently sold there for a dollar.
Walter Reuther and his anti-communist stance and the “labor movement” of the 40’s are no longer relevant. The unions wanted to enrich themselves along with their members. And, as someone pointed out above, they functioned as a parasite and killed their host.
It’s time for us all to move on from the Big 3. Any sort of government help will only prolong the inevitable.
califcon on November 18, 2008 at 7:59 PM
Just a random thought:
The whole UAW / Detroit problem reminds me of a Heinlein character from Double Star, I think. A politician gave a speech promising that he would not rest until “everyone earned an above average salary”.
Wasn’t Heinlein a friend of Upton Sinclair until he came to his senses?
Laura in Maryland on November 18, 2008 at 7:59 PM
Need to retool ? Get rid of the tools (UAW 1st)
Wade on November 18, 2008 at 8:01 PM
That’s a great idea! Maybe then some of our military equipment will actually work.
Laura in Maryland on November 18, 2008 at 8:01 PM
he would not rest until “everyone earned an above average salary”
Laura, I have enjoyed (and agreed with) all your comments today, but want to thank you for that giggle!
califcon on November 18, 2008 at 8:02 PM
Ding, ding. We have a winner! Thank you for the best laugh of the day.
Laura in Maryland on November 18, 2008 at 8:02 PM
I agree! And do you agree with me that some STDs aren’t as bad as others?
You gain credibility with that statement
aw shucks, then you go and lose it…
Just kiddin with ya, cause my comments are actually meant for the other readers here. I’m guessing that you’ve chugged so much of the Union Kool-Aid that I could not give you a compelling argument that you’d consider.
Red State State of Mind on November 18, 2008 at 8:03 PM
Oh man, where to start. (Begging mode/ on)
I started on LGF during the rathergate era and moved to Hot Air when Michelle started it along with Allah.
I am a stern, devoted Conservative. But I live in the greater Detroit area. I live in a blue state, yes. A pain in the ass. My kids go to high school here. I grew up here.
Living in an area which I am still proud of, yet gets beaten the hell out of because of the city of Detroit and it’s politcs and crime and the UAW and our car companies and it’s problems (and our 0-10 Lions)is a daily grind which can be quite depressing. QUITE DEPRESSING.
But I must for once plead with you folks for just a little sympathy.
I don’t agree with the unions, but the Detroit three started reversing the bad decisions it made a number of years ago and is now is deep trouble even after closing plants and cutting back and improving it’s cars.
Our area, you might call the entire southeast portion of Michigan and parts of Ohio are deeply invested in the auto (American owned) and our life blood is in what happens to them.
It’s easy to say let them go bankrupt. My wife works for a major hospital in the area and they will be laying off close to 1000 people possibly in the next few months. Before the auto industry possibly goes under.
If the car companies go or have to declare and go under to rebuild. The entire region will die quickly. Millions of people will be out of work. Not just the auto workers with their big contracts, but many more people whom rely on the auto industry for jobs, related jobs, the restaurants, the retail stores, the hospitals, the local governments, etc., etc., etc.
I am scared to death for what might happen. My job is safe for now but my wife could be on the verge of losing hers and if the “Detroit Three” go down, it will be devasting on the level of Katrina. I kid you not. A flood of unemployed without the water.
The Detroit area was only second I believe to Stockton, California in foreclosures already before this began (from what I remember)(I blame Granholm, the mole lady). We have the highest unemployment rate right now I believe in the nation.
If this happens, this place will be devastated. I agree that they originally got themselves into this mess. They have been trying over the past number of years to reverse this and then the subprime problem, of which they had nothing to do with, came about. Credit collapsed.
I could argue about the foreign car companies setting up shop in Alabama and the right to work states and the FARM SUBSIDIES for producing Ethanol.
But that’s for another day. Just all I ask, be sympathetic for those of us here who are going to be harmed big time in the wake of what might happen. Those of us, who do not work for the the “Detroit Three” will be affected.
And it’s damn cold here to. It’s like friggin’ January in November. GLOBAL WARMING MY ASS. Cafe friggin standards my ass.
Done. Pile on if you feel it. I ain’t moving. I still have the Red Wings.
(Begging mode / Off)
Scoreboard44 on November 18, 2008 at 8:03 PM
Well if the UAW and the incompetent management of the big 3 isn’t dealt with that is exactly what will happen. They are facing extinction and both Honda and Toyota are busy making vehicles while the big 3 grovel for handouts. There is a lesson there for those who care to see it. An American vehicle built by American workers is just that, regardless of the GM or Honda label.
A domestic automotive industry employing American workers is a good idea, but the fools who need a bailout are the ones who brought themselves to the edge of ruin.
Why should anyone believe they will suddenly shed this incompetence if we fill their pockets with money?
sharrukin on November 18, 2008 at 8:05 PM
You’re welcome. Heinlein got a little weird now and then, but he sure could write.
Laura in Maryland on November 18, 2008 at 8:05 PM
Just say no to bailouts.
msyb on November 18, 2008 at 8:06 PM
Because they know the dire situation that they are in?
As most of us who live here know it.
Scoreboard44 on November 18, 2008 at 8:08 PM
Bullshit. So me in writing where the current UAW contracts with the Detroit 3 result in the line starting up 15 minutes late.
Not just bullshit, but disingenuous bullshit. Your comments were specifically directed at me:
Man up and admit your error, don’t deflect.
Of course a hamburger, with its 8 or 9 “components” is just as complicated as assembling a car with about 15,000 parts, with a supply chain that includes sophisticated materials science, electronics and just about anything else that has to do with industry and manufacturing.
Once again, a warehouse is as complicated an operation as an automotive assembly plant.
Who needs an industrial base when we have folks pulling parts off of shelves and squirting ketchup on a bun?
Look, I hate the idea of bailouts, but sometimes you just gotta eat a shit sandwich.
rokemronnie on November 18, 2008 at 8:08 PM
The dems and the idiot messiah are going to kill the industry with their global warming/enviro-nut legislation that will be coming down the pike, anyway, at which point the companies will be back looking for $100 billion. Make of it what you will.
progressoverpeace on November 18, 2008 at 8:09 PM
That’s a perfect comparison. Both the USPS and the Big Three are delivering products no longer in demand and no longer the only game in town.
The only time I ever use the USPS to send stuff is birthday cards, stuff that requires a signature, and renewing memberships in local organizations (like the VFW) who only want checks to the PO box they’ve had since 1948. Everything else gets paid online. The USPS simply isn’t as relevant as it once was. If some private company were willing and legally able to take over delivering mail to households, the USPS would go the way of the Pony Express or telegrams.
Likewise, what is an “American” car these days? I had a Mitsubishi assembled in Illinois. I drive a Ford assembled in Canada. Break it down to components and you have a whole UN festival going on. WHY ARE WE PROTECTING THE BIG THREE FROM THEIR OWN IRRELEVANCE?
highhopes on November 18, 2008 at 8:09 PM
progressoverpeace on November 18, 2008 at 8:09 PM
Well you might be right.
But you have to live here to know that at least, they should be given one good shot.
And I don’t mean in the head to kill the companies.
Scoreboard44 on November 18, 2008 at 8:11 PM
I believe that most Americans are more sympathetic to the individual families affected if the Big 3 fail. Most of the ranting here is meant for the Union bosses, the Politicians and the Management of the companies. And yes, regulation has exasperated (sp?) the problems.
If they go to Chapter 11 and re-organize, will that lessen the negative impact on the region where you live versus if they just shut down?
Agree with you on the Ethanol subsidies; one man’s subsidy is another man’s economic stimulus / tax credit / rebate
Certainly, most here don’t want to see the little guy hurt.
The way I see it, one problem with what is happening now with the bailout, is this….
If you are BIG enough, and INEFFICIENT enough, you may get bailed out..
If you are smaller and more efficient, you won’t even sniff a bail out offer when times are tough.
Red State State of Mind on November 18, 2008 at 8:12 PM
And it’s not trustworthy anymore, either. It used to be that messing with the post was a ticket to federal prison. Nowadays, postal workers think they can do whatever they want with the mail, and they do.
progressoverpeace on November 18, 2008 at 8:13 PM
You allow foreign manufacturers to buy American companies you lose magnets that can be used for weapon systems.
AKA China.
Scoreboard44 on November 18, 2008 at 8:13 PM
And they didn’t know it for the past 30 years on the long slow road to destruction? The Chrysler bailout in 1979 didn’t act as a wakeup call for them then. Why will it do so now?
sharrukin on November 18, 2008 at 8:14 PM
Oh, and by the way, according to supply and demand and the way competition works, if you remove the Detroit 3, who sold 400,000 cars last month and took a 55% market share, what will happen to prices? Will feature content go up or down? Will the pace of technological innovation speed up or slow?
Toyandissandai doesn’t have the capacity, here or in Asia, to meet the demand of a market abandoned by the Detroit 3. Sure, they can buy some GM, Ford & Chrysler plants, but it takes and hundreds of millions of dollars to changeover one plant. Remember, they’re not switching over a plant designed to be flexible in producing their own product line, they’re switching over plants designed to build completely different platforms with completely different hard points.
You think Toyota is concerned about anything but profit?
Take away the Detroit 3 and prices will go up, features will go down and technology will suffer. That’s not a defense of a bailout, it’s just simple economic truth.
rokemronnie on November 18, 2008 at 8:15 PM
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