Why bail out Wall Street and not GM, demand many people. Why do we care about bankers and not ordinary folks?
I think this misses the point of the financial bailout. Whether or not it works--and I sure hope it will--I don't think very many people wanted to bail out the financial industry because we were so moved by the plight of those plucky traders on the mortgage desk. We bailed them out not because they deserved it--they didn't--but because if we didn't, there was a very big risk that they would take us down with them.
This is not generalizeable to other industries. Money is weird. Finance is weird. There is no other industry that is, first, so tightly coupled, and second, severely affects every other industry in the country. Moreover, there are few other industries that are so vulnerable to panic. Strategic injections of capital can actually salvage operations that are otherwise sound.
GM's operations are not otherwise sound. They have been headed for this moment since 1973. Conservatives blame legacy costs, and liberals blame management. They're both right. GM's legacy costs are crazy. So is the UAW leadership, which, goaded by the retirees, is knowingly driving the company into bankruptcy rather than negotiate clearly unsustainable deals. Those legacy costs would probably not be supportable by any company in a competitive environment; the UAW's expectations were created in an era of comfortable oligopoly, when all costs could be directly passed on to the consumer. And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers. My favorite was the supplier plant that was forced to work in english measurement even though they had to sell parts in metric. But the examples are legion.
But too, management doesn't seem to be trying much harder to keep themselves out of bankruptcy court. The company could have limped on for longer if it had, y'know, made cars anyone wanted to buy. That's not the UAW's fault. GM's management seems to have a positive genius for making horrible cars, as if they'd deliberately sat down and asked themselves how they could best combine ugly, inconvenient, and unreliable into one expensive package.
What is government money going to fix? Will GM's management be so grateful to America that they decide to make an attractive, reliable vehicle as a thank-you gift? Will the unions realize that they owe the taxpayers a little more flexibility at collective bargaining time? Oh, hear that hollow laugh.
Merging with Chrysler doesn't solve anything. It's like two alcoholics deciding that they could maybe quit drinking if they got married. Everything that's wrong with GM is wrong with Chrysler, in spades. Adding the chaos and expense of a merger will not improve the toxic rot of horrible labor relations and muddled management. They can't even save money in the traditional way, by streamlining operations, because it costs them so much to lay anyone off. They'll save on steel and electricity from cutting car lines. But they can cut those car lines right now. And steel and electricity are no longer the major costs of auto manufacturing.
GM can't be saved. It needs to go into bankruptcy, which is the only possible way I can see to adjust its legacy labor problems, and possibly provide sufficient shock to the corporate culture to allow the company to make a competent car. Even that may not work. And it's going to involve a whole bunch of pain for everyone.
But unless we're willing to essentially nationalize three auto companies, that pain is going to come, sooner or later. And if we want to keep auto workers from feeling pain, then we should just up and give them money. There's no reason to waste steel on a lot of crappy cars.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
The fact that you don't seem to recognize that the American automakers have made significant strides in performance and reliability in recent years, and seen attendant upswings in consumer rankings, or acknowledge that there was a massive union reorganization and renegotiation which has had many positive effects on their bottom lines, well... it just makes it abundantly clear to me that you aren't actually investigating how the Big Three are doing. I'm afraid the absolute, unwavering, extraordinary (and childish, and unjustified) hate that libertarians feel towards unions, and the UAW in particular, makes it impossible for any of you to argue in good faith on this issue. There have been real changes in Detroit in the last three years. A credit crunch, however, is uniquely damaging to car manufacturers. But I have no faith whatsoever that libertarians would ever bother to educate themselves about that. Most are too busy having their Two Minutes Hate against unions to notice.
Freddie,
"American" cars may have improved in the past decades, but they haven't improved as fast as the competition. That's why they continue to lose market share. You didn't refute any of her arguments.
And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers.
1) Which reports are those, pray tell?
2) This is basically the opposite of everything W. Edwards Deming ever said, which should give you pause.
3) Ford's quality is generally above industry averages, GM is generally in the middle, Chrysler is generally below average. Yet, all deal with the same union.
My favorite was the supplier plant that was forced to work in english measurement even though they had to sell parts in metric. But the examples are legion.
Really? In what section of snopes.com should I be looking for those examples?
(In seriousness, that does not set off your BS detector?)
Uh, no, it's from a pretty trusted source from Detroit.
FWIW, Megan, the view in the market (I work at an investment manager that has an unfortunately large investment in the auto supplier industry) is that a bankruptcy of an auto OEM would destroy the business, on the premise that consumers won't buy buy an expensive, warrantied durable good from a bankrupt company. I'm somewhat skeptical of that concern, but I'm not the in-house automotive expert, either. (Thank God.)
Megan_McArdle, you're repeating a common misconception here. Legacy costs clearly have more to do with their situation today than current management, for the simple reason that the former necessarily prevents correction of the latter, while the reverse isn't true.
To repeat myself again: even if I could magically imbue *every single* manager at GM with managerial genius, that would accomplish precisely nothing. Why? Because those geniuses would suddenly get bid away by foreign competitors who *don't* have to divert a huge chunk of value the geniuses produce, into legacy costs for people they don't give a damn about.
Anyway, this just shows what a fraud the Big Three have been. The fact is, they were only ever able to even report profits for the past ~50 years because they were allowed to rook the world into believing that pensions "didn't count" as real obligations. Anyone can run a successful business if they're allowed to delete liabilities from the balance sheet, throw off dividends extravagantly as if they were actually profitable, and then act surprised when the bill comes due and all the money's safe in a Swiss bank account.
By the way, GM as of *June of this year* still had the audacity to announce intent to pay dividends. Sickening.
Why is it necessary to save all of GM? Can't we keep the good stuff (Corvette, Cadillac) and jettison the rest?
Freddie, what Scoop said. People don't want to buy their cars. People have not wanted to buy their cars for years. The only category in which they excel is the one in which foreign automakers barely compete because of gas taxes: light trucks. Without light trucks, they die.
Even if people did want to buy their cars, they couldn't survive their legacy costs, which are vastly higher than what their competitors pay *in the United States*. The Big Three union model is simply not sustainable. That "massive" renegotiation didn't fix their problems; it merely staved off the date of the projected bankruptcy. That's why the stock has been heading south pretty steadily for nearly a decade, as has GM's credit rating, which hit junk long before the credit crisis. Perhaps you have seen something that all the investors, analysts, and creditors missed. But the company seems to me to have been in trouble for a long long time, and its turnaround strategy based on waiting for the price of oil to drop so it wouldn't lose so much money on light trucks.
I agree that the banks, finance etc should be distinguished from other areas of business. As I believe you once wrote, banks are like a bridge between parties. If the bridge collapses, it messes things up for anyone who relied on it.
The comments about domestics now making better cars are, IMHO, true. However, the fact that they make better cars now does not alter that (a) people discount them because of a history of unreliability (b) they have terrible financial, legacy and other costs that have not been altered. The management, unions, and government have been in some sort of dysfunctional relationship for decades.
Perhaps bankruptcy would be a good thing for GM, and allow them to restructure along 21st century lines, not the 1950s.
Ok, so I'll give the commenters above that quality has improved - JD Power now shows American plate cars competitive and in the mix with foreign nameplate cars.
The Pontiac Vibe is still one of the butt-ugliest things to ever see a street.
Seriously, I'm a good lefty and can't imagine how a bailout for Detroit is anything but good money after bad. The only way to tell I'm a lefty is that I see it as management's fault and the hole is now too deep (and too cultural) for management to fix. The simple way to put it is that Detroit has no vision.
Example: just as gas reached $3/gallon, Jeep releases its largest vehicle yet, the Commander. As you might imagine, it tanked (no pun intended). Chrysler has no hybrids. Ford has 1, an SUV of all the odd choices. GM famously "killed" its EV-1 electric car, the clearest forerunner of the Tesla.
Toyota now dominates that fast-growing segment (followed by Honda), and the idea cycle in Japan - from drawing to commercial sale - is much, much shorter than in the US. Europe and Japan have for decades had designs that buyers found more compelling. And of all the silly management decisions, Ford sells a 50 mpg subcompact in Europe that it has never released in the US - presumably because it would undermine the lobbying against higher CAFE standards.
You cant bet wrong everytime and expect the house to keep staking your game.
I do, however, disagree with Megan about the GM-Chrysler merger. It would be helpful in reducing capacity, reducing total number of separate nameplates, thinning management ranks, and since Chrysler is a lost cause, GM may as well have the 11 MM in cash Chrysler is sitting on so there is some chance one of the two can survive as opposed to neither.
I agree that the banks, finance etc should be distinguished from other areas of business. As I believe you once wrote, banks are like a bridge between parties. If the bridge collapses, it messes things up for anyone who relied on it.
The comments about domestics now making better cars are, IMHO, true. However, the fact that they make better cars now does not alter that (a) people discount them because of a history of unreliability (b) they have terrible financial, legacy and other costs that have not been altered. The management, unions, and government have been in some sort of dysfunctional relationship for decades.
Perhaps bankruptcy would be a good thing for GM, and allow them to restructure along 21st century lines, not the 1950s.
Rover, that's an interesting point I hadn't thought of. But in the long run, it seems to me that it would be better for the company to go out of business and sell off the profitable lines than to keep it alive as a zombie firm indefinitely.
I do, however, disagree with Megan about the GM-Chrysler merger.
Me too. I have friends who work in antitrust law who are well positioned to suck up whatever cash the two companies might happen to have.
I keep hearing about the warranty problem: why buy a vehicle if the warranty could be voided by bankruptcy? Surely the warranty could be separated from the supplier: its only a form of insurance, and its not as if there is no interchangeability in parts.
Rover: Yes, people will be hesitant to buy an expensive warrantied good from a bankupt company ... but what I want to know is, why the hell were they so willing to buy from a company *very close* to bankruptcy? Idiots.
@SJE: Newsflash for you: the warranties are backed by GM, *not* a third-party insurer. Oops. There's no magical elven bank you can run to to get the payout for your repairs.
Yes, it would have been a great idea to increase the credibility of the warranties by paying a 3rd party insurer to do it. But the last chance to try something like that was maybe five years ago. Today, *any* insurer would look at their quality problems, the prospect of agencies issues, and GM's general credibility problems, and then laugh at the very idea.
@Megan_McArdle: you ... hadn't thought of Rover's idea before?
Ok, so I'll give the commenters above that quality has improved - JD Power now shows American plate cars competitive and in the mix with foreign nameplate cars. The Pontiac Vibe is still one of the butt-ugliest things to ever see a street.
Uhm, you are aware that the Vibe is a badge-engineered Toyota Matrix?
Or were you thinking of the infamous Aztek?
I've heard in the news that the collapse of one of the not so Big Three could bring about the collapse of both of the other two.
I can understand how that might work in the banking industry but I can't see how that works in the automotive (or most other non-finance) industry. It seems to me that in most cases if one of your competitors goes down, you are at least temporarily better off.
(Arguably GM isn't a major competitor against Chrysler and Ford anyway, the real competition is Toyota and Honda)
Can someone explain a plausible mechanism whereby a GM failure causes a failure in the other two that wasn't going to happen anyway?
Maybe something to do with part suppliers or something? I just don't get it.
Sebastian: The typical reasoning given is that a bankruptcy will let the carmaker get rid of enough legacy costs and management snags that they can offer a competitive price for their cars, which increases the pressure on the others.
This of course, as you might point out, assumes the Big Three aren't already in a big corrupt gentlemen's agreement. But even if that's true, they'd time their bankruptcies to happen at the same time to maximize the "we need it!" factor and "it's not our fault!" factor.
Ah, the state of American industry!
I think this is a perfect example of "jurisdiction" shopping. Right now, the short term interests of individual managers and the union are in near perfect-alignment. The unions are a big component of the Democrats' coalition and can claim to have helped deliver several states in the recent election. Bankruptcy results in an impartial bankruptcy judge and creditors holding all the leverage. Neither the union nor management likely to get a deal that is good for them. But, if they can convince the Democrats to give a bailout, then they can preserve some of the gravy train for at least a little while. They probably actually think they can turn the company around. Of course, the odds of that are at least four SDs from the mean.
In B-School, there was a big case about GM & Saturn. I managed to offend most everyone by saying the whole case was pointless. There was enough information in the case to show that even fifteen years ago, GM was very much a lost cause. I said the best thing GM could do was run themselves into bankruptcy as quickly as possible. The union had already captured the company and had made it clear they would not make win/win deals until forced to by external factors (like bankruptcy.)
The warranty argument is a good-natured one, but it's not the major obstacle to consumer buying decision. The US airlines, most of which tried bancruptcy at one time or another, managed to preserve the frequent flyer miles programs intact during their turbulent times. From economic and even accounting standpoint, a car warranty is not drastically different. In fact, it may be even easier to "separate" the warranty from a car maker. Dwelling on the subject of bailing out what used to be big three probably does more damage to demand for their vehicles than letting them be (bancrupt or otherwise), because potential buyers eschew the uncertainty about the producer and switch to a different producer altogether. Given the product lines of the former big three and their competition, this uncertainty is just a nail in the coffin for traditional "American" car-makers.
Legacy costs cannot be separated from management decisions. It was the management that agreed to the Union demands, ultimately leading to the demise of both the firms and the workers. Whereas the Union was extremely myopic in imposing the terms that would bancrupt the company, the management was outright suicidal in accepting them. The management lack of expertise in the subject matter, more than convincingly manifested in their decision to bet their fortunes on large-sized trucks, was another proof of their overall ineptitude.
The car makers, especially Chrysler and GM, have been bailed out too many times. Let the State of Michigan do it now, if they want to, but why would the Federal government step in, taking tax dollars of BMW, Toyota, and Nissan workers, (among other US taxpayers) to pay for the bailout of their competition.
Megan,
Please read this piece by Michael Lewis if you haven't already: http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom.
After reading it I am tempted to rewrite bits of your post:
Wall Street's operations are not otherwise sound. They have been headed for this moment since 1980.
What is government money going to fix? Will Wall Street's management be so grateful to America that they decide to make an attractive, reliable investment vehicle as a thank-you gift?
Merging with [bank a] doesn't solve anything. It's like two alcoholics deciding that they could maybe quit drinking if they got married. Everything that's wrong with [bank a] is wrong with [bank b], in spades.
Wall Street can't be saved. It needs to go into bankruptcy, which is the only possible way I can see to adjust its legacy [insert random crazy financial instrument here] problems, and possibly provide sufficient shock to the corporate culture to allow the company to make a competent investment vehicle. Even that may not work. And it's going to involve a whole bunch of pain for everyone.
--
I am not advocating saving the auto industry. I recall you had your doubts about the WS bailout (and still do). Shouldn't we just deleverage and get it over with? Why prolong the pain/uncertainty and give the gov't even more opportunity to "help?" And do you truly believe that Wall Street is "otherwise sound?" Even in the face of the massive deleveraging that is set to occur? Wasn't that the argument with AIG? How is that "investment" going?
It'll be interesting to see if Ms. McArdle's thought of discussing facts is going to be relevant to the music of the new band 'Obama and the Democrats.' I wonder if GM could make money if Congress scrapped the CAFE standards allowing GM to produce just their high (any) profit vehicles. Ford's new officer, hired from the Toyota board, in discussing their new hybrid vehicle coming out in about a year said 'that would give them time to get it right.' To me that is insight into an underlying problem for the (laugh) Big Three. 'They' didn't mind a crappy car going out the door. Part of the reason for this may have been the multitasking implicitly demanded by the CAFE standards. They couldn't just concentrate on what they were good at and, in part because of this, have ruined their brand.
Maybe the government should let them go bankrupt, force them to re-organize and re-brand, and then step in and explicitly offer to protect consumers who buy from them for x years, until things are running smoothly.
How do we blame the union for management's failure to aggresively negotiate with them? I mean seriously management could've said "no" right? Then take the lawsuit hits when they striked and then GM would've hired scabs. I mean this was a management failure all around. Getting mad at Unions for always going for the best deal for them is silly. Thats what a rational actor is supposed to do. Management should've knuckled down and took the hits.
As for the bailout, GM is going to break, it seems past the point of salvage. Let it die and see if it can get back up on its own. There has to be vicious consequences somewhere in this mess, we can't patch a ship with so many holes in it.
And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers.
....
2) This is basically the opposite of everything W. Edwards Deming ever said, which should give you pause.
Deming argued that management was able to set up all the work rules, factory layout, staff training etc that controlled quality, and so was responsible for quality.
However, if the Union is controlling half of those factors, then the union is acting like management, and so the union is (partly) responsible for the quality. QED.
Uh... many apologies to the board, to Megan in particular. My own post above appears to have the word "bankruptcy" consistenly misspelled. Any lawyers in the audience to help me to get retribution from Microsoft?
Question: why does the UAW get blamed for negotiating contracts that the automakers agreed to? Aren't the automakers at least partly culpable? I understand that the automakers' decision-making process is likely hampered by the need to use union labor, although I confess I'm not familiar with the contracts, laws, and regulations that actually make this a necessity. But unless we're claiming that the union has absolute power to dictate the terms of their agreements, the employers share some of the blame for negotiating a bad deal. If the unions do have absolute power (maybe they do, I don't know), it seems wrong to blame management for difficulties, because it's obvious what the problem is. You can't run an effective business as a jobs program.
Again, I don't claim to know where the blame lies, but it seems to me that it doesn't make sense to pin blame for bad labor contracts solely on labor.
"And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers."
-- this is an utterly ignorant, uniformed and unproven statement. has this writer ever been to an auto factory? been a union member? looked at a UAW contract? does she know what VEBA is? does she know the details of the 2007 GM contract? does she know Thing One about GM's management? etc. etc. ... Are economics writers for the Atlantic required in the least bit to research their assertions? this person cannot be taken seriously.
The astonishing degree to which cocoon-dwelling East Coast elites, media and otherwise, in the Wall Street/D.C. corridor are unthinkingly, arrogantly anti-union would send Studs Terkel to his grave.
(this is NOT and endorsement of a bailout.)
Tom Mashberg
Boston
Does anyone know what would happen to the Volt project if GM went under?
In other words, Megan, you have no response to what I actually said. Because it really is just that you hate unions. That's really as far as it goes. I don't, for example, see you pointing out that Toyota has just announced enormous setbacks. Because that doesn't help your "Unions are the only thing that's wrong with Detroit, unions are evil and must be eliminated, ergo let's do nothing to help the automakers, while we give $700 billion to banks."
I was just watching a few episodes of Ken Burns' /The War/ this weekend, and I was struck by the importance of American industrial capacity in making Allied victory inevitable. Do we really think that the need for a capacity to mass produce heavy weaponry in a sustained fashion has gone away forever? While we may be engaged in asymmetric conflicts now and into the foreseeable future, it doesn't seem clear to me that our interest in retaining the capacity to massively produce weaponry domestically has disappeared. Some significant and lasting subsidy is justifiable, I think, even in the face of the near criminal incompetence of the management of these companies. A bankrupted Big Three will produce a Three that aren't so big anymore and can't move as seamlessly to producing what we might need for a more symmetric conflict. Or they may cease to exist entirely. Do we really want to rely on foreign manufacturers to shift production to help our war effort if we ever need to fight another war on a grand scale?
This debate is a bit late in the day. The bailout/nationalization of the "Big Three" is a certainty now. Once we started bailing out the financial firms, the argument for not doing so for the automakers was politically weak, and, with the election of Obama and even more Democrats, a lost argument.
Once the government has a significant stake in the business, you will see handicapping of the competition.
Freddie,
The American auto companies have been losing money for the last few years, with only an occassional profitable quarter. The credit crisis is not the reason they are unprofitable today, it only means they are more unprofitable than before. Bankruptcy is going to be needed to rid them of the legacy costs, and getting rid of these costs is the only way they are going to be able to profitably build and sell cars, and even that may not be enough.
So one says its already a certainty, and the other says that the hostess hates unions. Libertarians on principle have an issue with an organization that works collectively, but I doubt a libertarian who favors regulation of the financial industry (albeit an entirely too trusting set of regulations) should be able to see the union as a rational actor. Blame the union is a popular rallying cry, but businesses go under because of bad management, bad management gives into foolish labor demands. Foolish labor demands don't create bad management.
Okay, here's how the UAW negotiated contracts with GM in the 1980s and '90s:
1) UAW's national bargainers agreed to various concessions in the national strike negotiations.
2) Contract is ratified.
3) UAW has a local at a key parts plant owned by GM declare a "health and safety" strike. With the key part supply cut off, GM is forced to end production at a dozen assembly plants.
4) UAW local demands repeal of the concessions in the national contract as part of the resolution of the "health and safety" strike.
5) GM files an unfair labor practice complaint with the NLRB, pointing out that the "health and safety" bit is a fake, and it's actually an illegal economic-issues strike during a contract. The NLRB goes into a long resolution process.
6) States with assembly plants shut down from unemployment insurance. GM complains that they should be getting UAW strike pay instead of unemployment since it was a UAW strike that idled them; states say the workers aren't out on strike.
7) UAW actually collects standard dues from the workers getting unemployment pay to finance strike pay.
At this point, GM is looking at having its plants shut down and not producing income for a full six months before the strike starts to pinch UAW/worker finances, the strike fully funded by money taxed earlier from GM. The UAW doesn't have any pressure to grant any concessions until that six months are up, while GM is losing money every day.
8) The local's demands for the deal includes GM withdrawing its unfair labor practices complaint, meaning the NLRB will not punish the union for its blatantly illegal strike, and, just to add insult to injury, GM repaying the UAW for the UAW's strike pay expenses.
In short, the choices for GM management when dealing with the UAW were, "Declare bankruptcy this year" or "Agree to continue the slow strangulation of the company."
You tell me; given their legally-obligated fiduciary duty to the stockholders, what choice did management have? Deliberately driving the company bankrupt now in order to stave off bankruptcy in twenty years is pretty hard to defend as serving the best interests of the current stockholders.
Gm has two choices
1) Declare bankruptcy
2) Accept government money and be micromanaged by Pelosi and Franks
I would pick bankruptcy.
BTW in 2007 Obama supported the UAW strike against GM. At the time Obama blamed unfair GM management and NAFTA for the auto industrie's problems.
Isn't it odd that GM has been able to compete in the China market (with about 20% market share) but somehow has difficulties with the business climate in this country.
Ben, what if three guys come over to you on the playground and say 'They need a quarter for lunch money.' With the depression era Wagner Act that is what the auto unions we're able to do. They'd pick a target and negotiate. That was/is the law. Any one of the autos was free to refuse, be the one that was bankrupted, at any time. Welcome to 'negotiate.'
The Detroit manufacturers long since ceased being vertically-integrated full line manufacturers, they rely very heavily on tier-one and tier-two suppliers. In many cases final assembly occurs using outsourced modules (entire dashboards, seating, axles, transmissions, etc).
Failure of GM or Ford would result in bankruptcy of numerous supply chain participants whose survival depends on their large customer(s). So if GM goes down, so does many of GM's core suppliers. With the suppliers out of business, the surviving Ford is up the creek without a canoe, it takes far too long to qualify a new supplier.
In theory, the warranty concerns resulting from Chapter 11 could be addressed, in reality the customer base would not accept alternative arrangements like third-party fulfillment.
People who blame management for introducing a Jeep Commander just as prices spike ignore the fact that product lead times of three years means the customers of three years ago were sending signals that they wanted larger, more versatile SUVs. Not knowing when fuel prices would spike up, what were the product guys to do? Work instead on a new subcompact that buyers might disdain?
Managements at Detroit makers have known for years what they had to do. Their constraints on the regulatory front, desperate need for sales volume to fund their legacy costs, their inability to control the retail dealership network because of state laws, etc. forced them to attempt to restructure slowly, step by step.
No point in blaming unions or management exclusively, both sides have plenty of blame on their heads.
My dad and my grandfather were UAW (in a machine tool and aerospace firm that didn't have anything to do with the auto industry) and I just laugh at this entire narrative. There is barely a fact in any of this.
Most of this is just 100% bullshit and I'm not going to sit around and try and fix it, but if GM and Chrysler go down they can take this country down with them in a very similar way that the financial industry could.
It's not about GM and Chrysler employees, it's about the 10 million employees who work in companies whose entire product line is auto parts. When I was nineteen I worked at a plant whose entire purpose was making one certain type of headlight brackets for three GM products. They had a payroll over two-thousand strong.
The massive, immediate increase in unemployment would be centered exactly in the midwest which just broke even farther the rest of the nation for Obama. This isn't going to happen, and if they need nationalization, they get nationalized.
For people with a longer memory, the UAW drove International Harvester out of business.
IH hired a very tough CEO who decided that drastic steps needed to be taken to control costs. Profits increased dramatically. The new CEO then demanded concessions from the UAW. The UAW went on strike.
The two sides held fast. Neither side would blink. IH lost, in today's dollars, about $2 Billion. The UAW preferred to see the company go bankrupt then concede. IH management didn't think the company could compete without the concessions.
Within 3 years IH started shutting down and selling off assets. US Steel Southworks was also damaged by the strike.
Senior GM management knows what the UAW did ti International Harvester. If GM management had stood up to the UAW they probably would have done the same to GM.
If anyone reading this has any sense, try and figure out what the motive is for Automotive Lunatic's ignorant, conspiracy theory about the UAW is.
What wound up left of IH, got picked up by Case which is UAW to.
So maybe a stupid, moron, CEO drove it into insolvency to make a point about unions rather than your version.
Ed, this is classic broken windows fallacy. Where do you think the money is coming from to bail out the auto makers? It is being taken out of someone's pocket, or borrowed. That money would have bought other goods, manufactured by other people, who will now not get that money, and not employ the workers used to manufacture those products. You cannot get rich by picking your own pocket.
That's precisely why finance is weird--the resource constraints are very different from the rest of society.
Freddie, Toyota had a bad quarter. This is not surprising, given the credit crunch and oil prices. It's not at all comparable to GM, which is having a bad thirty years. The stock prices tell the tale. Hell, the financial statements tell the tale--GM is losing money and hemorrhaging cash. Toyota's just earning less than expected. Toyota is not in danger of bankruptcy. GM is nearly certainly going to go there sooner or later unless the government keeps throwing good money after bad. They were temporarily bailed out of their stagger towards death by very low oil prices in the late 1990s. But aside from that, they've been lurching from crisis to crisis for thirty years.
It is being taken out of someone's pocket, or borrowed.
Unless you feel this is a doomed nation, you borrow. Say you had credit (this is a weird question at this point) and your kid needed clothes and books for school but you had just lost your job. You put it on the credit card and you count on being able to make a comeback. If you don't, they have bigger problems anyway.
No matter how hard finance shills try, there is simply no way that you can defend the completely nonsensical proposition that bailing out GM is bad while bailing out GS is good.
The question isn't about how important or vital the company is. The question is about whether the bail-out will do any good or not. If it won't do any good for GM, then it won't do any good for GS. There is absolutely no way one could weasel a justification for this being any different.
You can see that GM is a terrible, worthless company whose cars can't fetch a price that can make them a profit. Putting more money in them will not change that, it will only exacerbate it; just like pouring oil in a leaking tank won't fix the leak.
The same is true for GS. It's got worthless papers which it won't be able to sell to make up for all the obligations it owes. Pumping money into it will not change that, it will just basically give a big pay bump to idiots who don't deserve it. The company will continue to be in bad shape, and the worthless papers will continue to be worthless, except now they'll be owned by you and me.
There has really been nothing more pathetic than finance shills like Megan using this GM business to argue how finance robbing trillions from the Treasury is good, while GM doing it is bad.
Megan, but will 'the chickens come home to roost?'
I made a maudlin comparison of macroeconomic theory to balancing a checkbook for which I heartily apologize without thinking the general theory is sound.
GM and the UAW are a perfect illustration of bad government in action.
At some point, a collective decision was made that the unions should be given such expanded powers that they could destroy the company if they wanted (see the above post describing how a strike at a key plant could idle the whole company). What happens here? Well, naturally the union tries to extract as much as they can from the company with the tools available. The union doesn't profit from increasing profits and building a healthy company, it profits from building an overstaffed company that exists to benefit its employees. The union would have been better served if it divvied up the right to collect a union payout from GM among the workers of the time and let them sell the claims. Then the union could simply negotiate the maximum dividend possible for the holders of these claims. This way you have a rationally run company with the benefits going to the larger voting block (the workers) than the shareholders who are all presumably evil capitalists.
What would have been much more honest and worked better would have been outright nationalization of GM when the rules were set up that the UAW could destroy the company. Instead you've got unclear property rights and consequent ill management.
Or a stupid collection of moron union bosses drove a company into insolvency to make a point about union power.
Either way, IH was no longer profitable and one of the largest companies in America was in the dust bin.
You tell me what lesson GM management took away from that episode. I know what they told me. And it wasn't that the UAW was misunderstood.
Only about 600 of the current 10,000 employees at Case are represented by the UAW. And in 2004 Case had to declare an impasse with the UAW over contract negotiations. SAme old same old UAW
1. Re: warranties
I realize that the warranties are backed by the company, and that their fair price would arguably be much higher if outsourced to a third party. Doesnt mean it couldnt be done, although who would be the backer? A big insurer like AIG....mmm
2. I had heard that a key event in the genesis of the current mess was the wage restrictions following WWII. Manufacturers could only offer improved benefits, pensions etc. Automakers did so, but found it impossible to get rid of them in the face of union opposition. Thus, some of the legacy cost problems are sourced to government meddling in the first place.Our hostess may have some more ideas about this.
Either way, IH was no longer profitable and one of the largest companies in America was in the dust bin.
Well, not really, he killed the company based on his projection that the UAW would do it. That really is extraordinarily stupid.
"Well, not really, he killed the company based on his projection that the UAW would do it. That really is extraordinarily stupid."
Unless he was convinced that he competition would kill the company without union concessions, as was indicated in a previous post.
People who blame management for introducing a Jeep Commander just as prices spike ignore the fact that product lead times of three years means the customers of three years ago were sending signals that they wanted larger, more versatile SUVs. Not knowing when fuel prices would spike up, what were the product guys to do? Work instead on a new subcompact that buyers might disdain?
That was me blaming management, and note that Toyota, for example, rolled out a well-timed family sedan hybrid (Camry) at about that same time as Chrysler rolled out the Commander but no hybrids. You note (correctly) that no one knows exactly when gas prices will spike, but either Toyota and Honda sure get lucky a lot and Detroit has the worlds worst luck or, much more likely for the non-superstitious crowd, (1) Japanese management has had much better vision than Detroit management or (2) their much shorter cycle time results in fewer such awkward timing situations or both.
So how am I wrong to blame this on management in Detroit? How did Japan foresee that buyers wouldn't disdain that new efficient model but Detroit couldn't take the chance?
In retrospect, had Congress shown a little tough love earlier and raised the CAFE standards, not only would it have been the right thing to do environmentally and in terms of oil security, it actually would have made Detroit more competitive with Japan by now. Coddling Detroit is part of what got them into this mess.
Seriously, what I have yet to see on this thread among those who say we cant let the Big Three fail (and I understand the instinct, particularly the argument that we are losing all of our heavy manufacturing capacity) is a forward-looking survival plan. So Congress infuses cash - then what? What changes suddenly make them more competitive than they have been the past 30 years since the last big oil shock in 1977?
Fine
The UAW did not call a series of strikes, they did not want crazy work rules, they were perfect model citizens always working for the common good.
Management one day just decided to destroy the company, for no good reason. It happens all the time to the UAW for some reason.
Or at IH the UAW ran into a CEO who refused to be intimidated and the UAW destroyed thousands of jobs to make a point to all other companies who dared to challenge the UAW.
But as GM, Chrysler and perhaps Ford go bankrupt, American workers building Toyotas, Hondas, and Nissans are selling cars. What is the biggest difference in these plants?
And if a UAW workforce is such a good idea, why doesn't management demand the unionization of their plants?
Believe what you want
Unless he was convinced that he competition would kill the company without union concessions, as was indicated in a previous post.
The "destroyed the village in order to save it" school of economic theory. Brilliant.
I get the chance to deal with the auto industry a lot. The ordering process and efficiency of the foreign manufacturers is far superior t the domestic. The foreign manufacturers have fewer problems at delivery. The foreign manufacturers have fewer warranty issues. These are all my experiences. The domestics have become a whole lot better but their are still legacy doubts. The domestics have been advertising how bad their products are for decades and that takes a long time to turn around. I imagine their is enough blame to go around. The unions and the management all learned a long time ago that the american people won't let them go under. Why bother being competitive. Take big risks and hope they work out or just game the system to your competitors disadvantage.
American workers building Toyotas, Hondas, and Nissans are selling cars. What is the biggest difference in these plants?
They make better fucking cars. That's it. "They" meaning the workforce don't even work better. "They" meaning Toyota and Honda are starting to reach into the unionized world in the midwest because their experiment in heading south to "right-to-work" states gave them a workforce that needs a bunch of time off to hunt. They need time off to whatever, to be rednecks. Hiring a bunch of stupid, talk-radio, morons you can buy off cheap has it's own downside and it's being recognized in the market.
I believe history will judge that these actions were a big mistake and led to greater misery.
Tag I'm back. Ok I would illegally produce my vehicles and threaten to move my plants overseas. I mean the worst they can do if you pick up scabs and run the plant is try to stop the workers, and sue you, a lawsuit that you could force the dismissal of as per negotiations. And if labor didn't do anything, the fines, or the legal award would never have amounted to the capital hits they've taken because of their weakness. Look if there is no GM there is no job. Labor is not invincible, just cheat a lot. Bottom line you can't negotiate with a gun to your own head, and that is the inherent risk of union negotiations, if they screw up they don't have the job they were trying to improve. This play nice or fair crap is fiction, GM should've just thrown the rules away and gone with the smart move. Even a massive settlement would never have approximated the costs they are facing now.
Hindsight is 20/20 though, it looks easy from here, but in the 80's and early 90's very different 10 year outlook.
Commenters here seem to be missing (or avoiding) the larger point. It doesn't matter whether GM is being destroyed by greedy, stupid, and short-sighted management or by greedy, stupid, and short-sighted unions. The important point is that the US economy is not threatened by the loss of GM's output of cars and trucks, and hence the government has no reason to step in and subsidize it.
If Linens-n-Things, Circuit City, and GM stop operations then Americans suffer no more than being forced to buy from Bed, Bath and Beyond, Best Buy, and {Ford, Toyota, Honda, Kia, etc, etc}, and I wouldn't want the government taking over any of these losers. On the other hand, if an electric or water utility was in danger of halting operations, then I would expect the government to step in and preserve the function of the utility, even if it meant wiping out its owners.
To borrow a phrase, GM does not provide an "essential facility".
I'll agree that the financial system in the US is now much more like electrical power than car parts. It's an essential piece of our economic system that cannot be replaced (in the short term) and whose function needs to be preserved. The question is whether "tight coupling" in the financial industry has created a system so lacking in redundancy that the failure of one or two firms would cause the entire industry to collapse. If not, then those individual firms should be allowed to fail. If so, then those firms (or, rather, the products and outputs of those firms) must be saved, even if it means wiping out the stockholders of those firms.
Additionally, though, if the financial system is so lacking in robustness that individual failure is catastrophic, then it also says that something else is fundamentally broken. I don't know if it's the regulatory system, or corporate risk analysis, or both and more, but companies routinely design against critical failures for power and water. What went wrong that finance became such a single point of failure?
Could use some answers from learned bloggers:
Why shouldn't foreign-owned companies with US operations using local workers be included in the discussion?
If the industry were centered in a heavily Republican state, say Arizona, would Congress be clamoring for a bailout?
ONLY VERY DRASTIC ACTION WILL SAVE DETROIT
Congress: Here is a radical, but common sense and workable plan -
http://pacificgatepost.blogspot.com/2008/11/solution-for-detroit-gm-friends.html
It is this, or bankruptcy. The American Auto industry should be saved but under new conditions.
Do not leave it to the likes of Paulson or Congress to come up with a creative plan resembling interest in taxpayers' wellbeing.
There is much creative talent hidden inside the Big 3 that has been smothered by mismanagement and the UAW.
"The company could have limped on for longer if it had, y'know, made cars anyone wanted to buy."
Like the Hummer, the Cadillac Escalade, and the Corvette? All seemed pretty popular, until gas hit $4 per gallon over the summer.
"But unless we're willing to essentially nationalize three auto companies, that pain is going to come, sooner or later."
Perhaps the politicians are being rational in preferring the pain to come a little later (e.g., after the current recession ends). If the Dems have to do something, maybe they can extend the companies financing for a couple of years, with a hard deadline to rationalize their businesses by then. If not, then they can go bankrupt and we can get one leaner, profitable domestic automaker out of the rubble.
Freddie and Megan both, please try to leave your feelings about unions out of it. Megan, since it really doesn't matter whether unions or management get the blame, why bother arguing over it? And Freddie, you know that Megan would oppose a bailout of a non-union firm like Toyota, too, so why claim her opinions about unions make her opinions about bailouts inadmissable?
You don't bail out a firm because it supplies great value to its workers. You don't even bail out a firm because it supplies great value to consumers. You bail out a firm only when the great value it supplies to consumers cannot be quickly and easily replaced by other market players. And that's simply not true of GM -- Toyota and other manufacturers can and will step in and meet the demand for cars with little interruption when GM fails.
Toyota, Nissans and Hondas are all made in the USA right, in factories, by American workers?
Well I guess we can dismiss any worries about "losing American heavy industry" then. America will still have lots of car factories. America will only lose the inefficient factories with poor design.
I must say, I strongly embrace the "nationalization and shock therapy" solution proposed over at PacificGatePost.
Giving Detroit a series of loans is clearly, as Megan points out, throwing good money after bad. If GM could fix itself, it would be doing so.
There are only two paths GM can take. One leads to bankruptcy. The other path leads to nationalization.
Um, PacificGate's suggestion is political suicide. The whole (political) point of a bailout would be to allow the millions of workers dependent on the auto-industry to *not* have to undergo massive economic upheaval.
What do you think is going to cause workers to be more unhappy? No bailout or a bailout with a 25% pay cut. I'll claim that if you think it's no bailout, you don't understand human nature...
Ed Marshall: "...heading south to "right-to-work" states gave them a workforce that needs a bunch of time off to hunt. They need time off to whatever, to be rednecks. Hiring a bunch of stupid, talk-radio, morons you can buy off cheap has it's own downside and it's being recognized in the market."
The problem is that when they go north, they will find that their workers are just a bunch of crooks. Most of the good white people left Detroit already, so the only people left are a bunch of lazy niggers. Maybe they have skills at making cars, but they also know how to steal them. What's going to happen when cars come out of the factory with the hubcaps stolen?
I'm a racist? Strange how prejudice looks bad only when directed at members of your political coalition.
I'm an engineer. In 1976 I went shopping for a car and bought one of the first Honda Accords. Why? because the engineering was so superior to any US cars it was a joke. I sold it with 240K miles and its still running.
In 1979 I bought my first BMW. Why? Superior engineering. A colleague bought an Oldsmobile Diesel. Five years later the BMW still ran great and had good resale value. the Olds had thrown a piston through the hood and was junk. My BMW went 250K miles before being replaced with another. I currently drive a 1991 BMW 8-series with 140K miles. It still runs as well as the day it was driven off the lot.
The American Car manufacturers have never learned that quality begins with superior engineering. You can engineer and manufacture a part to not fail. You can engineer a part that is impossible to put together incorrectly. You can engineer a collection of parts into a car that's guaranteed to fail. The mentality of "there's no substitute for cubic inches" and "rich Corinthian leather" haunts US car manufacturers. They find the badly engineered parts at the end of the manufacturing process or in the dealer's warranty bay.
The only way the Big 3 will be able to recapture market share is to deliver a product with engineering, quality, and price superior to the Japanese and German competitors.
Otherwise they're just spinning their wheels.
Growing up in Flint, Michigan, birthplace of General Motors, I heard the phrase "Generous Motors" many times over the years, from workers who, upon receiving some windfall, shrugged their shoulders as they uttered the phrase.
Great Post, Thanks
It seems a lot of different industries are coming smack up against the 21st Century. It may all turn out to be one of those you can pay me now or you can pay me later deals.
It's funny to read all the comments bashing Megan for being "anti-union," and discrediting her analysis of the proposed bailout plan because of this perceived bias. Yet, not one of these people mention that as of yesterday GM's stock price was at a level not seen since 1943.
The markets do not lie. This is not some newfound problem with GM, accentuated by the recent credit crisis. People simply do not want to buy cars made by GM, Ford, or Chrysler at the same rate that they buy cars from Toyota, Honda, or Nissan.
This fundamental truth cannot, indeed will not, be cured by any sort of government bailout. How do you magically create market share with money? You can't, and if you could, we'd have a much different economy.
So in the end, the unions will lose, because all of their people will be out of work. Additionally, the management will lose because they ran their companies into the ground, refusing to make systematic changes in order to compete with Japanese automakers. They will go out the same way they have been going down: begging the Fed and the Congress to keep them protected. This time, it's not going to work.
Tom said "The astonishing degree to which cocoon-dwelling East Coast elites, media and otherwise, in the Wall Street/D.C. corridor are unthinkingly, arrogantly anti-union would send Studs Terkel to his grave."
This is the comment that wins this board. I am sick and tired of all this "blame the Union" crap.
Unions in this country not only raised the standard of living for unionized employees - but for everyone who works. Weekends off, paid vacations, health insurance and retirement benefits in non-unionized postions would not exist without unions having fought (SOMETIMES LITERALLY) for them first.
I don't know is anyone at the Atlantic has a library card, but perhaps someone should read a little history about what working in manufacturing used to be like without union representation.
This "blame the unions first" crowd, as Tom above indicates, stinks of people that have soft hands and softer middles. Anyone who is (or has been in the past) required to take a shower AFTER work knows the difference union representation makes.
As far as the bailout goes, my father sweat for 40 years in a factory - the same factory - bulding cars. He retired last year. He's 65 years old and I'll be dammed if this man who worked his whole life - who played by the rules and did what was expected of him - now hs to go to work at freaking Wall Mart so he and my mother can eat. All because, in the end, his union negotiated contract means nothing, because the people who signed it from the management side effed up the company.
Take it from someone who walked all of Ford's North American plants to do rolling inventory surveys for 4 years, the biggest problem with the big three is the Unions.
As stated above, legacy costs are ridiculous. Full medical and a pension? Where else but the governmnet do you get that kind of deal.
The pay scales are also absurd, another item to thank the Union for. A forklift operator with 15 years in on a 40 hr week is pulling down $115k a year. Does that seem like fiscal prudence? Now multiply that over the UAW population and you can see where the root issues of this problem are.
Just a thought....
Obviously the human impact of a belly-up auto industry is too large to let it sink (on what? some economic principle?).
Obviously the management of the Big 2.5 has mismanaged these companies to a point that they can't survive a serious down turn.
Serious minds would understand that limiting the solution to (a) Bailout (b) Bankruptcy is, more or less, a Hobson's choice.
There are other alternatives. We may not know them yet, but they are there. THINK
If we want to take a stroll through history and try to see where things began to go wrong in terms of governmental and business responsibility, we should look at the 70's when New York City and Chrysler were in bad straits. Rather than allowing both to go into bankruptcy where they could have been reorganized, the federal government stepped in with funding. Had these two entities gone through successful bankruptcies we would have a good history of how a bankruptcy can help a bankrupt regain its footing. Bankruptcy does not mean liquidation.
For what it is worth so far down in the comments, I started reading this article until I came to this ridiculous statement "And the poor quality control on American cars is, from all reports, the responsibility of the union, which maintains downright silly work rules that not even the most ardent liberal could defend in both the Big Three and their various parts suppliers." What silly work rules are these? I work at the plant that makes the G6 and Malibu as a quality inspector and I just can't understand where that statement is coming from. Are you too lazy to do the research? We build quality cars and are constantly seeking improvements. I have worked at GM only 5 years and have no doubt GM has dragged its feet on quality over the years but to lay the blame for that on the union is just SILLY! A buddy of mine worked at a Chevy plant in Flint in the early 70's and ran out of passenger side seats and was told by MANAGEMENT to put driver side seats in instead. Quantity over quality. Silly work rules meant he actually had to do as instructed and listen to management. Plenty of blame to go around for management and union but most of you leave out our government. It is my understanding the Japanese government pays for their workers health care and pensions. Right off the bat they have an advantage over our companies. Are some of you people saying we should get inferior or no health care so that we can compete with the Japanese? If GM payed no health care or pensions over the past 20 years they could be in a lot better shape right now. Would that make all of you feel better? I think the author of this article is trying to oversimplify the issue to fit her warped views.
"plantwalker"
On what planet is a forklift operator making $115k a year? On 40 hours? With no overtime? This is an outright lie - show me this contact. I want to see this - this kind of anonymous, unprovable BS comment is what people point to to shore up their anti-unio bias.
Even if it isn't a lie - which is IS - are you saying a guy operating a forklift doesn't deserve $115k a year? Do you know the skill it takes to move 35000 lbs of steel with a forklift - without killing anybody? Your comment stinks of anti-blue collar bias. So you walked on the plant floor with a white collar and a clip board doing inventory and this makes you an expert on who is suppose to make "what"? BIG DEAL. You are an example of why unions are needed - if it was up to you, only the people sitting at desks getting fat would make any money - the schlub on the forklift should take what we give him and be happy about it - after all ANYBODY can drive forklift, right?
My favorite was the supplier plant that was forced to work in english measurement even though they had to sell parts in metric. But the examples are legion.
You got a source for that? Or for the rest of the "legion"? No? Then maybe you shouldn't be building your argument on vapor.
One thing that hasn't been mentioned is the automotive worker labor monopoly in closed shop states. There is no alternative to the UAW. During bargaining it only takes one of the big three to cave in to the UAW and the rest have to follow suit to stay in business. The flight of capital equipment (factories and machinery)to right to work states or Mexico/China did not seem to happen quickly enough for GM. And even if it did it would not help economy of the closed shop states abandoned.
The closed shop state enforcing the automotive labor monopoly is what has caused the big three catastrophe. Big government is going to step in and bail out the big three, for the union employees and the region in general, in return for their votes.
Tim H.
More anti-union boilerplate. It's all the union's fault. Not management - they are the good guys.
Then tell me this Sherlock, how come The U.S. Bureau of the Census states some 60% of the 15 states with the highest poverty rates are Right-to-Work states?
And how come the U.S. Bureau of Labor Statistics reports that an average worker in the 22 states with right-to-work laws earns about $7,131 a year less than workers in free bargaining states.
What does this mean in HUMAN COST?
Well, right-to-work states have a poverty rate of 13.5 percent, compared with 12.2 percent in free bargaining states. The infant mortality rate is 7.94 percent higher and the uninsured population rate is 15 percent higher on average in right-to-work states. And right-to-work states spend $1,680 less per pupil in elementary and secondary school.
But like you said, it's all the union's fault for demanding these luxuries for their members - like insurance and pensions and a 40 hour work week. Let's all move to Alabama!
are you saying a guy operating a forklift doesn't deserve $115k a year? Do you know the skill it takes to move 35000 lbs of steel with a forklift - without killing anybody?
Yes, absolutely. There is no way that skill is so rare or irreplaceable to justify that kind of pay.
I'm not taking a position on whether that $115k/year forklift operator jobs exists, but if they does than that's a serious problem.
Michael Garrity: Let us, for the sake of argument, grant the entirity of your post. Why is that an argument to bail out Detroit? Are the people in Alabama, who you say have such worse jobs than the people in Michagan, supposed to send money to Michagan so the people there can continue to have much better jobs than they do? That harly seems like progressive redistribution.
The whole point of the auto industry bailout is to protect the UAW's profligate pensions. The Democrats aren't quite ready to directly bail out impossible union pensions, so they intend to do so indirectly.
Michael Garrity wrote:
Even if it isn't a lie - which is IS - are you saying a guy operating a forklift doesn't deserve $115k a year? Do you know the skill it takes to move 35000 lbs of steel with a forklift - without killing anybody?
Yes I do, and I'm willing to go up to anyone who is making 115k a year to run a forklift and tell them that they're overpaid. My first job out of college was that of a "Research Aide" at a research laboratory. As a research aide I did things to aid research, like setting up computers, stringing network cables, grinding barnacles off of sonar transducers and moving large heavy objects around our warehouses with a forklift. Learning to safely operate a forklift isn't that hard. I also spent 13 years in the Army driving, gunning and commanding M60 series and M-1 tanks, both of which weigh north of 100,000 pounds and can tell you that learning to move one around without killing anyone (except the people that you're trying to kill) just isn't that hard and anyone who thinks that it is is either stupid, or has never had to do anything in their lives that was really hard.
Wile -
Anyone can be anything on the internet. Perhaps I am a cowboy, millionare astronaut. Personal experience arguments are the last refuge of the scoundrel.
Happy belated Veterans Day, BTW. I have a DD214 as well.
David Wright -
I'm not saying bailout. It's not a bailout or no-bailout choice. We need to find another solution.
All I am saying is that I am sick and tired of the meme that it's all the Union's fault. It's all the fault of bad union members who joined together to bargin collectively for decent wages, OSHA laws and an effin' pension. BLAH BLAH BLAH. You want to see how a non-union workforce lives. Go to southeast Asia and watch tennis shoes being made.
Unions increased the standard of living in this country and made it possible for employees to actually BUY the product they were producing. Unions were good for this country.
>How do we blame the union for management's failure to aggressively negotiate with them?
That is why I absolutely and flatly refuse to be part of a union. If the people who 'represent' me are so stupid that they would bankrupt the source of my income...
This whole economic mess is a result of fools making foolish decisions. From top to bottom, government, banks, consumers, producers, manufacturers, unions. Everyone. Now the largest fool has decided to set up a printing press to give their fools money to fools so they can continue to act foolishly.
The perfect encapsulation of stupidity would be this: Treasury forces the banks to lend the money he gave them to GM.
Anyone willing to bet it won't happen?
This is going to be a long one. The idiocy runs deep and wide.
Derek
ps. for some anecdotal evidence: I want to buy a vehicle that fits my specific needs. No american firm makes one. They stopped making them. Guess who does? Toyota.
Regarding those second-tier manufacturers that supply GM. Do those companies also make subassemblies for other domestic and/or foreign automakers? If not, why not?
If GM does go under or merge with someone else, the displaced employees can do exactly what any other unemployed person must do. They can try their luck with another auto company, find jobs elsewhere in similar industries, or find another line of work. This isn't the first time an auto company has gone out of business. Are the mean streets of Kenosha still crowded with homeless AMC employees?
Bryan C: "Regarding those second-tier manufacturers that supply GM. Do those companies also make subassemblies for other domestic and/or foreign automakers? If not, why not?"
No. Because most of these second tier and third tier suppiliers of the Big Three are small, independant businesses that have been awarded contracts to build a specific part or series of parts or to build a machine that builds the parts for a line of autos. They have been tooled to build these parts and these parts only.
I have always failed to understand why all these proponents of "small business-people" don't undertand that the majority of small manufacturing businesses supply a much larger industry - auto, steel or airplane. If GM fails, how many small business people will close up shop?
What I have not read in the comments and I think to be overlooked is that the Unions...and specifically their collective bargaining practices...coupled with MGMTs inability to hold fast against these demands are collectively what has doomed the big three. Bottom line...the big three finally need to go under to teach the unions a very big lesson. That being...that skill levels and educational levels and supply and demand of workers available should always dictate the level of wages paid to perform a job. For example, people pumping gas or working in fast food operations do not require a whole lot of skills to perform their functions and thus are paid what they are worth, which is minimum wage. The very same holds true for assembly line jobs. The unions have gotten away with extorting a higher wage and benefits level for their members than they were entitled to...
No one who has commented here really seems to get what the real issue is and has been. Union employees have been OVERPAID commensurate to their skill and educational levels for the past 60 years and have been able to enjoy a lifestyle that they did not deserve.
Just to throw a couple of other things into the mix that haven't been mentioned yet:
1) Lots of people on auto-related blogs blame GM for having way too many brands, causing lots of duplication and high cost for the company, yet at the same time other people say that they can't get rid of the brands because the very large dealer network has over the years had many states pass laws restricting the ability of the auto companies to kill off brands. Any truth to this?
2) It is true that the quality of domestic cars has improved over the years - compared to previous domestic cars. Many people will say they are now comparable in quality to foreign cars. For things like "not breaking down" that may very well be true (for Ford, maybe for GM, not for Chrysler, according to this month's Consumer Reports). But people aren't buying their cars. Why? Several possibilities have been mentioned here, including that people have long memories. But here's one that hasn't been mentioned: What if you compare, as a consumer, one car to another, for quality? I found 3 years ago when I was buying a new car that for the same amount of money I could get a Honda Accord or a Chevrolet Malibu. But you just had to sit in them to see that the Malibu, at the same price point, looked a lot cheaper. And of course it had to: GM had spent upwards of $1500 more on health care costs for that car than Honda, which was $1500 less it could spend on nice looking materials to put in the cabin. And then, I actually drove the Malibu V6 on 4 occasions when I couldn't get Avis to give me something else. There was definitely a difference between it and a Honda Accord - the Accord was better. So, saying that the domestic auto mfrs have increased quality is not a sufficient reason to buy a domestic car - you have to be able to get the same quality as competitors at the same price.
Megan is wrong, because this is baloney:
Operations that incorrectly calculated regulatory risk are not sound. Period. Megan's error is to assume a free market where none exists. These markets are so regulated, that they are effectively managed by the government. Each and every business that chose to play in these markets took a calculated regulatory risk.
Megan's bailout created incentives for future finance companies to discount the regulatory risk of markets. This will increase entry into risky markets run by the government. Capital that would have been more efficiently used in less regulated markets will be put at risk.
And the next bailout will be needed. Thanks Megan, for ignoring the responsibility of businessmen to consider regulatory risk. Thanks again for making a a company's business model a right enshrined in statutory law. Your'e a real champion of liberty and personal responsibility, you are.
More concepts that most pro-union individuals do not understand...
1) You do not have a right to a job.
2) You should only be paid what the free marketplace value your talents to be...this is also known as MERIT.
3) You do not have a right to ANY type of standard of living.
4) You do not have a right to owm a home...or a car for that matter
I could go on and on...unions and their members do not understand the difference between rights and privileges. It disgusts me to realize that idiots that I went to high school with...that did not progress to college...because they were not intellectually capable of going...could join a union and extort a higher standard of living than they should have been experiencing with their lack of skills and intellectual wherewithall.
Unions are legalized MAFIA and have allowed the common uneducated man to be paid a wage not commensurate with his skills or education...and certainly not based on merit. Unions have destroyed every manufacturing industry in the United States.
Chris Schmidt - Bitter much? "...a higher standard of living than they should have been experiencing..."
WTFAY? Read a book moron. Without unions your kids would be working in coal mines. Dummy.
Toyota, Nissans and Hondas are all made in the USA right, in factories, by American workers?
Well I guess we can dismiss any worries about "losing American heavy industry" then.
Well, until the next major war.
GM, Ford, Chrysler and American Motors manufactured the tanks and trucks that helped America win World War II.
Nissan, Honda and Toyota are not likely to be willing to stop profitable car production and shift to break-even wartime production out of patriotic duty, in the event of another major war. They'll just shut down the factories, disband the US subsidiaries, and head back home with the repatriated profits.
Lots of people on auto-related blogs blame GM for having way too many brands, causing lots of duplication and high cost for the company, yet at the same time other people say that they can't get rid of the brands because the very large dealer network has over the years had many states pass laws restricting the ability of the auto companies to kill off brands. Any truth to this?
GM decided to finally kill Oldsmobile way back in 2000. It took them, due to legal requirements, until 2003 to finally stop manufacturing the last Oldsmobile car.
It cost over $3 billion in direct costs to buy out dealer franchises. And GM, eight years later, is still facing billions of dollars in additional lawsuits by dealers who cited franchise agreements that require, under state law, HUGE payments to dealers when a brand or line is discontinued.
As a result, Chrysler, which sells at a volume about 70% of what Toyota does, has three times as many dealers as Toyota.
Example: just as gas reached $3/gallon, Jeep releases its largest vehicle yet, the Commander. As you might imagine, it tanked (no pun intended).
The vehicle was planned as part of a typical five-year product cycle, when full sized SUVs were popular and DaimlerChrysler (as Chrysler was back then) had no entry in the segment.
Chrysler has no hybrids.
Not true. They have a Durango/Aspen hybrid that is only going to be produced in limited quantities, because the factory that builds it (and regular Durangos) is getting shut down.
The same dual-mode system was also to be deployed in the LX full-sized cars, but due to the economic problems as of late, Chrysler has lacked the resources to do this.
Ford has 1, an SUV of all the odd choices.
SUVs were (and are) popular cars. The SUV you speak of is actually more-or-less a tall car, the Ford Escape, which is derived from Ford's mid-sized car platform.
GM famously "killed" its EV-1 electric car, the clearest forerunner of the Tesla.
And a car that GM couldn't sell at a profit, which is why it leased it out.
Toyota now dominates that fast-growing segment (followed by Honda), and the idea cycle in Japan - from drawing to commercial sale - is much, much shorter than in the US.
That's not necessarily true.
Chrysler, for instance, developed its ENVI extended-range plug-in hybrid technology within 20 months and demoed production-ready versions of three different vehicles.
Europe and Japan have for decades had designs that buyers found more compelling.
Laughably false. Peugeot, Citroen, Renault, FIAT, Alfa Romeo, and Rover-Sterling were all forced out of the US market due to their lack of popularity. Rover-Sterling went under entirely.
Saab and Volvo were forced to sell out to GM and Ford, respectively, to avoid insolvency themselves.
And of all the silly management decisions, Ford sells a 50 mpg subcompact in Europe that it has never released in the US - presumably because it would undermine the lobbying against higher CAFE standards.
Actually, most cars that are "street legal" in Europe are illegal in the United States. The US government maintains a "different for the sake of difference" set of emissions and safety standards that make European cars utterly illegal to sell here without massive changes that harm economy and add cost.
The next-generation Ford Europe cars being brought over were designed to be "world cars," but as a result, they will cost more, be heavier, and lack certain features due to the US regulations.
US federal regulations also require automakers (of all nationalities) to violate the laws of physics. On one hand, the government demands cars that every few years must get ever "safer." They mandate extra stability control systems, anti-lock breaks, safety cages, crumple zones, six air bags, etc. Each of these adds literally hundreds of pounds of extra weight to the car -- requiring more power to move the car around, requiring more fuel to do it.
At the same time, they mandate ever increasing fuel economy as they add weight, cost and complexity on the "safety" side.
It's a losing fight for Detroit to continue to magically defeat the laws of physics. And it looks like GM might be pulled under by it.
Could you possibly give a link to these different emission requirements? Something that would support your thesis, rather than declaring it so?
GM, Ford, Chrysler and American Motors manufactured the tanks and trucks that helped America win World War II.
Nissan, Honda and Toyota are not likely to be willing to stop profitable car production and shift to break-even wartime production out of patriotic duty, in the event of another major war. They'll just shut down the factories, disband the US subsidiaries, and head back home with the repatriated profits.
Leaving the factory, equipment, tools and workforce behind? Or sneaking them into the briefcase and taking them home too?
Michael
You're confusing economic growth with unionization when you talk about standards of living. Or are you saying that if Vietnam unionized tomorrow, their workers would suddenly have a developed country standard of living? Where, pray tell, would all this money come from? Certainly not from the products they sell, which would still command the same prices.
Sooo....
We prop up wall street which Megan agrees with. OK. Why are we propping them up? In her words, so they don't take us down with them. OK.
And why is GM having problems right now? Because credit's locked up and they can't get bridge financing, etc. OK. So, why are we propping up Wall Street again?
So, let me get this straight, we prop up Wall Street so that they loosen up the credit market, a result of which I would think would mean working with someone like GM, who as someone mentioned in another thread has taken gigantic steps to turn the company around, including renegotiating the contracts everyone is complaining about on these threads.
I have an idea, instead of giving the money to GM directly, why doesn't the government work with one of the more stable firms (if there's such a thing right now) and work out some financing for GM to tide them over, until hopefully the markets loosen up? Perhaps back the loan and take an interest in any assets upon dissolution/ sale if it occurred.
I thought that was why we were pumping money into Wall Street. So that things like this didn't happen.
And just as an aside, I think that GM, et al. deserve to die (they make crappy products, the market has made it's decision)... but at the same time, I don't think dumping however many employees into a market that is shedding jobs like it is, is the best time to dump half the midwest into unemployment. Mayhaps they die, but to have them die now would drastically exacerbate already troublesome unemployment issues.
The amazing thing about this whole situation is that no one wants to bother getting creative. With all the smart people out there, the best we can come up with is: "Let em die!" or "Nationalize them!" Sad.
There's a reason we drive a Volvo and a Honda at my house - unless you're buying a truck or SUV, there's no reason to buy American. Japanese and European cars last longer, get better gas mileage, and are generally more attractive than their American counterparts. Think I'm wrong? Explain why the big three continue to lose market share.
Unions were vital at one point in American history - they stood up for the worker when no one else would. In today's big government environment, that's no longer necessary. The UAW is a stone around the neck of automakers that's dragging them under.
Having said that - UAW or no UAW, if the big three can't find a way to make a car that consumers WANT to buy, nothing will save them.
Mr. Garrity,
You completely miss the point about unions. They have destroyed the steel industry, shoe industry, tv industry, textile industry and now the auto industry. Again, the skill set and educational levels required for performing a job...and the pool of workers available to perform that same job should always dictate the pay level for that job. That is why pumping gas and working in a fast food job pay minimum wage. Working on an assembly line performing a rote task is no different. Safety laws, 5 day work weeks, overtime pay are fine and we do have the unions to thank for that. What does not change is that menial labor jobs which do not require a skillset of more than a high school education should not be paying much more than minimum wage. Unions are nothing more than mafia thugs and now they have completely destroyed the manufacturing sector of our economy...and now these people are finally getting what they truly deserve...UNEMPLOYMENT.
The origainal premis was, why bail Wall St. out and not GM?
Think about conservative ideals, as it relates to American taxpayer money going to private corporations. The market is not where it was in 1929, and as Americans we aren't the people we used to be, the generation that followed. We have a mentality in this country of, what about me? The generation that followed the market crash in 1929, had the resolve to stand and say, we can get throught this, it may hurt and things will change, but we are Americans, hard work is our foundation.
Capitalism is failing in America because of the way its used. It is exploited to the end and ripe with greed. Look at it, this way; To what end does Congress, stop hearing concerns of we need 50 billion for this, 750 billion for that. You, as an individual or small business owner, would laughed out of Washington if you asked for $10,000 to help you with staying in business. Going back to grade school civics and economics, we are tuaght that Capitalism is like evolution, survival of the fittest. Some business need to fail, for other to begin and others to become stronger.
Sure, its not fair- but people, life is not fair. And taking what you make and giving it to people that does work either. We need to take a step back and re-evaluate our ideals. We need to think logically about why we are where we are right now.
Chris Schmidt -
So we have a unions made up of "mafia thugs" who hold "menial labor jobs which do not require a skillset of more than a high school education" to thank for Safety laws, 5 day work weeks and overtime pay and as thanks for those wonderful things we should allow "these people" to get what they "truly deserve...UNEMPLOYMENT."
You stike me as a very small person who is full of bile and hatred and I don't want to play with you anymore.
/You stike me as a very small person who is full of bile and hatred and I don't want to play with you anymore./
Funny, last time I heard that was on a playground.
Unions were a tremendous benefit to the United States. So were buggy whips, and manual typewriters. Now, they are simply hindrances with small coteries of irrational hangers-on.
Howl: "Unions were a tremendous benefit to the United States. So were buggy whips, and manual typewriters. Now, they are simply hindrances with small coteries of irrational hangers-on"
If you add the phrase "18th Century Free Market Economic Theory" in there perhaps I would agree with you.
Mr. Garrity,
Again, you miss the point. As I said, unions did have a purpose at their inception. Workplaces are safe now and there are laws in place...legal remedies...and so on.
You miss the central point of my argument. Jobs should be paid what they are worth in terms of skillset and educational level required to perform and number of workers available to perform.
Assembly line jobs ARE menial labor jobs...that IS a fact...just like pumping gas and working at MacDonald's.
I am in no way full of bile and hatred. I speak the truth...Unions have DESTROYED the manufacturing jobs in this country in every industry...AGAIN, LACK of nothing more than a high school education and/or skillset is not an attribute that SHOULD EVER be rewarded in our society...rather, it should be PUNISHED...and rightly so in a competitive society. We are not equal...and people need to accept that fact.
For example, if one only has the ability to perform the job of pumpimg gas, then one MUST accept the fact that they will not EVER earn enough to EVER own a home...drive an expensive car...etc. Low skilled jobs MUST and SHOULD pay LOW SKILLED wages.
You have not refuted my point about the wages paid to pump gas, work at a fast food place, work in a grocery checkout line...etc. because YOU CAN'T. In your world...you would find it perfectly acceptable for these people to form a union and extort higher wages that should not be possible in REALITY. Assembly line/laborer jobs do not require more than a high school education, therefore, they should always pay low scale wages.
and guess what...in a free country...if the auto workers do not think it fair that their pay is drastically scaled down...they are free to go work SOMEPLACE ELSE!!! If no other jobs are available for them to take, then that means that they chose poorly by not educating themselves post high school. Bottom line...if you cannot compete...then you should fail.
The American people have ALREADY decided that the auto makers should NOT be bailed out...why do I say this???...because the American people choose NOT to spend their money by shopping at GM, Ford and Chrysler in the first place...thus declining car sales steadily over the last 40 years. Now the union thugs essentially want to FORCE the American people to shop at GM, Ford and Chrysler and subsidize their lifestyle (which is riduculously out of proportion to the employees skillsets and educational levels) by forcing them to give their tax dollars to them...this concept is absurd!!!...and flys in the face of common sense. Over the last 60 years...UNION EMPLOYEES HAVE DESTROYED EVERY MANUFACTURING INDUSTRY IN THE UNITED STATES!!!
Chris Schmidt - I hope, one day, you wear the chain you forge in this life.
Mr. Garrity:
Why would Mr. Schmidt ever wear such a chain? He appears to be the sort of person who understands high school economics and has chosen to improve himself out of the cycle of poverty. Or should he have stayed uneducated and instead used thug tactics to force his betters to give him a wage he could not have earned otherwise?
Actually, er, don't answer that. I already know what you'll say.
Howl -
"force his betters..." what is this, Feudal Europe? There are no "betters" in this country. That's kinda the whole point of this country.
And as far as uneducated UAW workers go - do you know anything about the auto industry? Ever hear of a millwright? A machine repairman? A tool and die maker? Do you know that there are two levels of workers, production and skilled trades? And skilled tradesman require a college degree AND a journeyman’s card?
And before you pish-posh simple production workers - have you ever worked on a factory floor for 10 hours straight? How much money would you pay someone so you WOULDN'T have to do that yourself?
The problem with people like you is that you don't understand that not everyone can work at a desk IMing some other guy working at a desk. Someone has to build the houses, build the cars, the bridges, the highways and the skyscrapers.
And you'd have them build those things for minumum wage.
Keep forging that chain, though.
Mr. Garrity,
You keep missing the point. The wage levels for jobs should be dictated by the skillset required to perform the job, the educational level required and the number of people available to perform the job...period. This is called supply and demand. People are a dime a dozen...that is why there are 8 billion on this planet. I am not saying workers should be exploited. I am saying that the basic concept of supply and demand works very well in companies that are NON UNION. Again, setting aside the minority of highly skilled jobs in the automotive industry...if the skill set required for a PRODUCTION line job is only that of a high school level...and there are hundreds of thousands that are available to perform that job...that that means that job should not command anything more than that of pumping gas or working in a fast food place.
I do understand that not everyone can work at a desk...etc....and that people have to build the cars...houses and so on. HOWEVER, this does not change the fact that skillset, educational level required, and supply of qualified workers must dictate the level of wages. Again, my fast food and pumping gas argument.
And yes...there are "betters" in this country...like it or not. For example, those that are educated are educationally superior to those that are not. Those who grew up in a stable two parent family are superior to those that did not. Those who were taught to only buy what they could afford and live within their means are superior to those that do not. Those whose parents lived their lives spending less than they were making so that they could pass on an inheritance to their offspring are superior to those that did not...
You seem to know nothing about how to effectively manage any type of private enterprise of any sort Mr. Garrity. Say, you opened a burger joint or a gas station...how would you decide how much to pay your respective employees??? Share your analysis with us on this...or...say you have an opportunity to open a business that makes...CARS...you are the owner...how would you decide how much to pay your employees???
"People are a dime a dozen...that is why there are 8 billion on this planet..."
"And yes...there are "betters" in this country...like it or not..."
Aside from the "who the fuck do you think you are?" argument, I really have nothing to say to someone who believes humans are a dime a dozen and the ones who have a two parent home are better than the ones who don't. I'm an American. I'll be treated as I deserve, not as my father deserved. Move to Europe if you want aristocracy.
Actually, I lied, I do have something to say: Who made you grand poohbah? How do you get to decide who's better than who? You know, Harry Truman didn't go to college - are you better than him? How about Bill Gates - dropout. Peter Jennings - he dropped out of high school. Do you want me to list eleventy million examples of people who a) didn't go to college b) came from a one or NO parent household or c) those who's parents were robbers or murderers or Republicans who don't fit your 19th centruy view of "betters"? I don't know if I'm "better" than you...I do know I much more compasssionate, empatheric and obviously smarter and better looking. Does that make me "better"? I don't know.
"I am saying that the basic concept of supply and demand works very well in companies that are NON UNION."
In every country, where Unions are either outlawed or tools of management, wages are incredibly low and quality of life is shitty. In. Every. Country. In these countries, wages are determined by a myriad of factors - ethnicity, gender and a number or random shit like 'who your brother is' - none of which have anything to do with "prodcution" or supply and demand.
And I'll let George Bailey close my post - he's got it right....
Just remember this, Mr. Potter, that this rabble you're talking about... they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath? Anyway, my father didn't think so. People were human beings to him. But to you, a warped, frustrated old man, they're cattle. Well, in my book he died a much richer man than you'll ever be.
Mr. Garrity,
There you go again...you MISS the point...as always...
All studies have confirmed that children raised in stable two parent (mother and Father) households... as a whole... are better prepared/equipped mentally and emotionally than those that are not...
Intelligence has nothing to do with educational accomplishment..however...those that have a formal education are educationally superior to those that do not...do not confuse genetic intelligence with levels of educational accomplishment...just like those that are born with a high intelligence level are superior to those born with low intelligence levels...just like those that are born with high physical strength levels are superior to those born with low physical strength levels...just like some people are born with the ability to play a musical instrument...and some are not. These are all attributes and some are born with better attribute than others...and in any discussion of the levels of these attributes...some will have attributes that are superior...better than others. The fact that you do not understand this concept I find to be amusing. Another example, some have below average abilities, average abilities, and above average abilities. Therefore, those whose abilities are above average abilities can be said to have abilities that are SUPERIOR/BETTER than those with abilities that are below average.
Judgments about whom is "better" are carried out by people every day. For example, in interviewing people for jobs...a judgment is rendered and an offer is typically given to the "best" candidate...which means that the person being offered the job was thought to be a better candidate then the others that were not offered the job...
Again...jobs that require the least amount of skill and educational level and intelligence to perform SHOULD be paid the least amount of wages in any free society. If you do not like the wage...work somewhere else. You STILL have not given any concrete analysis as to why pumping gas/fast food jobs should pay MORE than minimum wage...
Total Compensation Per Hour, 2007-2008 (includes wages and all benefits):
Big Three automakers — $73.08
Toyota — $48.00
All workers — $28.48
The prospect of concessions from the union came up during a meeting involving executives of Detroit's Big Three auto makers and Democratic Congressional lawmakers on Capitol Hill Thursday. But UAW President Ron Gettelfinger made clear that concessions were out of the question, union lobbyist Alan Reuther said in an interview with Dow Jones Newswires Friday.
"Workers and retirees have already made significant sacrifices," said Reuther, paraphrasing remarks that Gettelfinger made to House Speaker Nancy Pelosi, D- Calif., and others in the meeting, including renegotiated contracts. "We feel we've already stepped up."
Translation: Taxpayers are just supposed to accept the UAW-imposed cost structure as it exists, even though those being bailed out earn $44.60 an hour more in wages and benefits than other working families.
Again...Mr. Garrity...say you are the owner of a company that produces cars and you obviously must make a profit in order to stay in business...give your analysis of what you pay your workers for positions that do not require more than a high school education...high school level intelligence and skills and of which there is an abundant supply of...YOU HAVE FACTUALLY REFUTED NONE OF MY POINTS...which demonstrates that you have no idea as to how to effectively own, manage and run a business.
Yes...everyone lives and dies...so what. Last time I checked this country is about free will and free choice. If I own a company...you have no right to demand a job from me...you have no right to demand raises not based on merit...you have no right to own a home...etc. These are privileges, not rights. UNIONS HAVE DESTROYED EVERY MANUFACTURING INDUSTRY IN THE UNITED STATES because the workers were OVERPAID commensurate to their educational level and skillsets required to perform their jobs. MENIAL labor should always be paid menial wages...
Chris Schmidt said: YOU HAVE FACTUALLY REFUTED NONE OF MY POINTS
Arguing with you any further would do as much good as arguing with the person on the street corner who's yelling about Martians working in the Defense Department.
But - here goes anyways:
Why pay more than minimum wage? Possibly so the person who pumps your gas or makes your fast food can actually BUY goods and services to create economic growth??? Let's use your example and turn around the 2.5 million autoworkers making union wages and give them minimum wage. Who's going to buy the houses, cars, computers, TV and all the other shit that keeps this economy going?Are you that fucking stupid and small minded that you don't see a need for a middle class?
And do you even know what the name "Reuther" means in American History? I'm not going to go into the history of Walter Reuther, but did you know tried to negotiate lower automobile prices for the consumer with EACH and EVERY UAW contract he negotiated. And management said "no!" Boy, those Union pricks really stick it to the customers!
Lastly....In your world, what's the price of losing the game? Of making bad choices? Of not going to college? Of not winning and making money? Is it death? Is that the game ender?
If so, I truly believe you are a bitter little person who has a huge chip on your shoulder. I don't know who pissed in your corn flakes or how small your penis is but I really don't have time to argue with someone who proposes Darwinism as the operating set of Rules of a civilized society. We don't live in caves anymore. We don't stone witches either or believe the sun revolves around the earth.
I'm sorry you think you've been over taxed..but you don't have to go kill a wooly mammoth to feed your family, either.
I'm sorry you're upset that smelly serfs are working in factories making more than you think they should - but your kids don't have to work in coal mines.
And no one is telling you that you can't get a job with GM...come on down.
Could you possibly give a link to these different emission requirements? Something that would support your thesis, rather than declaring it so?
http://en.wikipedia.org/wiki/US_emission_standard
http://en.wikipedia.org/wiki/European_emission_standards
The two standards are very unique to each region, requiring that vehicles/engine must comply with completely different drive cycles. The emissions released during this drive cycle have their own limits in differing units from different drive cycles, so the numerical emissions limits are very uncomparable across the regions.
It's been fairly accepted in the industry that the US standards (that is, until upcoming Euro5 and Euro6 standards) were more stringent than the European counterparts, since the inception of emissions standards. The US FTP drive cycle is also far, far more difficult to conform to since it is a much more highly dynamic drive cycle compared to the NEDC (New European Drive Cycle). US emissions standards have also been much more strict concerning typical diesel emissions.
And as to the "street" legality of vehicles sold in the uS and Europe, he is absolutely correct. Unless and until a vehicle is certified by the respective regulatory regimes, vehicles from the different regions cannot be sold in one another. Often enough, developing a vehicle from the EU to be sold in the US requires a completely parallel development process, often leading to different hardware requirements and certainly different powertrain/vehicle controls.
For instance, I am quoting a job with a customer to retrofit and develop an existing engine for two existing vehicle lines from the US for the EU market. Doing this takes about 2.5 years and $12 million. A good deal of the effort is conforming to emissions standards.
We shouldn't forget the big picture. Saving our economy should be the goal of any bailout. Any bailout package should consider an option that has the greatest return in terms of sustainability, jobs, and social and environmental benefit. Investing in mass transit projects is the best way to achieve the greatest return. We could create hundreds of thousands of jobs and kick our dependence on foreign oil. But investing in the automotive industry is investing in the past, not the future.
There you go again Mr. Garrity...
Again, you refuse to offer a valid analysis as to why fast food jobs or that of pumping gas should pay more than minimum wage.
You also refuse to address the fact that UNIONS have destroyed every manufacturing industry in the united states.
You refuse to address the fact that the big three automakers pay $79 an hour including pension and healthcare costs for positions that, for the most part do not require more than a high school education to perform.
You do not address the fact that it is fundamentally wrong to create a middle class by overpaying workers...all this does is increase the price of the manufactured goods.
If workers cannot afford to purchase the goods they are working to produce then too bad. Buying a car is not a right...they can always purchase a used car instead. But, if markets are allowed to function, then the automakers would figure out a way to reduce the cost of manufacture or, if not...because the major cost of manufacture is labor...they should go out of business.
You do not address how you would determine what you would pay your employees if you were the owner of a fast food joint, gas station, or automaker.
The fact that you do not address the merits of the argument but, rather, call me silly names...only demonstrates that you LOSE the argument. You advocate socialist policies and, again, seem to know nothing about how to operate or manage a business.
Chris, a couple of points...
1) You make the point that all people who come from so-called "nuclear" families are superior to those who do not. I come from a single parent home and I can tell you from all certainty that I have achieved a lot more than some of my friends who grew up with two parents. I was at the top of my major in college. Not only is your comment offensive to a large segment of this country, but it is far behind the times.
I believe you are making a rash generalization from a correlation. Children in nuclear families tend to have less mental problems and stress than their single-parent peers, but that doesn’t mean that all children from single parent families can’t function normally or are somehow inferior.
2) Wages are not tightly correlated with education level (contrary to popular belief), so if you raise that argument, you are going to have to advocate for a lot more than wage reductions for UAW workers. For example, the average assistant professor in the humanities or social sciences makes around 40k. Do you suppose that's fair when the average MBA makes something like 70k-80k with only a couple years experience and an embarrassingly easy degree? Electricians and plumbers make more than the average adjunct sociology professor; do we need to reduce their wages and benefits?
Please… in our country, the factors that go into “market-rate” wages are all over the map, they don’t simply correlate to education/experience.
Union pay is better than non-union pay, but that is an argument for unions, not against them. It is in the best interests of all workers to form and join unions.
3) According to the UAW, the average unionized worker in a goods-producing industry makes around $20 an hour plus benefits (which brings it up to around $30 an hour). In 2006, the average assembler made about $28 an hour while skilled auto workers make about $32 an hour. Labor costs make up just about 8.4% of the total cost of the average vehicle. American auto workers are extremely productive, according to most economists.
http://www.uaw.org/barg/07fact/fact02.php
4) In America, some people have more privilege than others. For example, I have friends whose parents financed their educations and supported them through college. I did not have that and even though I got through school and graduated the top of my major, I’m saddled with debt and can barely make ends meet on my salary as a young professional. So think about that before you rattle on about how poor people aren’t working hard enough and don’t deserve high wages. Even after working hard and earning an education, I’m still not doing much better than I did when I worked in fast food. That isn’t much incentive for poor people to go get an education.
5) I’m not going to argue with you in favor of socioeconomic human rights, because you obviously oppose that notion. But I will make the argument that there are social and economic benefits to paying workers a living wage. One benefit is that we don’t have people living off the welfare system. I’m sure you can agree with the notion that we need people to work for what they earn instead of living off the government.
Another benefit is that we do not have families and children sleeping on the streets. As much injustice there is in paying an auto worker $30 an hour, there is a lot more injustice in having people struggle to afford basic necessities on what we call here in the U.S. a minimum wage, which even full-time is below the poverty level. You may say “tough luck”, but perhaps we’d have less people on welfare if work paid in this country. Why should people work hard if all they can do is make the minimum wage?
You argue in favor of a meritocracy that pays workers “what they are worth” in terms of producing wealth, but by such a system a factory assembler certainly should get paid more than a college professor or even an MBA because of how extremely productive they are. Economic studies prove that in the United States, manufacturing workers are extremely productive despite their high wages. Do you think that maybe, just maybe, high wages can inspire workers to work harder and better?
After all, the auto manufacturing workers are actually achieving what they set out to do – produce a working vehicle. It is the CEOs and executives that are the ones not performing in their role of selling vehicles and returning a profit.
Urban Patriot,
1) Nature has dictated that the preferred, optimal setting in which to raise children is that of the man and woman together...therefore, nature has decided that this setting is superior.
2) My point about wages is that number of workers available to perform the job, skillset required to perform the job and educational experience required to perform the job should determine wages...period.
3) The average cost per UAW worker, inclusive of pension and healthcare costs is $79 per hour. The average working family earns $48 an hour. Unions eliminate the competition among wages that are paid and DRIVE UP the cost to produce goods to the consumer. Union employees are OVERPAID...that is why EVERY INDUSTRY IN THE UNITED STATES HAS BEEN DESTROYED. This is a fact.
4) Higher education is not a right. Yor do not have a right to make someone give you a job at what you feel you deserve. Too bad that your parents could not pay for your education...the fact that your friends parents could is of no consequence...they have every right to spend money they worked for on whatever they so choose. Education is no guarantee for any type of success and it does not come with a money back guarantee. Your education simply means that, on average, over the course of a working lifetime, you should make more than those with only a high school diploma. If the job that you perform can be done by anyone, by simple economics, that job will not command a high wage...like pumping gas.
5) Living wage as defined by whom? If pumping gas for a lifetime means that you can only rent, not own, never go to the movies, eat out for dinner, bring a bag lunch to work...etc., then that is what your life is...and it is not the fault of anyone else. If families cannot afford to have children, then they should not be engaging in activities that produce children...it is called responsibility...living within your means. As far as you are concerned...to cut down on your debt...you should NOT be spending you money on eating out...movies...beers...social activities after work...etc. Tell me what you take home is...and what your fixed expenses are and I will tell you what the problem is...also, if you do not like what you are being paid, quit and find a job elsewhere...or open your own business.
I favor a meritocracy that pays workers what they are worth...yes. Not in terms of the wealth they produce...no!!! Menial labor jobs that ANYONE can perform must pay menial labor wages. Your statement "Why should people work hard if all they can do is make the minimum wage?" is absurd on its face. They should work for minimum wage if that is the only wage that they are qualified for because they are ABLE BODIED...and no one...the taxpayor or the GOVT should reward any able bodied person for NOT WORKING.
The American consumer disagrees with you...they are not buying american because the quality is simply not there...honda and toyota are better quality vehicles...look at market share lost due to foreign competition...again, your numbers are wrong...$79 hour for UAW workers...grossly overpaid...THAT IS THE PROBLEM.
You also seem not to understand how to run a business for profit were you to own one.
Seriously, let's just leave the market with fair competition. Imagine that if during Olympics all of the athletes had to compete as always, and some "big three" athletes were allowed to use banned "performance enhancing" drugs?
Just leave the Big Three alone, and whatever happens - happens. If they survive, they will come out stronger. If they naturally die (like dozens of American brands in the previous century), they will clear up space for competitors who are better adapted to fair and open market. And those competitors are going to hire up people with experience and knowledge that will be laid off by the Big Three.