One of the interesting things to me about talking to other wonks about the bailout is that the wonks who support the bailout are, almost without exception, outside the beltway.
All the analysts from left to right basically agree what should happen to GM, if there is a bailout: it needs to get a lot leaner and a lot meaner: slash the number of marques and car lines it makes, concentrating on a profitable core. Smart commentators like Felix Salmon and James Surowiecki view the bailout as a way to give GM enough breathing room to accomplish that transition.
But no one inside the beltway, left to right, thinks that this kind of pseudo-LBO in any way resembles what is actually going to happen. The entire motivation for the bailout, which is reportedly quite unpopular outside the midwest and the labor movement, is to keep GM from precipitously shedding jobs. And every marque you shut down, every line you slash, means closed plants and layoffs.
Mind you, I'm talking about the supporters of the bailout. They view the thing as half Hail Mary pass to shore up a profitable sector of the labor movement, half fantasy bid for a green car that none of them has the faintest idea how to build (memo to Josh Marshall: try strapping a car seat--or a working class salary--into a Tesla roadster. Then try charging it in the natural market for such a car, the urban, street-parking environment). They emphatically do not view it as an orderly means to let GM shed 2/3 of its union workforce, which is one of the sunnier figures I've heard for a profitable firm.
The opponents, meanwhile, are considerably more cynical. They (we) think that even if Congress allows substantial layoffs, they will do so in a way that will cripple the firms; plant/brand closures will be decided based on where the cars are produced, rather than their profit margins.
By far the most optimistic estimates in the financial community come from the people who have virtually no dealings with Congress. Anyone who does, recognizes that this is not going to be bridge financing towards a massive restructuring. I'd wager even the supporters in the DC area would admit that GM is probably going to be back for more within the year. The company has the capacity to produce 17 million cars, a little more than it sold two years ago. Projected sales next year are under 12 million. Their cash burn rate right now is $2 billion a month, which could well get worse. Unless GM starts slashing jobs, closing plants, and shuttering venerable marques like Buick, $25 billion is about a year's worth of lifeline.
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
You're forgetting their obscene labor union contracts. Unless there are some serious concessions on that front, nothing is going to help those companies.......nothing.
The UAW's already on record as being willing to make exactly zero concessions for their members and their respective employers being bailed out.
It's time someone called out this extortion for what it is: using the formerly-Big Three to launder payments to the UAW rank-and-file and so make a partial down payment of Obama's debt to Big Labor with taxpayer money.
Bankruptcy laws exist for a reason. GM has every right to utilize those laws. I suggest they do so ASAP. The company will not shut down, they will continue to operate. Happens all the time. As for sales, considering all the used car lots around this town, I'd say there is more than enough supply for some time. Its called supply, demand, product cycle etc. Many businesses deal with it, GM can as well. Let the chips fall.
It's unbelievable that GM apparently has no intent to make any changes. No plans to shed marques, no plans to shed dealerships, no plans to shed production, no concessions from UAW, no change in management...
When Chrysler went to congress in '79 it first brought in Iacocca with his symbolically-brilliant $1 salary and a plan. GM actually thinks that they can get $25b that should be going towards credit-easing, without changing a single aspect of their business. And they'll probably get their way, too. Amazing.
The UAW's already on record as being willing to make exactly zero concessions for their members and their respective employers being bailed out.
The problem isn't the UAW's current contracts with the Big 3, it's the legacy benefits from the contracts in the 1980's and 1990's that they have no power to change. Any bail-out is going to be to preserve those contracts, if the Big 3 was allowed to jettison them they could probably get by.
Any bail-out is going to be to preserve those contracts
Somebody needs to explain to my why my tax dollars should go to pay for the gold-plated medical care of UAW retirees. If Medicare is good enough for everyone else, then it's good enough for them.
Very interesting post.
"Their board rooms in my view have been devoid of vision. They have promoted and often driven the demand of inefficient, gas guzzling vehicles, and dismissed the threat of global warming."
- Chris Dodd today on the Big 3
Isn't it reassuring to see that our lawmakers have a firm grasp on the causes of this crisis?
Well we used the previous 'bailout' to launder money to politically well connected Wall Street firms (no, not well connected, damn near Chang and Eng with D.C.). This partially halted costly but necessary restructuring of the financial sector -- for example leaving to to community banks and thrifts and credit unions the business of making homeloans and being responsible for their payback. It also is somewhat limiting market correction in housing. BTW he build up of of identi-kit McMansions and Biego Stucco Tracts, many built with the help of imported low-wage low skill labor is a misallocation of resources that the Big 3 can only dream about -- it is a permanent error and a blot on the land. So, I can live with some chump change being directed at some poor slob that has worked 15 years on the assembly line.
Crappy cars can be burried in landfills or left to rust in fields. Overbuilt housing means crack houses, prostitution dens, fetid pools breeding mosquitos, and general decay.
"Somebody needs to explain to my why my tax dollars should go to pay for the gold-plated medical care of UAW retirees. If Medicare is good enough for everyone else, then it's good enough for them."
Agreed.
OTOH, since Medicare spending comes from the same pool of federal tax dollars that will be financing the bailout, the real cost to the Treasury of preserving those health benefits only the difference between current expenses and Medicare for those same people.
On the gripping hand, it would be more transparent to have those retirees formally enrolled in Medicare for future budget projections. A series of bailouts for Detroit can be marketed as 'emergency funding' without implications for the sustainability of new spending commitments, but not so for larger Medicare rolls.
Somebody needs to explain to my why my tax dollars should go to pay for the gold-plated medical care of UAW retirees. If Medicare is good enough for everyone else, then it's good enough for them.
I wasn't all that clear in my post but, I agree. My point was that the bail out is to preserve pensions and gold-plated medical benefits for retirees, not so much to preserve jobs. I feel that if the Big 3 enterr bankruptcy and jettison the legacy pension and medical benefit contracts that would likely be enough to save them.
Rob, Carl, it's not just former UAW members that get GM health care plans after retiring. Salaried workers get it too. And there are big rafts of under 65 retirees, who aren't eligible for Medicare.
..Rob, you aren't suggesting everybody be eligible for Medicare are you? :-)
http://medicareforall.net/
http://www.thenation.com/doc/20060206/stark
Again, Chapter 11 is the only way forward. The automakers and parts suppliers should be working on securing DIP financing for Chapter 11 reorganization.
I think Mitchell Young's got a point up there. The whole reason we got into this mess, the reason we've got all these mosquito-infested crack houses and dens of iniquity in affluent suburbs, is that we've let the market to decide what kind of houses people want, instead of letting them decide for themselves democratically via the government, which, unlike developers motivated by greed, at least has an incentive to give people the houses that are right for them. Face it, if a developer puts you in a house you don't want, you've got no recourse, but if the government does, you can vote for somebody else in, at most, four years. Usually less. Your voice will be heard.
We've seen these problems time and again, and anybody who thinks it's any fun for a retired autoworker to learn to make a living by prostitution in a mosquito-infested den knee deep in water, well, all I can say is, it's not. It's not fun. We need to bail these dens out, because they're breeding in there.
I'll consider favoring the bailing when the UAW agrees to the elimination of every single "work rule" in exchange for the bailout.
No massive increases in productivity? Then no bailout.
Somehow on this site the idea got going that there is overlap between Medicare and the GM retiree benefits. Not so.
The GM retirees have always been enrolled in Medicare and get those benefits. The plan is "integrated" and thus pays only for benefits not provided by Medicare. Carl, those folks are already in the Medicare spending projections.
Of course, Medicare only applies to persons over age 65 (or disabled). So, before age 65, the benefits of nearly all company retiree medical programs are larger and more costly.
KM wrote "Bankruptcy laws exist for a reason. GM has every right to utilize those laws. I suggest they do so ASAP."
The objection I've heard to allowing GM to go into bankruptcy is that consumers won't buy cars from a car maker in bankruptcy. But can't the government somehow guarantee the GM's warranties? Wouldn't THAT help mitigate their problem? Arlen Spector brought the idea up yesterday during the Senate's blabathon on CSpan. (He was actually the only Senator that seemed interested in coming up with a cheaper alternative. The rest of them were either predicting total doom and gloom for the US if the Big 3 didn't get their money OR they just "No bailout.")
Regardless of what happens the industry is going to face alot of pain. The demand just isn't there anymore to support it as it's currently structured.
In fact, I think MOST industries are just going to have to face the fact that people are going to tamp down on their spending. One reason we are in this mess right now is consumers spending beyond their means. We can't prop up this economy by throwing government money at this problem. The only way out is the creation of better paying jobs so consumers can actually AFFORD the lifestyle they enjoyed the last 8 to 12 years. But that requires some creative entrepreneurship, untapped markets and capital. (Just a thought: Thank goodness the Dems don't seem interested in pushing protectionist legislation. Once that begins our country will truly be screwed.)
Re: One of the interesting things to me about talking to other wonks about the bailout is that the wonks who support the bailout are, almost without exception, outside the beltway.
And this is a bad thing how? Seems to me people outside the Beltway might be a bit more plugged in to the real economy and less addicted to the high octane booze of naked ideology.
Re: Somebody needs to explain to my why my tax dollars should go to pay for the gold-plated medical care of UAW retirees.
While I rather agree that retirees who can go on Medicare should, what should be done with those who are too young for Medicare? They're also likely to be too well off for Medicaid (meaning they are not living in a cardboard box), and the chances of them finding a job with benefits in today's economy about about equal to those of George Bush leaving office in a blaze of popularity. Some of these folks (and their spouses) have serious medical problems. Are you proposing that we simply let these people die?
JRP wrote "The GM retirees have always been enrolled in Medicare and get those benefits. The plan is "integrated" and thus pays only for benefits not provided by Medicare. Carl, those folks are already in the Medicare spending projections."
Thanks for the info. The more I hear the more I think they need to go into bankruptcy to break these obligations. As I said, there will still be alot of pain in the industry. But the only way they'll be able to survive in the long run is to reduce the number of dealers, get major concessions from the UAW, etc. The sad thing is, the carmakers and the union have made a lot of changes in the last few years (at least that's what I've read). Yet they're still in trouble.
'McNamara' proves once again that libertarianism is applied autism. (Udolpho). The fact is millions of people' bought' homes they couldn't afford, using 'financial products' pushed by the 'finance industry'. No where did I say government should take over. What I do say is the local banks and savings and loans which operate under stricter rules and know their areas better are better lenders. They should be grabbing market share while the large banks fail.
You doubt the wreckage that the overbuilding of houses has caused in SoCal (among other places)? I suggest you take a look at this.
http://latimesblogs.latimes.com/laland/2008/10/trashing-out-in.html
Here's a clue -- abandon properties *do* attract whores, pimps, drug dealers etc. Abandon swimming pools *do * turn fetid and breed mosquitos and cause a 'collective' (oooooh, collectivist !!!) health danger.
Sure is great for the government to have so much power, isn't it? Seeing as how they always try to do the right thing, and are never beholden to powerful interest groups. What a contrast to the greed of the free-market system, which only goes around making things people want. It's such a comfort knowing that we've found a way to have the 'creative' without the 'destruction.' But then again, that's why we have powerful governments, to give people something for nothing.
Wonks talking to each other about the bailout? This is what: journalism? Policy? Ivy League alumni newsletter?
Why is it we get all het up about workers keeping jobs, pensions, and health insurance when wonks are running around DC trying to decide what is best for the working stiff? Who elects them? Presumably they are getting paid for this? Health care?
I hold no brief for GM's cast of clownish execs. Still, I hope they get the money if only to watch the professional twiddlers retire to the fainting couches. If you are going to assume it is all right to tell hundreds of thousands of working families "f**k you," you might as well be prepared for them to return the favor. That's just a consequence of the systematic program to destroy the American middle class by the free market frauds and other assorted know-it-alls. Suck on this.
Megan, check out the Buick sales data in China for the past few years. I doubt Buick will be shutting down anytime soon.
Many companies build automobiles and trucks in the US. Apparently, 2.5 of them are in trouble, while the others are not. The other companies have Japanese, Korean and German names; but, they employ US workers in US factories, frequently with US managers. The 0.5 of the "Big 2.5" even shared one of the German names at one time.
If the US "Big 2.5" fail, US automobile and truck demand will remain relatively unchanged and the Japanese, Korean and German manufacturers will require more workers to build the increased numbers of vehicles the market will require.
However, longer term, "Card Check" may be "the great equalizer" which causes the companies with the Japanese, Korean and German names to ultimately fail in the US as well.
The "bailout" might just give the UAW enough time to kill them with higher wages and benefits and tighter work rules. However, the current employees of the Japanese, Korean and German manufacturers may also realize the UAW 'death threat" and refuse to sign the authorization cards.
Hope springs eternal!
Many companies build automobiles and trucks in the US. Apparently, 2.5 of them are in trouble, while the others are not. The other companies have Japanese, Korean and German names; but, they employ US workers in US factories, frequently with US managers. The 0.5 of the "Big 2.5" even shared one of the German names at one time.
If the US "Big 2.5" fail, US automobile and truck demand will remain relatively unchanged and the Japanese, Korean and German manufacturers will require more workers to build the increased numbers of vehicles the market will require.
However, longer term, "Card Check" may be "the great equalizer" which causes the companies with the Japanese, Korean and German names to ultimately fail in the US as well.
The "bailout" might just give the UAW enough time to kill them with higher wages and benefits and tighter work rules. However, the current employees of the Japanese, Korean and German manufacturers may also realize the UAW 'death threat" and refuse to sign the authorization cards.
Hope springs eternal!
Dr. Smart, every current or former auto worker and auto executive, who supports Federal Government aid to the auto industry, thinks it is all right to tell every other tax paying American "f**k you, give me money!". How should tax paying Americans who don't support the bailout respond to such thuggishness?
If the current shareholders are wiped out, and when the union workers and pensioners accept an immediate reduction in wages and benefits, to that level enjoyed by non-UAW autoworkers in the U.S., and when the UAW and Big Three management accepts any job and brand reductions needed to make the Big Three competitive, and when the upper level management of the Big Three agrees to accept the majority of their compensation in the form of stock grants which cannot be sold for 7-10 years, and when all state laws concerning closing dealerships are overturned by Congress (there is no doubt this involves interstate commerce), then federal aid to the Big Three would be worthy of discussion. Until then, it is simple thuggery.
Bush's one chance to redeem his Presidency (somewhat) on the domestic front would be to make a public offer to Congress, the UAW, and the Big Three's management, with those conditions. If nothing else, it would establish once and for all that those three entities were most interested in self-dealing, as opposed to saving the American auto industry.
Bailing out the automakers truly opens Pandora's box; if Congress provides billions in loans to a poorly managed, perennially unprofitable business sector such as the Big Three, who clearly are not going to emerge lean, mean and profitable on the other side of a bailout, then how do you shut off the spigot. There are tons of businesses, munipalities and regions that are equally or less pathetic than our automakers, are they going to get turned away from the trough?
Megan's point is that people inside the Beltway might be a bit more plugged in to how an actual bailout — as opposed to some ideal bailout — would be structured.
It's oh so nice to be blithe about GM, and Fords, impending bankruptcies. There is a strong probability that they will not be able to reorganize. There is a non trivial probability that the cascading effect on the real economy will add several negative points to the GDP for years to come. There is very little cash in the world at this time free to buy up the good assets. If many of the plants are totally abandoned they might not ever be worth restarting. The deflation of those assets puts any return on their outstanding debt into question.
A compromise solution would be to use bailout money to support the reorganization. Keep the core running, guaranteed.
There is a systematic risk here higher than that resulting from the failed bankster pigmen firms where as much as $3 trillion of Uncle Sams money is either gone or at risk.
*If the dollar would crash by half then yes the plant assets might be revived, by lets say, China. There is a tin foil hat theory that the selling off of US assets and the bankrupting of the Treasury were a plan. Planed or not if and when it happens you can bet half of America will think it was and the French Terror might look like a picnic under some perfect storm of troubles.
It's going to be really interesting to see how all this plays out in the new administration. If the bail-out does NOT require the necessary streamlining in UAW contracts, dealer franchises, brand reduction, etc, then nothing will be solved. The companies will burn through the cash quickly and be in as bad a shape as ever, needing another big infusion within a year. This would be viewed as a major early screw-up by the new administration.
BUT, if Obama et al, DO demand the needed painful changes as a part of a bailout, can you imagine the reaction among Obama supporters on the left? Wow.
So what would I do if I were in the Dems shoes? I think I'd arrange for the Gov't to provide debtor-in-possession financing if needed but otherwise let the Chapter 11 process work and avoid taking the blame.
As I understand it, the idea is that the federal government will pay to buy out some workers, fund the pension obligations of retirees, pay off dealers, and carry the company for three years, all at a cost of approximately $50 billion (this is just for GM), plus its share of the $25 billion in loans. Then, in three years, GM's cost structure will match the imports, and its only problem will be that its product is (slightly) inferior.
So, basically, we're paying $50 billion to have a sick and small GM, and to have lots of well-off UAW retirees.
How does your 401(k) look? What about your retiree health benefits? Me too. Fuck 'em.
I'll consider favoring the bailing when the UAW agrees to the elimination of every single "work rule" in exchange for the bailout.
No massive increases in productivity? Then no bailout.
Amen.
I don't understand why so many of the pro-auto maker bailout folks are acting so hysterical right now. Even if it fails to pass this week it will surely pass under the new Congress with all the Dem gains. I'd be highly surprised if any of the Big 3 went under in the next 1 1/2 months. But even if I'm wrong and the situation is as dire as the Big 3 and UAW claim it is the Dems DO have an alternative. They can take the money that's supposed to be used for advanced technology loans and give it to the Big 3. That $25 billion should be enough to keep the Big 3 afloat until Congress reconvenes in early January. Frankly, Pelosi's refusal to tap into this money is idiotic. She says it's a bad idea because it would "unwisely divert money urgently needed" for industry modernization. But who gives a crap about modernization if they're on the verge of going under? In fact, if the bailout doesn't pass and the Dems DON'T tap into this money I'm going to be calling shenanigans on this whole spectacle. It'll look like the Dems could've waited until Jan but tried to push it through right now to get a little political coverage. That's classic Pelosi, the biggest partisan on Capital Hill.
Dr. Smart, we've already bailed out Detroit. Back in the 1980s we imposed import quotas on Japanese cars that drove up the price of the average Japanese made car by an average of $1,500. Why did we do this? Well we did it because all of those working class families you're so concerned about, the ones where daddy or mommy went off to work in one of the big 3's plant where they produced lousy cars that got terrible mileage, fell apart and occasionally exploded and burned people to death couldn't compete with the Japanese, who were being all devious and inscrutable and oriental 'n shit by producing cars that ran well, got decent mileage and didn't fall apart after three years. So in order to confront this malicious Asian plot, this automotive yellow peril, we had to drive up the price of Japanese cars so that American workers could continue to produce lousy cars that got terrible mileage, fell apart and occasionally exploded and burned people to death.
Of course there were unintended consequences to this, there always are, one thing that guys like you never understand. The Japanese figured that if they were limited on the number of cars that they could sell that they were going to make as much money as they could on those cars, and thus were born Acura, Infiniti and Lexus. The irony is delicious, when they were no longer allowed to sell cheap, well-built cars to Americans because they were wiping out Detroit they just started selling expensive, well-built luxury cars and kicked the living shit out of Cadillac, Lincoln, Mercedes and BMW.
Guess what, Dr. Smart. The working class families whose jobs are dependent upon the Big 3 automakers have been saying "We're going to build shitty cars that you don't want to buy and if you don't like it fuck you! We'll get the government to force you to buy our shitty, overpriced products. Suck on it, bitches." to the American taxpayer and American consumers for 30+ years.
Don't whine and piss and moan and blame management while trying to absolve the workers on the factory floor for this state of affairs. Everyone in Detroit, management and UAW member alike, everyone from the factory floors to the executive suites made lots of money by fucking over the American consumer. Those working class families you care so much about took home nice hefty paychecks for producing Ford Pintos, AMC Pacers, Chevy Chevettes, Pontiac Azteks, Ford Expeditions and Excursions and didn't feel a bit of shame for fucking over the working class families who bought these pieces of shit.
Have you, when you're not being incredibly self-righteous and bleeding concern out your ass about the plight of the working classes in Detroit, ever considered the plight of working class families who have had to deal with paying for the maintenance and fuel for these lemons? Did you ever think about that Dr. Smart? Did you ever consider the plight of the guy stuck with an expensive set of repairs on his Ford, GM or Chrysler car, repairs that he had to pay for so he could get to work and support his family? Has this thought ever crossed your tiny little brain? Or are those people just supposed to suck it up, eat shit and hand the big 3 more money out of some sense of working class solidarity?
I'm sick and fucking tired of the Big 3, the UAW and their apologists, shills and various assholes telling me that I and other Americans somehow owe them something. For what? Producing cars that we don't want to buy? Failing to learn from the competition? Being bloated and stupid and assuming that oil would never go above 30 dollars a barrel? Having nothing but contempt for the people who buy your products? The only thing that American taxpayers and consumers owe anyone at the Big 3 is a serious beating.
Tversky:
I don't understand why so many of the pro-auto maker bailout folks are acting so hysterical right now. Even if it fails to pass this week it will surely pass under the new Congress with all the Dem gains.
With luck, at least GM will go bankrupt before Jan 20. Suppliers are already refusing to give GM anything on credit. Would you buy a GM car, knowing that your warranty could be worthless a month from now? (In fact, I don't know about that last one. Would the warranty be worthless if GM goes into bankruptcy? I'm certainly not going to buy a GM car until I know the answer to that.)
Can Congress redirect money without Bush's ok? If not, I hope he demands passage of the CFT, at least, in order to allow the re-direct.
Mitchell Young, dude, relax, I wasn't playing libertarian. Just gently satirizing your rhetorical enthusiasm.
Quite frankly, if every single human being in Southern California were eaten by brobdingnagian whore-fed mosquitoes tomorrow, I would stand by and cheer as the greatest mosquito of all chased the last screaming Angeleno across the desert.
Wile E that is quite the stem-winder. While you wipe the sweat from your brow and take a sip of cool water, let me suggest that those big gas-guzzlers that no one supposedly wanted sold really nicely in that big free market where conservation was just a silly personal virtue.
I don't know why you hate on American workers who are just tryin' to get-er-done. Let me ask you: do you blame bank tellers for the financial crisis?
The inability of anyone in these comment threads to make a case against the bailout that doesn't cast the UAW as a band of mustachioed bandits is illustrative. As with previous discussion on teachers' unions, it's really an aesthetic allergy more than anything. How dare the red menace tread on your beautiful mind.
GM would get 12 billion of this 25.
That's 4 months @ their current cash burn. Not to mention every creditor they have is going to want to get paid out of the 12 billion. I predict a run on the GM once they get the money, which will shorten how long they can last. This is a bridge loan to provide them with the time to beg for more money, nothing more.
If you want to save GM, really save it: Have the government provide debtor in possession financing for the 11 (no one else will touch it).
Otherwise let it die, because you can throw nearly any amount of money at them you please, they will piss it away. A lot of bailout fans are calling this bankruptcy "unthinkable". It's very thinkable; anyone who could read their quarterly reports knew this was coming years ago. GM hasn't had a profitable year since 2004!
2004!
2004!
Sudden economic downturn my ass. They've been bleeding out for 4 years; this recession was merely the coup de grace. And Rick Wagoner has putzed around the entire time half-assing it and now he's at Washington in a $3000 suit begging for money so he has the time to beg for more money. Dude couldn't even restructure his begging to fit current trends.
Dr Smart, do you not get it? The bailout shovels money from the taxpayer to the UAW members. That's the whole point of the exercise. Yes, management will get their share. But most of the billions will go to UAW members.
You have to understand the bailout as a very inefficient way to pay off Democratic Union Supporters in the UAW.
$50 billion goes into the big 3.
Management takes a cut.
The suppliers take a cut.
Then some goes to the factory workers.
The factory workers use it to pay their UAW dues.
The UAW gets it's money.
My guess is that $50 billion probably represents no more than about $100 million in the pockets of the intended recipient (the UAW). It's a pretty inefficient way to pay off ones political supporters...
"Rob, Carl, it's not just former UAW members that get GM health care plans after retiring. Salaried workers get it too."
Adirondacker, yes, salaried workers get some "Medigap" retirement health benefits. But no, they don't get the UAW's gold-plated version. Back in the 1990s, GM slashed the benefits for the salaried retirees — there was even a case that went to the U.S. Supreme Court over it, upholding GM's right to do so.
The retirement benefits for UAW retirees, on the other hand, were spelled out in the union contracts. Which has given us, for the last decade-and-a-half, the situation where a line worker had better retirement benefits than upper-middle managers who regularly made multi-million-dollar decisions.
Have you ever pruned a tree? It's simple. cut off the dead parts and the tree will grow bigger and faster than ever. That's what needs to happen with the Big 3. Prune it down to the bare bones and insist the companies enact fixing principles and consult with advisors. Maybe we'll get a bumper crop of cars in the next decade. Of course, it's not in the nature of the liberal illuminati to prune. They want to tack on even bigger pensions and spending plans to "kickstart" the dying auto industry.
A defense program I once worked for made it a point to have major subcontracts in all 50 states so as to make the main program politically unkillable. I think the car companies are doing the same thing using their suppliers.
I don't see how you can give in to this kind of extortion.
Would you buy a GM car, knowing that your warranty could be worthless a month from now?
Would you buy a GM car, knowing that your warranty could be worthless a month from now?
Would you buy a GM car period, knowing that GM has a 30 year track record of producing inferior products at higher prices compared to its foreign competitors?
quadrupole, the manufacturers supply political cover as convenient foils. The UAW's primary interest is in survival, not a one-time raid on the Treasury. If autoworkers don't have jobs in union shops, they don't need to belong to the union.
Just as with the Paulson Plan for Wall Street, the $25 bil should be considered the opening round. Expect dense traffic on the Detroit-Dulles air corridor for the next several years.
try strapping a car seat--or a working class salary--into a Tesla roadster. Then try charging it in the natural market for such a car, the urban, street-parking environment
I'm pretty sure the Tesla already comes with seats - at least two of 'em - and anyway, it's a sports car. Is the natural market for such a car really to be parked out on the street? I mean it's an open-top car. Do people really leave those out? In the rain and everything?
Are you proposing that we simply let these people die?
I am proposing that they get the same benefits from taxpayer dollars that other similarly situated taxpayers get. If Joe the Non-UAW-worker would die in similar circumstances, then yes, I am proposing that we let them die.
I am doing no more than opposing creation of a favored class of Federal healthcare beneficiaries who get more tax money than the rest of us by virtue of having worked for incompetently run companies.
I'm pretty sure the Tesla already comes with seats
Perhaps this was merely lame humor, but the term "car seat" is generally understood by us bitter clingers to mean children's safety seats. Like the two I have strapped into the back of my SUV.
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I'd wager even the supporters in the DC area would admit that GM is probably going to be back for more within the year. The company has the capacity to produce 17 million cars, a little more than it sold two years ago. Projected sales next year are under 12 million.
Actually, those figures are for the entire North American auto industry, not GM. But that kind of error is typical in this debate. And the point that the solution which will emerge from the inside the beltway process will be very different from the way things appear outside the beltway is well taken. It's sufficiently frightening to see the way Treasury has been handling the financial sector efforts - but to watch the utterly clueless in Congress (Sens. Dodd, Stabenow, or example) and the way they want to deal with auto manufacturers is far worse. GM should know from the way Congress has received the AIG process - that the bailout they are asking for comes at the price of adding 535 ignorant members to your board of directors. Good freaking luck!
Dr. Smart - The inability of anyone in these comment threads to make a case against the bailout that doesn't cast the UAW as a band of mustachioed bandits is illustrative. of the fact that the UAW is trying to get a lot of money from the taxpayer that most people would have to work for? Isn't that the definition of a bandit?
Why should the UAW get special privileges at the expense of their neighbors?
As with previous discussion on teachers' unions, it's really an aesthetic allergy more than anything. <-- insert supporting evidence here.
Yes! That's it! People don't hate having congress funnel money to politically connected groups or enacting protectionist measures which place added burdens on everyone else. They're just allergic.
Dr. Smart, before you start pontificating on why people's flawed psychology causes them to disagree with you en masse, first you have to demonstrate that they are factually, objectively wrong.
You've missed that step. Jumped right over it. And if you don't make a supported argument you will not persuade anyone who disagrees with you.
Okay, McNamara, in the cold light of day I did overreact. I'll save that for my trolling over at (un)Reason. My point was, however, that investment bankers have exactly one function in life, the productive channeling of capital. They failed miserably, and we are stuck with the results.
I would like to say that those claiming the last 'bailout' of Detroit -- specifically Chrysler -- was a failure. It obviously wasn't. The industry went from being terminal to inventing whole new categories of well-selling vehicles (or radically reworking them). The much maligned mini-Van, the apotheosis of the Sport-Ute, Those didn't come out of where-ever it is that Japanese build cars. Detroit had a near three decades of solid performance after the Chrysler-loan (repaid with interest) and the import quotas.
McNamara -- you. are. awesome.
I'm guessing that never before in human history has anyone ever used the phrase "brobdingnagian whore-fed mosquitoes".
However, I will certainly be looking for ways to work it into conversation in the future.
It'd be nice to see Buicks off the road, provided their drivers go with them. Why do the worst drivers all seem to drive buicks?
Dr. Smart reads alot like Michael Garrity.
UNIONS have destroyed every manufacturing industry in the united states. Skillset, educational level and number of workers available MUST determine wages for jobs. If you do not need even a high school degree to perform a job/function, then that job must pay low, menial wages...this is what supporters of the bailout REFUSE to understand. Pumping gas, working in fast food are all positions where it is universally understood that they are MINIMUM wage jobs. It is high time that the same supply, demand, marketplace rules apply to the automakers. The union employees have been OVERPAID for the last 50+ years and this needs to STOP!!! Menial labor jobs MUST pay menial labor wages. ALSO, about the "gap" in Medicare coverage for retirees under 65...listen to what you just said...no one should be retired before 65...they should still be working...just like the majority of americans. The American people have ALREADY decided that the automakers should fail...they did this by not buying their high-priced, low quality cars...abd I would bet that one additional reason was that they did not want to see money they worked for go into the hands of OVERPAID union workers...
Back in July, Fortune published an article about the challenges Tesla Motors has faced in producing its roadster ("Tesla's Wild Ride"). Bear in mind that it's a lot more difficult to build a profitable mass production car than it is to build a high-priced niche sports car. Tom Friedman's idea that Steve Jobs could start an auto company and produce a mass production hybrid 'iCar' in a year was a little naive.
Let them Die! Set aside a few extra bucks for increased unemployment and retraining and move on.
The bankruptcy process will handle the deconstruction just fine. The first job of the bankruptcy court will be to deal with the warranty issue and get them some credit. Delaying the filing is only making things worse. It will be messy, but there's no better way.
There are a lot of tough problems and difficult questions in this crisis. This isn't one of them. Pouring in government money will impede the inevitable and delay our economy's return to health.
Many(especially democrats) are operating on the mistaken premise that they have the power and know-how to fix this. They don't.
Soemthing that hasn't been covered that some people -- like Kaus -- have been on to... Because of work rules demanded by the Union it takes several more hours for a big 3 manufacturer to assemble a vehicle than Toyota/Honda whoever. (see kausfiles) PLUS they have as much as a $30 deficit in wage and benefit costs PER worker PER hour (see mankiw). This is one reason some GM cars are so lame because the overriding design consideration is ease of assembly, not style or quality so they can narrow that gap as much as possible. Especially on low-end horror shows like the Cobalt. PLUS they have what works out to about a $1000 cost PER vehicle in legacy retirement pension and health benefits (see kausfiles again). THEY CANNOT COMPETE, even against US based foreign manufacturers.
The only way they can do it is to shed the wage, benefit and pension and work rules to get more productive and there is only one way to do that and that. Bankruptcy! So, yes, fuck em and let em sink. Something resembling a profitable core will emerge from the wreckage. Management deserves its share of the blame for agreeing to all this bullshit and allowing themselves to be argued into a shop-floor culture that thrives on filing grievances for the stupidest shit you can imagine. But there was no incentive to do otherwise until now as they stare into the abyss.
Wile E Quixote, @#$% yeah! Preach it, brother! Hysterical.
Those of us who grew up and worked in Michigan for the past 40 years know all too well what the Big 3 and UAW are all about. Now the rest of the country gets a peak under the hood of that K-Car too. Oh, the stories anyone who worked in a union shop can tell. When I went to law school, the people in Ann Arbor could not believe what I told them went on in the unionized Workers' Paradise. They thought management was still exploiting the proles. Nah, I told them, the UAW is exploiting everyone, especially the poor the lower middle class consumer.
While my state is going to soon become a backdrop for a Steinbeck sequel, the Big 3 must nonetheless be reorganized like any failed business.
Dr Smart, you need to get quiet for a bit. Unsupported superciliousness only highlighted how relatively content-free your posts are.
Ms McArdle supported the ineptly planned and executed Iraq War and a no-strings-attached bailout for the financial service industry which has proven to the most ineptly managed sector of our economy. That bailout, it should be added was equally just as ineptly executed by Secretary Paulson. How else to explain the sink-hole at AIG?
Now McArdle's a budget hawk who can't spare a mere 25 billion to save an industry that is a linchpin for as much as a tenth of the country's labor force and built the tanks and planes that won WWII. The only consistent rationale you've offered for this change of tune is your hostility to organized labor and your lack of respect for people who don't work on Wall Street or for the Federal Government.
And to think, you advised Democrats to roll over and play dead when the Republicans rolled out Sarah Palin - the real American woman from the heartland that those pencil neck Democrats should be afraid of. Ms McArdle, you're the perfect representative for the decline of American journalism - heartless, brainless and useless. This blog and its comments will be exhibit A in the future when people want to know why the Republican Party can;t buy a vote.
Nathan, this isn't you posting at TPM Cafe:
http://tpmcafe.talkingpointsmemo.com/2008/11/19/remembering_our_friends/
Is it?
Regardless, I stand by my assertion that this bailout proposal is nothing more than a taxpayer-funded payoff to Big Labor with management as a convenient-albeit-expensive foil. They're just somebody for Chris Dodd to yell at to help with the political theater.
It appears that the smoke screen of GM propaganda and dissembling is having it's desired effect of directing the attention of the lemmings away from the corporation's model for the 21st century; which for the most part, has already been successfully implemented.
All of the viable assets of this corporate icon of American capitalism have already been carefully liquidated or repositioned and placed out of reach of litigation, and they have the largest vehicle manufacturing facility in the world in full operation in Beijing, China. Add these simply understood facts to their having the largest world-wide product distribution network for domestic and military vehicles, all of which can be produced at their new mega-plant, and presto, you have the new and improved GM.
And by the way, their new line of hybrids are already in production!
"See the USA in a Chevrolet"
It's sad that the whole thing is politicized as it is into the "big get even" with big labor. I would love to see a poll taken with the simple question; Would you buy a car from a bankrupt car company?
Tversky, with his comment at 10:35 p.m. identifies the key political wrangle. The Big 3 will not go bankrupt before Obama and the new Congress take their seats, however, after that date, the bailout falls entirely on the Democrats' watch. The motivation for bailing them out before the inaugeration is to lasso Bush into providing political cover so that, if the bailout needs to be expanded in the future, which is a certainty in my opinion, then Bush can be blamed.
I don't have any doctrinal objection at all to bailouts, whatever the sector. My moral objections are trivial, and are balanced-out by the moral objections to putting people out of work in large numbers, further crippling regional economies, etc.
But before I would give anyone any money, I would want to see a real business plan; what is the narrative in which X dollars from Washington will produce a certain desired/desirable outcome? That's something I have not seen at all, in this case. The financial-sector bailout at least has a narrative about how $700 billion will restore the sector to a health it enjoyed in the recent and longer-term past: whether through purchase of so-called toxic assets (now discarded as a strategy) or through direct purchase of stock (to prop up share prices and restore market capitalization, I suppose--I'm not an expert on this at all), I'm at least getting a credible story in return for my money. But I'm not even getting a credible story in return for Big Three bailout money: it's bridge financing to what, exactly?
We need to ditch the notion that a certain company or overall sector is inherently viable, if it only could overcome certain externalities. Car manufacturing in the US isn't inherently or axiomatically more viable than perpetual-motion-machine manufacturing, and the fact that we've manufactured cars here for 100 years doesn't prove anything. In B-school they make you convince skeptical people that you've got a plan, and we should demand at least as much from Detroit. Not the "best plan they can come up with," but a plan that exceeds some threshold of objective viability.
Ms McArdle supported...
What Ms McArdle supported is immaterial to whether or not we should bailout GM. Many people who are against the GM bailout, were also against the AIG Bailout, Bear Stearns Bailout and the overall financial bailout. I was against the bailouts from the beginning, because I figured it was a waste of money and would signal to every other industry to try and get their piece of the pie. Just because we made some bad decisions with our money recently, isn't a good reason to continue to make bad decisions with our money.
The much maligned mini-Van, the apotheosis of the Sport-Ute, Those didn't come out of where-ever it is that Japanese build cars.
No, both of them came from Germany, and they were originally air-cooled.
Nathan, Johnjr,
You BOTH MISS the point. UAW union employees make an average of $79 an hour...counting pension and healthcare costs. Most UAW jobs require nothing more than an average skillset and high school education. These are jobs that most anyone is capable of performing. Therefore, laws of competition dictate that these jobs SHOULD NOT EVER pay much more than minimum wage. These workers have been OVERPAID for the last 60 years. They have workrules that require that they be paid for not working...absurd!
Johnjr. forget about your poll, Americans have already been buying fewer american cars for the last 40 years and will continue to buy fewer american cars each year al long as Unions are allowed to dictate wages instead of the free market. Union employees have artificially driven up wages, thus costs to consumers and have lived a standard of living that they were not educationally qualified to live for the past 60 years. Assembly line workers are no different than those that work in fast food or pump gas. Performing rote functions should be paid accordingly; menial pay for menial labor jobs.
Again, Bush, if he, for once, wanted to deal effectively with his domestic opponents, should call their bluff, and announce that he will support aid to the Big Three, under the following conditions:
1. Shareholders get wiped out.
2. Management accepts to have a substantial part of their future compensation be in the form of stock grants which cannot be sold for several years, say, seven to ten.
3. UAW workers and pensioners agree to an IMMEDIATE slashing of their compensation
and benefits, to that enjoyed by non-UAW American autoworkers.
4. UAW agrees to work rules which match those for non-UAW American autoworkers.
5.Congress overturns all state laws regulating the closure of dealerships.
6. UAW agrees to not oppose any closure of dealerships, or termination of brands.
I suspect we would soon find out that all of these parties which are now saying that Federal aid to the American auto industry is immediately essential would then find such aid far less immediately essential.
Re: "A good reason to avoid bankruptcy is because people won't buy a car from a bankrupt company."
I'm not sure this matters anymore. The cat is out of the bag. People aren't as ignorant as they were a mere six months ago, when they would still roll their eyes when I'd say, "No, I'm not goint to buy a car from the Big Three because I can't be sure they'll be around to honor the warranty."
Everyone know nows that the Big Three are insolvent. Whether they "make it official" with a bankruptcy or not doesn't seem to matter. What matters is how much a customer can trust them to fix all the inevitable screwups. And they can't, regardless of bankruptcy. Even regardless of a bailout!
What's worse, even if you could somehow *make* GM honor those warranties, there's still a massive "ick" factor. I mean, think about it: if you were to go and get warranty work done, they have to *sigh* spend money on you. For an insolvent company, that obligation trades off against all their other obligations. Meaning that for you to get that *bothersome* engine noise patched up, you have to take food off Granny's table.
Who wants to be in that position? Where you choose between starving an old woman, or dealing with car trouble? Not me.
Therefore, laws of competition dictate that these jobs SHOULD NOT EVER pay much more than minimum wage.
Lots of jobs that only require a high school education pay far more than minimum wage. There's more to many jobs then what you learn in school. If they deserve to be paid much less then why do Honda and Toyota pay their employees $60K a year for the same work. I'm not defending their $79/hour salary+benefits (which they likely won't see), but to act like it's a minimum wage job is ridiculous.
Chris Schmidt:
They might have made that at one time. Not anymore. Do you know new hires only make $12 to $15/hr?
All of you union haters out there need to check yourselves. First, I hear little criticism of management. Aren't they to blame as well? Why not cut their bonuses and the like? Second, the unions have been engaged in give backs. Third, I wonder how you would feel if your company was in the same boat. I'm sure you'd all like your industry to die off and fade away with little chance to find a new job any time soon.
Jordan,
I disagree...and I would also suggest that non-union auto workers at honda and toyota are also overpaid. Toyotas average wage per hour is $48 inclusive of pension and healthcare costs...this STILL translates into approx $100k a year. Bottom line...skillset required to perform a job, educational level required to perform a job and number of workers available who want that job MUST ALWAYS determine the level of wages paid. Like I said...if the average assembly line job requires high school level skills...then that job should be paid high school level wages. If workers do not like the level of wages they are being paid...they are free to not accept the jobs...
Joe Klein,
That may be regarding new hires...but the FACT remains that CURRENT AVERAGE COSTS are $79 per hour. Anyone with a brain could have observed that, over the last 40 years, the marketshare of the big three has been shrinking. Fewer cars sold equals lees jobs in the future...meaning...that those that still continued to work in the industry KNEW OR SHOULD HAVE KNOWN that these businesses, over time, could not afford to still remain in business. I feel no remorse for the union employees or the executives...but...you DO KNOW that labor costs are the biggest cost in producing an automobile...right? Bottom line, failure should always be punished and NEVER be rewarded. American consumers have already decided not to pay executive salaries and union salaries by NOT BUYING THE CARS. The american consumer shoul now not be punished for their exercise of free choice by being FORCED to keep these companies by a bailout via their tax dollars. A bailout would essentially force us to shop at GM...spend our money...and walkout without a car...absurd on its face.
Joe, my company, which is me, has been in that boat nearly every single day of my adult life. If I don't provide superior value to that of my numerous competitors, I don't get paid ANYTHING. If more employees at large companies, and that includes most of all top-tier management, understood, to their very core, that failing to get to work, every damned day, with a fanatic desire to provide obviously superior value to the consumers of their product and services, poverty, misery, and deprivation were just around the corner, we wouldn't be having nearly as many of these debates.
I don't hate unions at all. I'll note again that I have owned Southwest Airlines stock periodically over the years in part because it was obvious that the unions and management involved in that enterprise had a far more enlightened view of self interest than it's competitors. I really despise stupid unions and stupid management, and I define stupid as being nearly completely uninterested in shaping the direction of a company with an eye on a multi-decade horizon. That describes the American auto industry pretty well.
If they deserve to be paid much less then why do Honda and Toyota pay their employees $60K a year for the same work.
Because they want to avoid unionization, of course.
All of you union haters out there need to check yourselves.
I checked, but didn't find anything on my shoes. It wasn't me.
First, I hear little criticism of management. Aren't they to blame as well? Why not cut their bonuses and the like?
Absolutely. I don't know how a company that is teetering on the verge of bankruptcy and lobbying for taxpayer dollars can - in any stretch of logic or propriety - pay out bonuses.
Second, the unions have been engaged in give backs.
True, but it looks like it might not be enough to compete in this international climate.
Third, I wonder how you would feel if your company was in the same boat. I'm sure you'd all like your industry to die off and fade away with little chance to find a new job any time soon.
I am currently in, among other things, the auto parts industry. But I don't agree with the premise that the industry is going to (or must) die off. Maybe some companies will die, and make way for newer/startup/better-run manufacturers. But it's obvoius that the current system is unsustainable. I think a major paradigm shift in the auto industry is in order, and it seems that the only way that it will happen is if the change is allowed to take place - ie. Chapter 11.
If they deserve to be paid much less then why do Honda and Toyota pay their employees $60K a year for the same work.
One other thing I would take issue with, and that is the word "deserve" above.
We're not (okay, I speak for myself and maybe some others I hope) arguing that these employees deserve or don't deserve anything. There is no normative judgment to apply here. We're simply arguing that the current level of pay doesn't square with (1) other jobs that require the same level of education/skill, and more importantly IMHO (2) what is sustainable for the business model.
If they can afford to somehow, I have no problem paying auto workers $500K to put cars together. That's their choice as a company. But that somehow shouldn't be my tax dollars.
TakeFlight, I pretty much agree, but if Congress, or an entity it designates, can competently (yes, I know it is a bit of an oxymoron) referee what is essentially a much-accelerated Chapter 11 reorganization with 25 billion, it may be useful, given the problems involved with a typical work-out, in terms of timeline, dealing with an industry which sells very complicated machinery costing tens of thousands of dollars, to middle- class consumers.
Of course, the lackwits now clamoring for the cash have little apparent interest in enduring the sacrifice of a reorganization; they just want the cash. As a result, this point of mine is likely moot.
Again, Bush, if he, for once, wanted to deal effectively with his domestic opponents, should call their bluff, and announce that he will support aid to the Big Three, under the following conditions
TakeFlight, I pretty much agree, but if Congress, or an entity it designates, can competently (yes, I know it is a bit of an oxymoron) referee what is essentially a much-accelerated Chapter 11 reorganization with 25 billion, it may be useful, given the problems involved with a typical work-out, in terms of timeline, dealing with an industry which sells very complicated machinery costing tens of thousands of dollars, to middle- class consumers.
Will,
(1) Ha ha - you said "congress" and "competently" in the same sentence!
(2) Please pry the comma key off of your keyboard and place it in a hard-to-reach place.
;)
I wonder how you would feel if your company was in the same boat
It will never be. Some of us tend to work for small companies (or are entrepreneurs/self-employed) which will never ever have a shot at a bailout. Some of us (rather a lot in the present crowd, I suspect) have occupations that are nowhere near unionization. Try and organize software engineers? Or herd cats?
In short: MY family has little chance of getting any government largess come hell or high water... well, unless the next hurricane can drag that high water all the way to Dallas. I don't see why I should be paying for the largess for some other family which, after all, has not been subject to an unpredictable catastrophic event. When the .com bust (and more importantly, the attendant telecom bust) decimated the high-tech jobs who do you think sucked it up?
TakeFlight, you damned anti-commaite, the comma wants to be free!
Dr. Smart, one of those people whose brain shuts down as soon as he hears the word "union" because we all know that unions are all good and wonderful and benevolent and really are looking out for everyone in society and not just the narrow and parochial interests of their members.
And Dr. Smart, who was it who fought hardest against CAFE standards? Why it was the Michigan congressional delegation. And where did those congressional stalwarts get their money from? Well they got truckloads of it from the UAW. Tell me Dr. Smart, did anyone at the UAW stand up and say "You know, we should really start looking at making smaller cars that get better mileage because the price of oil is going to rise." Nope, they just collected the paychecks they got for making all of those big SUVs and pick up trucks that are collecting dust and birdshit in car lots all over America now. The UAW is a bunch of incompetent fucking retards just like the management of the big 3.
If you knew anything about the history of the automobile industry, which you obviously don't, you'd know that this happened before. American cars were selling really, really well until 1973, then the oil embargo happened, gasoline was rationed, prices went up and nobody wanted to buy 19 foot long Chrysler Imperials any more because they cost lots and lots of money to keep running. This is when Japanese cars really took off. The Japanese had been building smaller cars for years because oil was more expensive in Japan, and when oil got expensive in the US they were ready to take advantage of the situation while Detroit and the UAW just whined and cried and shit themselves and hurled racist innuendo against the Japanese for having the temerity to build cars that Americans wanted to buy. The Japanese had also learned how to build cars more efficiently than the US because they didn't have a lot of capital or heavy machinery to rebuild their automobile industry in the 1950s because of the US Army Air Corps low-level re-formatting of the country in the 1940s. So the Japanese had to build smart and lean while Detroit kept building dumb and fat and the Japanese kicked Detroit's ass.
Flashforward 30 years. Oil prices were low again, anyone who looked at history knew that they weren't going to remain low forever, especially with the Chinese and Indian economies demanding more and more oil as they industrialized. Did anyone at the Big 3, did anyone at the UAW say, "Ya know, we're making good bank making SUVs these days but this can't last?" Nope, they kept on making big, gas-guzzling cars. Along comes the summer of 2008 and gas prices hit $4.50 a gallon and suddenly Americans do what they did 35 years previously, they start buying smaller cars and Detroit finds itself fucked again.
What was that saying "those who do not learn from history are stupid fucks who are going to get bitch-slapped again and again and again until they do"? Something like that. The big 3 and the UAW are a bunch of stupid fucks. This happened to them before, they failed to learn from it and now they're in dire straits.
Dr. Smart can't make any cogent case for a bailout other than "the workers, think of the workers". Tell us Dr. Smart, how much money is a bailout going to cost? How long will it be before Detroit starts building cars that Americans want to buy? How long is it going to take the local Dodge and Ford dealerships by my house to clear their lots of all of those SUVs and big pick up trucks? The ones that have been getting marked down for months? How much money do we have to give Detroit so that they can build cars that we want to buy? Will this bailout guarantee that Detroit will be solvent or will they be back in 12 to 18 months whining that they need more cash?
Come on Dr. Smart, I want one of you bailout bitches to offer up some substance instead of just more smarm. I want real answers to these questions instead of more bullshit from asshole poseurs who support a bailout because it makes them feel good to pose as champions of the oppressed working classes of the UAW.
All of this discussion of the merits of a bailout is moot.
1. Big Labor elected the Democrats.
2. The UAW is the biggest of Big Labor.
3. The UAW wants a bailout.
4. Politics rules.
Chris Schmidt said "Union employees have artificially driven up wages, thus costs to consumers and have lived a standard of living that they were not educationally qualified to live for the past 60 years"
On a related note, one thing I've noticed alot of zealously pro-union liberals fail to grasp is that artificially driven up wages end up being passed on to consumers most of the time. To be honest, I'm not sure if they don't understand, don't give any consider to or just don't give a damn about the unintended consequences of many of their economic proposals.
Question for those that know more about the UAW:
Do any of the autoworkers receive profit sharing and/or stock options? If not, why not? (This was an idea offered by Mitt Romney in a recent NYTimes Editorial) It seems like such a simple way to align worker-company incentives.
Bottom line...skillset required to perform a job, educational level required to perform a job and number of workers available who want that job MUST ALWAYS determine the level of wages paid.
Maybe Honda and Toyota want a person who's a bit smarter and more dedicated than the average fast food worker. Fast food workers really aren't known for their quality of work and attention to detail. Just because auto workers didn't go to college, doesn't mean they won't be a hard worker with a good eye for detail. I guarantee if they started to pay their employees minimum wage we'd see a significant drop in the quality of their vehicles. Since their reputation is built solely on the reliability of their cars, paying workers a good wage to build them ensures you'll be able to pick high quality workers out of the pool.
One of the problems with the UAW is that they are corrupt, so hiring and firing is not based on the quality of worker and job performance. Their work rules also ensure that the average UAW worker, doesn't work as hard as the average Honda/Toyota worker.
Yeah, I doubt that most autoworkers jobs are really of the burger flipping variety. It takes a lot of time and practice to manage to even flip burgers well, much less install a cars electronic system flawlessly and efficiently.
The idea that auto workers are a bunch of skill less losers who lucked into a high paying job is bullshit. They are skilled workers. Just not $78/hour skilled.
One further reason to support the bailout: The law of supply and demand.
If Ford and GM go out of business, it will be years before foreign auto-makers can meet the present demand - much less increased demand assuming our economy improves. Thus, present demand minus large supply = increased cost of existing products. I wonder how "let em' fail" libtards will feel when a Honda Accord costs $95,000.
Further, people who denigrate auto workers because they don't have college degrees: I'll remind you that our current president has an MBA from Yale and yet he's universally seen as an incompetent dimwit - and rightfully so. Andrew Carnegie, by contrast, was a poor, uneducated immigrant who could barely speak English. A college degree is NO determination of a person's intelligence, work ethic or character. If you can't grasp or accept that concept then you don't appreciate or value America; doubly so, given the spiteful glee with which Libertarians seem to be cheering the demise of the American auto industry.
Heaven help our country should we have to fight another world war and have to rely on these selfish, arrogant yuppie douchebags to defend this good land.
I wonder how "let em' fail" libtards will feel when a Honda Accord costs $95,000.
Granting the rather dubious premise that nobody would be willing to step in and take over the physical plant for their own purposes, I'd feel fine. I haven't bought a new car in 8 years, or a used car in 4 years. Most people buy new cars at an astonishingly wasteful rate.
selfish, arrogant yuppie douchebags
Does that "selfish, arrogant" designation apply to opponents of the bailouts, or to UAW retirees whose pensions and healthcare would be financed by taxpayers with considerably less generous pensions and healthcare themselves?
Really, what exactly is the justification for treating one class of people better than others with taxpayer dollars?
Jordan and Toxic,
In principle, I agree with your points...employers might want to pay more than minimum wage to ensure a more competent work force. However, the salient point here is that the mgmt/owners of the company should set the wages for the positions they wish to fill...NOT THE EMPLOYEES. Unions have perverted the free market are now are being paid more than they are worth for the tasks the employees are performing...it is that simple.
Nathan,
My point regarding a college education...listen CAREFULLY...if performing a job to the employer's satisfaction does not require a high level of skill, intelligence or a college education...and almost anyone can perform that job...then one should not expect to be paid at a premium to perform that job. Working on an assembly line to perform a ROTE task is not rocket science.
UAW Union workers are paid for not working...per their contracts...THAT shows NO WORK ETHIC and is UNAMERICAN.
Andrew Carnegie...if he were alive today and ran an auto company would never have put up with the unions of today...which is that or organized crime.
Oh, again...no one is entitled to demand of an employer a job...if they do not like the wages offered...they are free to either not accept the job...or if already working...to quit that job and get another one or to start their own business. By and large, these union jobs are not worth $79 an hour inclusive of benefits...OTHERWISE we would not be having this discussion.
Nathan...you also seem to have no concept of how to own and run a business for profit as well as to remain in business. You do not accomplish that by paying workers more than the marketplace has determined that they are worth.
Nathan, who is more arrogant; the person who demands that their fellow neighbor pay more taxes, so that the person may enjoy greater pension benefits and wages than people in the same country who make the same products, or the person who says that such a use of tax revenues is illegitimate? What is your native tongue? Douchebaganese?
Heaven help us, should we have to fight another world war, if we have to depend on people to defend this good land, who think the proper use of state power is to line their pockets at the expense of folks who make the same products for a lot less money.
(yes i was here earlier making a somewhat histrionic rant on another post... i think this is a bit more level)
I have to agree with Nathan and others on the point that "uneducated" labor doesn't mean "unskilled" or unintelligent. I see a general consensus among people on the thread that the current wage model inclusive for pension costs for a worker hired before the contract renegotiations is both untenable and, from a free- or quasi-free-market (as the US model hasn't been a free market since the rules of the two Roosevelts) perspective "unfair" when being compared with the wages that foreign automakers pay their employees, who certainly don't seem to be leaving in droves despite their lack of union protection or guarantees of life-long medical care that is in some ways better than even the vaunted federal employee coverage.
But I would agree that the Big 3 would need to start making better cars that don't have a reputation for failure among all classes of Americans (except rappers and their Cadillacs.) Although I am partial to the Jeep brand myself, and have noted that their AMC engines other designs represent durable _and_ domestic engineering. (and no i have no affiliation with Jeep or the auto industry... it's funny that i even feel the need to say that...)
I wonder how "let em' fail" libtards will feel when a Honda Accord costs $95,000.
http://www.laobserved.com/biz/2008/11/all_those_unsold_car.php
Sometimes the responses practically write themselves.
Wow. I never realized there was so much hatred of working class people in this nation. Some of the sentiments I am reading here would not have been tolerated at the court of Marie Antoinette! Sure, we can admit that the UAW has taken some things to excess, but the idea that individuals with only high school diplomas should all make minimum wage is shockingly feudal. Just what the hell is wrong with a nation having a prosperous working class? Even in the days of the Founding Fathers that would have been a matter of national pride.
I'd agree that the unions are strangling the car companies, but those gold-plated benefits were negotiated (it only seemed like extortion), and the car companies agreed to them at the time. It seems like bad faith to use bankruptcy to dump those obligations now.
The unions really have no incentive to give up anything, other than the threat that if GM goes under, they all lose. The goals of employees - wringing the maximum amount of salary and benefits from the company - and the long term goals of shareholders aren't aligned at all. This is the intractable problem that'll still be sitting there if taxpayers bail them out in the short term.
If we're going to spend $25 billion bailing them out, can we do anything to fix that at the same time? It looks like GM is worth somewhat less than $2 billion today. Can we just buy GM, and gift it to its employees, effectively accomplishing an employee/retiree buyout? Have them elect a board that hires the executives, and make the employees and retirees face the hard choices between sustaining generous salaries and benefits, and keeping GM operating in the black.
Didn't United Airlines try an employee buyout to get past some of the same problems with unions in the 90's?
I never realized there was so much hatred of working class people in this nation...the idea that individuals with only high school diplomas should all make minimum wage is shockingly feudal.
There's exactly 1 guy pushing the minimum wage idea, so the generalization to the nation seems unwarranted.
I'd agree that the unions are strangling the car companies, but those gold-plated benefits were negotiated (it only seemed like extortion), and the car companies agreed to them at the time. It seems like bad faith to use bankruptcy to dump those obligations now.
Huh? In what way is it "good faith" to make taxpayers pay for them? Pensions are as much of a gamble as 401(k)s. The company ensuring them might fail.
Run them through bankruptcy and restructure debt, have the PBGC assume the pensions and then write them down to the $40k/yr maximum, then have the Feds bail out the PBGC. Toss all the union contracts and re-write them along the lines of what Toyota and Honda pay. No union rules on how to employ workers beyond normal working hours/overtime, basic safety and not being relocated more than 50 miles distance without moving assistance. All pensions to be defined contribution, and modest at that. Give accelerated depriciation for new capital equipment to re-tool factories to build better and more efficient cars. Relax some of the CAFE/safety standards so that GM and Ford can build some of their popular European designs here (Germany is not the third world) - in fact, by harmonizing standards with Europe plus lower-cost workers, we could actually start exporting more cars.
I would rather rely on the warranty of a manufacturer that just emerged from bankruptcy as a lean, healthy entity than one that looks like it is about to fail at any moment.
And unlike most of the folks on this thread, I drive a GM vehicle (my third) - it has been pretty good to me. I looked at the foreign equivalents but the price and features of the GM worked for me - I have no regrets, but I do wonder how much better it would be if GM were more efficient.
I'm presently unemployed and desperately looking for work, and I'd love to see some government stimulus of the economy, but EVEN I do not want to see a bailout of GM. 8 years of George W. Bush has been all about rewarding failure. GM will never change, as long as it keeps getting taxpayer money. Let GM fail, or at least force it to seriously downsize! GM is barely a car-making company; it's basically a front to transfer money to the UAW, whose members seem to be doing pretty darned well.
Just to be the contrarian here. But GM has turned the corner and has begun to make better cars. The Cadillac CTS is Motor Trends car of the year. The Chevy Malibu is much improved from earlier versions and was selling well before the economic crisis slammed the industry.
SUV's and trucks sold well because they met a demand in the market. That demand was for a vehicle that can tow heavy loads and/or carry more than 4 passengers.
As mentioned above, even Buick is enjoying a large measure of success in China.
For a company that is supposedly making products no one wants GM was making a profit just a year ago.
Tom Friedman's idea that Steve Jobs could start an auto company and produce a mass production hybrid 'iCar' in a year was a little naive.
For Friedman, being a little naive is a significant improvement. He's usual level of naivete is somewhere between 'incredibly' and 'terribly'.
Let PBGC assume pensions and "write them down" to 40k per year? Ok by me. Hourly retiree pensions are about $50 per month per year of service, or in my case (30 yr. x $50) about $1500 mo. or $18000 per year. (I can't speak for executives, but maybe hourly workers' pensions are not as generous as some people think.) Also, just another point of information (hasn't been mentioned but some may consider it relevant) some may not know--hourly UAW workers have never got a nickel in 'matching' 401k contributions
The thing that worries me is medical coverage. I have just a few years to go until Medicare, but my (younger) wife would be without medical for over 20 years. Am I wrong in thinking of future medical coverage as a form of deferred compensation that I earned by holding up my part of the bargain and punching the clock for 30 years? (Lucy...Charlie Brown...football.)
I'm pretty sure Chris Schmidt's assertion that "labor costs are the biggest cost in producing an automoble" is just plain wrong. Let's round up and multiply $80 per hour by the number of labor hours involved (30-35, Harbour Report, 2007 figures) and see what we get, shall we? We find labor cost to be $24-2800 average per car.
The thing that worries me is medical coverage. I have just a few years to go until Medicare, but my (younger) wife would be without medical for over 20 years. Am I wrong in thinking of future medical coverage as a form of deferred compensation that I earned by holding up my part of the bargain and punching the clock for 30 years?
Your wife is entitled to health care for 20 more years from a job she never worked from a job that you worked in the past? Seriously?
Brian,
"Just to be the contrarian here. But GM has turned the corner and has begun to make better cars. The Cadillac CTS is Motor Trends car of the year. The Chevy Malibu is much improved from earlier versions and was selling well before the economic crisis slammed the industry."
Motor Trend has also chosen as Car Of The Year:
1971 Chevrolet Vega
1974 Ford Mustang II
1975 Chevrolet Monza 2+2
1981 Dodge Aries / Plymouth Reliant
and...
1997 Chevrolet Malibu
Please excuse me if I heavily discount Motor Trend.
Maybe the Malibu *is* improved. I'll need to see them after 5-6 years of service before I buy that, though. Since I'll be in the market for a new car before then, GM isn't going to be on my list until *at least* the purchase after that.
Let the auto makers go into bankruptcy and then have the government provide DIP financing for the restructuring. That way we may get some money back and the car companies can shed their legacy burdens (including management).
Rob Lyman,
No, I am not pushing the idea of minimum wage. What I am sayiny is this...if the performance of a job requires nothing more than a high school education, nothing more than average intelligence, nothing more than an average skillset...then this means that ANYONE can do it. What this also means is that the supply of people qualified for this job are in the tens of millions...which means that no one should expect or demand that this position should command anything close to a premium in terms of wages. Because the unions extorted more than their employees were worth, the automakers have been losing money hand over fist and have been losing jobs and marketshare for the last 40+ years. If you agree that the labor costs are too high...then that means UAW workers are overpaid...which means that they are not worth what they are being paid...plain and simple. Everybody with half a brain should know that any retirement benefits and medical benefits owed in the future are contingent on the company remaining in business. They are not and have never been guaranteed...maybe if the employees were educated...they would have realized that this was a risk of choosing to accept employment. Bottom line, relative to the skillset, intelligence required and number of available workers to perform a function...the UAW workers have been overpaid for the last 60 years...that is a fact. Rob Lyman, you also do not seem to understand how to operate/manage/own a business for profit. It has not ever been the responsibility of a business owner/manager to pay employees what they feel they deserve...the employees do not own the company. If employees do not like the wages they are being paid...they do not have to accept employment. For example, if I am the owner of a business and two equal individuals want to work for me...and one is willing to accept $15 per hour and the other wants $20 per hour...and they perform exactly the same...I should be free to hire the $15 per hour employee. A union, in this example, would FORCE me to pay $20 per hour...which is absurd on its face. That is WHY the automakers will, I hope, file for bankruptcy. UNIONS HAVE DESTROYED EVERY MANUFACTURING INDUSTRY IN THE UNITED STATES. You pro-union people simply CANNOT accept this simple fact...and what most of you REFUSE to accept is the fact that, generally, on average, college educated individuals, over the course of a working lifetime will make more than those without a college education. Graduate level educated individuals, on average, will make more than college educated individuals over the course of a working lifetime. That is a fact...and it is supposed to be that way...that is what a competitive society is all about. Not everyone is intellectually capable of going to college...that is a fact. Therefore, on average, these people will spend their lifetimes in jobs that do not require more than a high school level skillset and intelligence, which means that their wages will be and SHOULD BE reflective of their skillset and educational level...meaning on the lower end of the scale. If that means they will never own a home, be able to purchase a bmw, mercedes, have to shop at target, walmart, never go out to the movies, take a vacation, then so be it. Last time I checked, "C" and "D" level students should make "C" and "D" level wages. People in this country have over-valued their own worth for too long and now the demise of the automakers will finally drive that point home.
From 2006...and even still, Honda, Toyota U.S. autoworkers are OVERPAID...
Labor cost per hour, wages and benefits for hourly workers, 2006.
Ford: $70.51 ($141,020 per year)
GM: $73.26 ($146,520 per year)
Chrysler: $75.86 ($151,720 per year)
Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)
According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).
Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D. (see graph above, click to enlarge), and 52.6% more than the average worker at Toyota, Honda or Nissan.
Chris Schmidt:
You don't seem to understand why people are paid what they are. It's not because of their education. It's not even necessarily because of the supply of labor. It's simply the result of a negotiation between the employer and employee.
There are lots of reasons why an uneducated person might be able to command a high salary:
- The job may be tedious, difficult, or otherwise unpleasant.
- The employer may have to sink tens of thousands of dollars into training, and therefore may want to pay enough to prevent a revolving-door employee pool.
- The cost structure of the company may dictate it (i.e. the next level of employees up, the line managers and such, DO have educations, and are very expensive, and it's not healthy to have people who work directly together have widely disparate incomes).
- The cost of downtime when workers leave may be so high that it makes sense for the company to pay the workers above prevailing wages so they don't have an incentive to quit.
- In places where companies employ a significant fraction of the local population, it may be in their interest to pay them enough that the local community is middle class, reducing crime and other stresses on the employees.
And I'm sure there are many other reasons why a company may decide to pay their workers a higher than prevailing wage rate. So long as they aren't being forced by government or protected through subsidies, heavy-handed labor laws, bailouts and tariffs, I've got no problem with auto companies paying workers whatever they think they should pay them to maximize the profit of their company.
One thing hopefully people will learn from this: Expanding the power of big labor in a global economy is a very bad idea, and the Democrats want to do exactly that. They want to turn every labor pool in the country into a mini-UAW by implementing card check, eliminating right-to-work state laws, eliminating the right to hire replacement workers, and other new rules that will greatly strengthen the power of big labor.
Someone up above said that all we have to do is wait for these rules to come in, then the big 2.5's competitors will unionize and the playing field will be leveled. Well, no it won't. What will happen next is that these jobs will move offshore. Then there will be pressure on Congress to stop the migration of jobs that their own policies have caused.
This will lead to more protectionism. The Democrats are already talking about punishing companies who set up factories outside the U.S. The next step will be new tariffs on imported goods. You'd think we would have learned the lesson now, but we haven't.
This is how economies decline. This needs to be resisted, and the place to start is to force American businesses to be competitive by refusing to let them suck at the taxpayer teat when they make bad decisions.
The Democrats are setting America up for a major decline. Around the world, globalization pressure is forcing countries to lower taxes, and the U.S. wants to raise them. The U.S. has the second-highest corporate tax in the world, and Obama wants to increase it. How are American companies supposed to compete on the global market against companies that pay 15% corporate taxes and they pay 40-50%?
Here's a sobering fact for those of you who want to keep jobs in America - If Obama passes the taxes he wants to pass, America will have higher overall taxes, higher marginal tax rates, higher corporate taxes, higher capital gains and dividend taxes... than Canada. As a Canadian, I'm looking forward to the end of our 'brain drain' to the U.S., and the new flood of U.S. capital investment that will be coming our way. Americans should not be quite so sanguine about it.
If you want to get capital flowing to GM, here's a much better idea: Eliminate the capital gains tax, lower corporate taxes, and force GM to take steps that allow them to rewrite their union contracts. GM actually makes very good cars now - the new Malibu is world class, as is the Saturn Aura. The Cadillac CTS is beating BMW and Mercedes in head-to-head reviews. Quality is way up. Ford's quality is higher than the average for the Japanese brands. These companies have fixed their problems with product - now they have to shed the detritus of a century of protected business models and union domination so they can compete in a new global economy.
Am I wrong in thinking of future medical coverage as a form of deferred compensation that I earned by holding up my part of the bargain and punching the clock for 30 years?
No, that's perfectly sensible. Where you are wrong is to expect me, the taxpayer, to hold up GM's end of the bargain while my family contents itself with Medicare and our savings.
Chris: Enough already. We understand your point, even if we think it overstated and unnecessarily reliant on the ellipsis. I was merely pointing out to JonF that "the nation" wasn't pushing the views he was attributing to it, you were.
Ahhh...but Rob...the nation IS espousing the same views and has been for the last 40 years...they have not been purchasing the goods made by UNION workers in EVERY MANUFACTURING INDUSTRY IN THE US because they were too expensive and of poor quality. Too expensive due to the fact that the american consumer decided that if the goods were priced too high, then that also meant that the employees were priced/paid too much.
Also, you only earn future compensation if the company is in business to pay it...that is the business risk.
Rob, what you refuse to acknowledge is that Unions have destroyed the munufacturing industry in the United States. This is OBVIOUS.
Dan,
Some of your points are socialist in nature. People that commit crimes know that they are in the wrong and should always accept responsibility for their crimes. You do not reward people via higher wages than they are worth for acting civilized (not committing crimes). All people in life are required to be good citizens...this is a non-paying job...as it should be.
Current union work rules dictate that even if the factories do not have orders from the dealers to produce cars for a particular week...the union workers must then take home 95% of their pay if they do not work for that time period. Where I come from...if you do not work...you do not get paid...period. This needlessly adds on costs.
other than the above two points...I think we agree that UNIONS FORCE companies to artificially inflate wages. My point is that if there are individuals in this country that are willing to work for $30 per hour on an assembly line making cars, then all employees making more than that are OVERPAID and should be fired and replaced with the cheaper employee if they refuse to take a pay cut. It is that simple. Employees that do not own the company should have no right in the decision making processes of that company. Again, if they do not like it, they are free to find another job. No one is entitled to a job.
Rob, what you refuse to acknowledge is that Unions have destroyed the munufacturing industry in the United States.
The list of what I refuse to acknowledge is considerably longer than that.
But in this case, the manufacturing industry is doing just fine in terms of output; it's just that (like the farm sector), that output requires fewer and fewer workers every year.
The idea that "because the average hourly labor cost is $70.51, UAW Ford employees earn an average of $141,020 per year" is erroneous. That hourly labor cost includes payments made to idled workers in the so-called "Jobs Banks." All of that money and benefits adds to the cost of labor (dividend), but since these guys are not adding anything to the number of hours worked (divisor), we get a quotient (hourly cost of labor) that can be misleading.
I concede that the jobs bank situation needs to be straightened out, but hourly wages for active workers in Big 3 vs. Japan-owned US facilities pretty close and in some cases the reverse of what one might think.
Let's see if this link will work.
http://www.aftermarketnews.com/Item/28594/uaw_losing_pay_edge_foreign_automakers_
bonuses_boost_wages_in_us_plants_as_detroit_
car_companies_struggle.aspx
Dang! The link didn't work, but the gist of the Feb. 1, 2007 news article is that Toyota workers in Georgetown, Ky. (largest US plant) were averaging $3 more per hour in direct pay than the average Big 3 UAW worker, as result of $6-8000 profit-sharing bonuses.
Rob, I beg to differ. The american shoe industry, textile industry, electronics industry, television industr, auto industry and others have lost jobs and market share because UNIONS demanded ever increasing wages that were unrealistic to the skills required for performing these menial industrial jobs...so they were rightfully moved overseas and these jobs were forever eliminated. Very few goods are manufactured in the United States...so much so that ours has been a service economy rather than a manufacturing one for many years now. You simply do not know of what you speak and have no economic understanding of what has been occuring in our economy over the last 50 years.
UAW retiree,
An hourly labor cost is still an hourly labor cost. The automakers are spending that amount of money...which is riduculous. They need to file chapter 11...ditch the union contracts...ditch the pension costs for present and retired workers...ditch the healthcare costs for present and retired workers and start over from scratch if they hope to survive. Your union comrades have destroyed the auto industry as well as every other industry you have occupied in this country.
Rob, I beg to differ.
Permission denied.
Very few goods are manufactured in the United States
I suppose if by "Very few" you mean 21% of the world's output, then I can't disagree.
You simply do not know of what you speak and have no economic understanding
Perhaps, but I do know enough to know that you can't judge a person's level of understanding from a two or three sentences on a substantially unrelated topic.
Chris Schmidt:
If you think my ideas are 'socialist in nature', you haven't really thought about them, or understand them. You seem to think that you somehow know what a job is 'worth'. I'm telling you that the 'worth' of a job is whatever the employer and employee agree to. Guess what? A hamburger flipping job in my city pays $10/hr. In other cities, it pays $6.00. Does that mean hamburger flippers here are overpaid? So long as the government is mandating that price, or a union isn't dictating the price under protection from the government, then the wage of a hamburger flipper is by definition what he's worth, regardless of what the wage might be. In this case, hamburger flippers are paid more here because we have a labor shortage and companies have had to offer more money to entice people to work for them. There is NO 'natural wage' for any job. A wage is a price, and the price is set when the buyer and seller come to an uncoerced agreement.
In the case of the UAW, this is not true. The UAW has been protected by government, and the automakers have also been protected by government, through tariffs on foreign cars, rebates for domestic cars, tax incentives, and a regulatory system that gives preference to domestic cars. This means there's an externality in the transaction - the cost to taxpayers and car buyers, mainly. That's what's wrong with the situation.
In the case of other auto makers, who aren't unionized and who receive little or no government protection I would assume that whatever they are paying their workers is what management thinks they should be paid. But without digging into the situation, I don't know whether there are other forces at play, such as local tax incentives for local hiring or other agreements with governments that they have signed.
Oh, and I forgot one more force that may be driving those wages - fear of unionization. If the UAW has managed to convince everyone that auto workers are worth $70/hr, then companies like Toyota, even though they may not be unionized, may have to pay wages at least in that ballpark to prevent a disgruntled workforce from unionizing. So there may be a bit of an implicit protection racket going on there.
Either way, my ideas are pure classical economic theory, and not even remotely related to socialism. I'm curious how you even got the 'socialist' idea from them.
C. Schmidt--I agree "hourly labor cost is still hourly labor cost,"--figures don't lie.
But your "Bottom Line" of 10:27 am serves well to illustrate the second part of the adage (liars figure).
Sorry, couldn't resist. I don't seriously seek to accuse you of an attempt to mislead--just sloppiness.
I meant, "So long as the government ISN'T mandating that price" above.
Dan--you also seem to be buying into the idea that the "UAW has managed to convince everyone that auto workers are worth $70/hr." I'm telling you, that ain't the deal! That figure is reached by adding up all the direct and indirect compensation paid hourly workers (including those not working, but drawing compensation because they're in the "jobs bank") and dividing by the number of hours worked.
Direct and indirect compensation to any individual hourly employee is nowhere near $70 per hour.
And yes, I agree that the 'jobs bank' has turned into a big ol' boondoggle. It seemed like a good idea at the time, though...
Rob,
I guess we are both right...yes our manufacturing "output" has remained between 20-25% since about 1980. However, this being accomplished with less and less workers. I wonder how many jobs would not have been outsourced if unions were not in these industries?
At the risk of committing reality here, some of you anti-UAW folks need to take a look at the last 5 years or so of Harbour Reports, which measure the productivity of auto assembly, stamping, engine and transmission plants. What you'll find is that UAW-represented GM, Ford and Chrysler plants equal or surpass the Japanese, German and Korean automakers' non-union U.S. facilities in efficiency.
And take a look at J.D. Powers & Associates quality ratings for assembly, engine and transmission plants; again, the UAW-represented plants are highly competitive - in fact, a few years ago, Powers' top three rated assembly plants in North America were all UAW-represented plants in Michigan.
Not saying UAW is blameless here, but the notion that unionized auto plants in U.S. lag behind non-union ones in productivity and quality simply isn't so.
Dan,
Maybe you did not fully read my posts...I said that wages must be determined by skillset required, intelligence required AND number of workers available to do the job...so OBVIOUSLY your burger analogy differential would make sense as the market would dictate it. However, I highly doubt that if workers were in such short supply as of right now...that burger flippers...today could ever expect to be paid $79 per hour inclusive of benefits.
There is a natural wage for a job...typically that involves the skillset required, the educational level required, and the pool of qualified workers willing to perform the job. THIS IS WHY to this day, we have so-called minimum wage, low skill jobs...they simply will never be high paying jobs...period.
Dan...the two socialist points you made were paying more so that they don't commit crimes...and union workrules that pay people for not working...
Clearly, with automakers losing money and marketshare for decades now...on an overall basis...UNIONS have only proved that they should no longer exist...they are nothing bug thugs...
UAW Retiree...point taken. However, LABOR costs are too high...the only way out is to declare bankruptcy...and ditch the unions...pensions...healthcare costs...and the retiree costs and the people to blame are the union employees.
I wonder how many jobs would not have been outsourced if unions were not in these industries?
I don't know, but farming has see outlandish declines in its share of the labor force combined with increases in output. I don't think that is a union phenomenon so much as an "invention of the combine" phenomenon.
Please, a bailout is a bailout...
If you were one of the suckers that bought a Detroit auto then you were part of the problem.
When was "I the taxpayer" ever rewarded for such short-sided ignorant behavior? -- never.
If Detroit showed up on my doorstep with a 1997 Ford Taurus with 70k miles which they robbed me, a college student of, then perhaps they would have my sympathy. Instead they get my honesty:
" NO BAILOUT FOR RICH FOOLS, AND INCOMPETENT LABOR "
Would you buy a car from a bankrupt car company?
Shouldn't the question be: "At what price would you buy a car from a bankrupt American cat Company?"
I knew I shouldn't have clicked through.
WTF happened to the deep importance of contracts to libertarian types? Management made deals to defer income, in the form of pension and retiree medical care. Management signed contracts to increase their quarterly return in exchange for guaranteeing future benefits. Why aren't libertarians demanding that the company be forced into liquidation, and all the resulting revenue given to the workers, who should pretty clearly be first in effin' line.
Privatize the profits. Socialize the losses.
jayackroyd: What revenue from liquidation? There isn't much of a market right now for used auto manufacturing equipment, and even less of one for large empty buildings in southeast Michigan. GM does have other assets that are worth something, but AFAIK they add up to far less than is needed to fund it's commitments for retiree medical care.
So the only chance for the contract with those retirees to be met (aside from using tax funds) is for GM to somehow continue operating, and make cars that sell at a profit. Which looks to me like no chance at all, bailout or no bailout.
So I expect that a bailout will work out as a transfer of money to many of America's most overpaid workers from those less well off but not as politically powerful...
Chris, Rob, etc: Minimum wage workers are often irresponsible, unreliable, or illiterate. That doesn't do for manufacturing, especially for auto assembly line type jobs. In a 1,000 position assembly line, one screwup will nullify the work of the 999 good workers. So manufacturers pay a little more for workers who come to work every day on time, whether or not they feel good. Who either can do their job right (with considerable attention to detail) even when hungover, or who make sure they never get a hangover on a workday - in spite of the shops handing out paychecks on Thursday. Who can arrange their lives and their transportation to work so family emergencies and transportation failures are very rare. And most of all, who can keep their morale up and their attention on their work even though the work is soul-crushingly boring. If you get all that for minimum wage, you'd better promote the guy fast before your competitors offer him a better job.
So you have to pay a little more than minimum wage - but you can meet those requirements for $10 or $15 per hour, not $30. At least that's my experience, and my experience includes 18 years as an engineer with electronics manufacturers in Michigan.