I am in receipt of an email yesterday, asking that conservatives and libertarians recognize that the unions have, indeed, made concessions in order to make the bailout work. Sadly, I had not had time to write a post about this before the UAW tanked the Senate bailout.
The concessions that the UAW has made, as far as I am aware, are to accept some equity instead of cash for VEBA, the fund set aside to pay retiree costs. Since if a bankruptcy occurs, those same workers are going to get told by a bankruptcy judge to get some damn Medicare like everyone else, or get in line with the other creditors, color me less than impressed.
I do think that liberals are right to point out that labor is far from Detroit's only problem. The dealer network, for example, is a creaking dead weight around the industry's neck, protected by cozy state laws written by legistlators who like the prospect of extracting value for their own state from Michigan. They have management problems. They have bad engineering. They have a crippling debt problem.
I think it's entirely fair to fire Rick Wagoner, but firing Rick Wagoner is a symbolic gesture; it is not going to make GM either more or less profitable unless you know where we can get some fantastic auto management talent that wants to lash itself to the mast of a sinking ship. And all the other stakeholders have agreed to take massive hits. The shareholders are taking cramdowns, the bondholders are taking a 2/3 haircut, and so forth.
What are the auto workers being asked to do? Set a date for accepting wages comparable to those paid at other auto plants in America. Now, we can argue about how much of a role labor costs play in the Big Three's problems. But I think most people should be able to agree that a company on the verge of bankruptcy, which is losing a ton of money on every car it makes, cannot afford to pay its workers substantially more than the competition*, particularly when there is no indication that this labor is any more productive than the competition.
Gettlefinger, predictibly, is decrying this as "union busting". But I don't really think there's anything particularly unreasonable about asking the UAW to accept a competitive wage while the company gets back on its feet. No one's asking them to accept minimum wage here; the average compensation for a non-union auto worker in America is well north of $40 per hour. And I think that there is, in fact, something particularly unreasonable in auto workers demanding that Americans, most of whom make less than either UAW workers or non-union auto workers, give up their hard-earned dollars to subsidize his members' wages.
I understand that it's his job to demand this. But if it's his job to scuttle a very generous bailout that most Americans don't want in order to avoid making any concession at all on hourly wages, then as far as I'm concerned, it's his job to preside over the gutting of his contracts by a bankruptcy judge as America tells him and his workers to go to hell.
* I know, there is some argument over how much more US auto workers actually get paid. But if the wage differential is small, then the auto workers aren't really being asked to give up much, are they?
Copyright © 2010 by The Atlantic Monthly Group. All rights reserved.
Gettlefinger probably would have gone for the deal, if he didn't see Bush standing at the side of the lake with a lifeline in his hands. I'm sure when Americans have had another $15 billion wrenched from them to support this confederacy of losers, they will be aching to buy a car from one of the Big 3.
Megan, your analysis of the situation is right on the money. Unfortunatly it looks like Bush is going to instruct the treasury department issue a funds out of the 700 billion bailout money to keep the Big 3 afloat until the new administration and congress can provide more substantial aid.
Gettlefinger probably would have gone for the deal, if he didn't see Bush standing at the side of the lake with a lifeline in his hands.
Exactly. He knew full well that Bush would step in to provide short-term loans until the Dems are in and able to pass a fat long-term bailout. Considering how things are likely to turn out, Gettlefinger's move was pretty damn smart.
A VEBA, is not set aside for retiree cost, but rather retiree health care costs. Just wanted to clear that up.
I think it would be better if the FED and treasury forced the banks to make loans with the tarp funds to the carmakers than just fund it out of tarp. We gave them a few hundred billion - all we got was T-bills at negative yields.
hmmm...700billion for wall street.
but when it comes to working folks in the midwest...screw 'em cause who needs manufacturing jobs anyway? after all, we're a nation of spenders and consumers. we don't actually need to MAKE anything....
so the UAW scuttled the deal all by themselves? Perhaps a more detailed analysis of the situation is in order. Because Corker and his Republican colleagues blame it on the UAW doesn't make it so. The Republicans insisted on a firm date in 2009 for wage concessions (according to Corker, he'd offered to let the union pick the date, but it had to be '09). The union, fearing it was being set up, pushed back and offered to target the concessions to 2011 contract expiration. That doesn't sound like the UAW scuttling the deal -- it sounds like neither side was willing to give. One could reasonably ask why the UAW insisted on '11, and also reasonably ask why the Republicans insisted on '09.
after all, we're a nation of spenders and consumers. we don't actually need to MAKE anything....
I get tired of pointing this out, but US manufacturing output is 40% greater than China.
And I'll be damned if I'm going to pay for GM retirees while my parents are on Medicare and Social Security.
Megan,
particularly when there is no indication that this labor is any more productive than the competition.
Given the Union Work Rules, they're likely to be less productive than their non-union competitors, not more. So paying them as much as the others is, at the least, generous.
So what does the CEO of Toyota make, and should we require that Rick Wagoner or his successor be forced to take the same pay as their competitors?
Isnt dictating worker pay way too much micromanaging anyway?
So . . . how much of the cost of a GM vehicle (average)goes to UAW workers? . . . $800!
The average UAW worker (excluding new hires who
start @ $14 per hour) makes $30.15 per hour. . .
$60,000 if they work 2,000 hours - which they usually do not. . .
Hourly rate in the Confederate states Toyota and Honda plants? . . . $28 per hour.
You are going to kill an industry because they made benefits promises to employees years ago? But, let's pay promised bonuses to Wall Street guys even though their companies lost billions?
I hate to state the obvious, el_nino, but I presume the Republicans would want the UAW concessions in 2009 because these automakers are going bankrupt NOW. Waiting for labor concessions until 2011 would be pointless.
The irony is that if Gettlefinger succeeds in holding out for a Bush bailout from the TARP, he's going to doom, not preserve, the companies he depends on (which, I guess, is consistent). The D3 need chap 11 to shed excess dealers and get labor costs in line (right now not eventually). The public already doesn't support the bailout -- it's not going to be politically feasible to come back for more and more rounds of injecting billions into Detroit.
el_nino,
When you get right down to it - if the wages and benifits at a Toyota plant in Kentucky are the same as those at a GM plant in Michigan - there is really no point in paying those union dues are there?
freaktown, this argument carries no weight, because it has no bearing on reality whatsoever.
as for the post: good job. the repeated claims i hear that UAW workers don't actually get PAID this amount of $73 dollars, as if that made any difference, is tiresome and beside the point. the UAW should have no leverage here - a bailout is a GIFT, and one that thousands of other laid-off workers around the country are being deprived of. it is entirely for the government to demand, in return, that the UAW get paid no more than the workers of other american automobile plants.
One could reasonably ask why the UAW insisted on '11, and also reasonably ask why the Republicans insisted on '09.
Because on the current course the automakers are going to go bankrupt in '09, so concessions in '11 are irrelevant. By that time either the company has made it through to the other side so concessions are unnecessary or it failed and you extracted as much value as you could before it failed.
If you want to see the automakers become viable, changes have to occur now. Even your more nuanced version makes it sound like the UAW was uninterested in making meaningful concessions.
The UAW's job is to look out for their workers. Now, one can rightly say that looking out for them means doing what is necessary to make sure they still have a job to come to tomorrow - something that got a lot less likely when the bailout bill died. But it is also perfectly legit for them to fight to ensure that the burden of restructuring is shared equitably.
Megan notes that taxpayers who generally make less than $40/hr aren't likely to be terribly sympathetic to UAW efforts to sustain wages north of that level. But if you are UAW President (or even a member) you are likely to notice that while you get $40/hr for actually laboring to make something, the CEO -- you know, the guy whose decisions continue to drive the company over the cliff -- is making in total 2007 comp $14,415,914. Assuming Wagoner works 80 hour weeks, 50 weeks a year, that works out to $3,604/hr., or nearly 100 times a line worker. Ben & Jerry's maximum was what, 7x the lowest paid worker?
CEO pay while the company loses money? $3600/hr.
Laboring line worker pay? $40/hr.
Blaming the mess on union lineworkers? Priceless.
el_nino,
The UAW wants the money now, they need to take the pay cuts now.
They are the ones driving the "Big Three" into bankruptcy. When your labor costs are a thousand dollars per car more than your competitors, you have to make it up on the rest of the car. With chap components, bad fit, less money for design, etc.
The UAW fought for high wages and lower productivity. They can keep that, and have their jobs entirely disappear, or they can accept that high wages demand high productivity, and stop screwing their employers (and the people who buy from their employers) over.
Corker was way too generous. He should have told the UAW "you don't get one penny until you stop sabotaging the companies you want us to subsidize." Until the UAW is willing to do that, screw them.
I don't blame the line workers.
If I were them, I'd have grabbed all the pay and benefits I could have too, and would fight to keep them.
But we're being told that without government help, GM will be bankrupt by the end of the month.
GM hasn't turned a profit since 2004.
If they want to stand their ground, so be it, but when you decide to Alamo, don't be surprised when ends badly.
Wisconsin,
First off, that $800 is how much MORE GM pays than Toyota.
Second, Toyota's profit margins are only 4.9%. The $800 that goes to the UAW is nearly all the money Toyota would make selling a $20,000 car.
http://finance.yahoo.com/q/ks?s=TM
That $800 is a huge part of why the Big 3 weren't able to compete. They spent all the money that Toyota spent of quality parts and instead spent it on lavish pay and benifits for the UAW.
Sorry for the crosspost, but a comment I made over on the American Scene seems very germaine to this post:
So, a lot people have been talking about reorganization of the auto companies, and amongst the methods of organization you hear is the conversion of credit to equity. Well, the biggest “creditor” of the auto companies to use the term loosely for a moment is the UAW. GM’s obligations to the union through their asinine contracts are monumental.
Over lunch, my dad mentioned the following alternative idea to the bailout: Have the government take-over (nationalize) one or more of the car companies, but instead of having them run it with some ridiculous car czar or some such, simply cede the company to the UAW. Neither my father or I are big (or even little) fans of labor unions or government nationalization of industry, but this curiously makes sense.
The main reason I don’t care for labor unions is the false dichotomy they set up between Management and Labor. In the best of all systems, everyone from the CEO to the weekend janitor should be on the same page, and their incentives should reflect this. That’s what stock options are for. That’s the engine that has allowed Silicon Valley (where I work) to function. It has always seemed that employee-owned companies tend to be run the best because everyone at the company has the company’s best interest at heart. They have the financial incentive to behave that way.
Well, let’s apply that here. Let the UAW renegotiate its own contracts with its workers knowing that now they have the power to run the company as they see fit. No more excuses blaming incompetant management; they can fire the board and executives and replace them with the group that they feel will maximize profit, and thus wages.
In fact, I’ll tell you what, if the union agrees to this, we can even throw in the first bridge loan to get them started, (but not any more down the road).
If the employees want this industry saved, and it’s reasonable that they do, it’s time to tell them, “You’re so smart, you run it.”
el_nino - my question to you would be: why does the UAW feel it is in a position to make any demands on this date? The alternative is, to be blunt, that they all lose their jobs. That they are behaving as if this is going to be somehow just as bad for american taxpayers on the whole as it will be for them is the pinnacle of arrogance.
jmo - you have a point. and if companies with militant unions continue to fail, people may start to think that militant unions are a bad idea. or wait, i guess not if the government bails them out...
I somehow missed your post about requiring salaries to be lowered at AIG and all the other recipients of Paulson's slush fund. You're
straining at a gnat and swallowing a camel.
Stan,
AIG isn't in trouble because of high wages the Big Three are. That's the difference.
One note on bashing the dealership laws - I know that a libertarian's thought process is always 'law that helps someone = law that must have been passed for evil reasons of rent seeking,' but most of the dealership protection laws were passed in the wake of the Depression when Ford refused to cut its production and made the dealers buy cars at pre-Depression prices and volumes when they could not possibly move them at those levels. In short, it passed almost the entire losses of that period onto its dealership networks, and most legislatures, rightfully outraged passed laws to ensure that that would never happen again.
In short, they were passed for the same reason that most consumer and franchisee protection laws are passed - to protect the less sophisticated parties with less bargaining power. You may disagree with that goal or its application here, but you do a disservice to yourself by mischaracterizing them as the result of cozy legislators assisting their states in rent-seeking.
zeitgeist - because while a number of issues led to the current situation, no single issue played a larger role in hamstringing the ability of these companies to react to market conditions more than the fact that they were paying significantly more per unit on labor than their competitors, and could not get rid of them.
"Conflating union line workers with the union: priceless"
Why do these yahoos keep up with the straw man that anyone is blaming union workers instead of the UAW. Are they so collectivist that they can't see the distinction? Many former UAW workers are working happily and productively on assembly lines in Smyrna, TN, and Fremont, CA. Most of them would never dream of inviting the UAW into their new employers.
I don't expect anyone who hasn't actually seen the difference between the operations of a Toyota plant versus GM plant to have anything useful to say about the impact of the UAW on auto manufacturer productivity. But let's at least eliminate the straw man that those of us with little good to say about the UAW are "anti-worker" or such BS.
No one's asking them to accept minimum wage here; the average compensation for a non-union auto worker in America is well north of $40 per hour.
It is essential to point out that it is the threat of unionizing that enables these workers to make that kind of money-- which the workers in question and Toyota have both acknowledged.
AIG isn't in trouble because of high wages the Big Three are. That's the difference.
No, AIG is in trouble because it took insane risks, abandoned basic fiscal responsibility, and utterly failed it's most basic responsibilities as a responsible corporation. But, no, let's bail them out.
Brian, my point was that Megan's statement that the UAW "tanked the deal" was a gross simplification of the situation.
As to the obvious, if the concessions are needed NOW, then the Republicans should insist that they take effect the day the money starts flowing, not sometime in 2009 at the discretion of the UAW. Corker said the union could pick the date, so let's say they picked Dec. 31, 2009. Who's to say that wouldn't be too late?
By the way, I'm not asserting that either the Republicans or the UAW was right -- just that there's plenty of blame to pass around.
AIG wasn't bailed out because anybody thought they "deserved" it, but because it represented a systemic risk to the greater financial system. Give it a rest with the sob story comparisons, no one is interested.
freaktown wrote: hmmm...700billion for wall street. but when it comes to working folks in the midwest...screw 'em cause who needs manufacturing jobs anyway?
Wisconsin Reader wrote: You are going to kill an industry because they made benefits promises to employees years ago? But, let's pay promised bonuses to Wall Street guys even though their companies lost billions?
First, you may have noticed that in the course of this bailout, AIG was essentially taken over by the Fed, who can flip it at a handsome profit in a few years while the management was thrown out on its collective butt and the shareholders took enormous losses. Meanwhile, in the wake of the banking consolidations, many surplus bubble workers are going to be laid off and bank shareholders have taken handsome losses. BoA just announced that it will be cutting 35,000 positions in the near future. Do these sound remotely like what either GM or the UAW is offering to undergo in order to receive their bailout?
Second, most of the money that is being pumped into Wall Street institutions right now is going there so that your company can continue taking out the normal business loans from those banks that will allow you to have another week's worth of payroll, even while your 401(k) fund manager is rapidly pulling money out of the money markets and stocks that these banks manage, thereby necessitating an ongoing propping-up of said banks.
Try not to confuse the bailing out of one economic sector, which refuses to change its unprofitable ways and whose products can be supplanted by a range of profitable competitors, with the bailing out of the entire economy via its primary proxy.
Can your offer a cite for this?
zeitgeist - because while a number of issues led to the current situation, no single issue played a larger role in hamstringing the ability of these companies to react to market conditions more than the fact that they were paying significantly more per unit on labor than their competitors, and could not get rid of them.
Posted by jamiet |
I agree with the first part -- the the cause is very multifaceted - but I disagree that the per unit labor costs was foremost among them. Someone noted earlier in the thread that the labor cost difference per car is about $800, but a Toyota Camry or Honda Civic sells for more than $800 above the price of a comparable Ford or Chevy. That is, buyers are willing to pay a premium for those Japanese nameplates.
That has little to nothing to do with labor and everything to do with vision, ability to accurately forecast market desires, design cycle times and the resulting speed and flexibility, and the reputation for quality control. To state my premise more directly, Detroit is not losing because they are being outworked by Japan (although that is probably true), rather they are losing because they are being out strategized by Japan in design, engineering, quality, and marketing. If I am right, the problem lies much more at the feet of management than labor and putting the blame on labor as a thinly veiled way to bust the union is misguided.
Megan claims that Toyota's ascendence is not due to having more hybrids than Ford. Looking at what is mathematically ascertainable, she seems correct, but that misses all of the intangibles -- what the Prius and eventually the Camry and Highlander Hybrids did for Toyota's PR, their goodwill, the perception that they are "with it," the perception that they have better engineering, etc. Those things matter even if they do not show directly in per model sales stats.
As to the obvious, if the concessions are needed NOW, then the Republicans should insist that they take effect the day the money starts flowing, not sometime in 2009 at the discretion of the UAW. Corker said the union could pick the date, so let's say they picked Dec. 31, 2009. Who's to say that wouldn't be too late?
They should start now (yesterday would be preferable), but it was a negotiation. In order to get the other side to buy in you given them some flexibility on the date. Both sides give a little. That's called good faith. Look were it ended up.
John B- Great idea, I was thinking along the same lines. Buy out the automakers' equity on the open market and give the companies to the UAW. Throw in a few billion extra cash for fun and wish them the best of luck! I would sincerely like to be proven wrong, but I will bet what's left of my 401k that the UAW would quickly kill what's left of the golden goose.
I'm entirely in favor of bankruptcy. Forget the legislation, this will all end up more costly in the long run.
Is the UAW a problem? Sure, along with loads of other problems...like making a quality product. Ford, GM, and Chrysler had a system where they would go to suppliers and tell them they need to decrease the cost on say a headlamp assembly. They didn't care what the supplier did to get that cost reduction. Sure, they knew that cheap parts were costing them X amount during the warranty on the car but they never factored the badwill discount these cars were trading at because if your headlamp breaks during warranty it'll probably break when your car gets out of warranty as well.
Toyota on the other hand tells there suppliers that they need good, working parts. Then they offer to come help them with their production process to save both the supplier and Toyota money.
A bailout won't do a thing for culture. Bankruptcy might. Closing down will leave room for more competitive car companies.
Management is certainly a part of the problem. But as a car enthusiast and follower of trades, etc. for many years, one major problem is the sea change in the type of management. There is much to be gained now in reading Lee Iacocca’s (yes, indulgent) autobiography. While very typical to the personality of the man, it contains some rather prescient insights. First, the men who used to run these companies were, indeed, as the parlance was, “Car Guys” as opposed to “Bean Counters”, which should give us some insight into the whole, “cars people want to buy debacle. One major reason for this shift in governance, and please forgive me for bringing up the big fat libertarian bugbear, was the massive regulatory revolutions of the late 60’s and especially the 70’s. But the fault was partially the auto companies’. Instead of responding to draconian measures by evolving their production, executives piloted the company according to cost-benefit only. Some of you might argue that American cars were shitty even back in the golden age of the automobile. Well, all cars were relatively shitty then, and a Volvo Amazon was just about the same quality for the buck as a Ford Deluxe, and the Ford was more attractive to boot. So the question is, how does the US car industry revolutionize by installing economically literate gearheads as CEO’s instead of investment bankers who happen to like shiny things. Better yet, how is this accomplished without Naomi Klein writing about it as the latest proof positive of the Shock Doctrine.
From the Detroit Free Press:
"If the jobs bank ends? Then I'm going to be without," said Lawrence Faw, 47, a Chrysler LLC worker who has been in the jobs bank for the past four years after last working at the Warren Truck Assembly Plant.
Faw said most people don't understand the community service part of the jobs bank, where he has worked for area churches.
When UAW autoworkers are laid off, they receive a combination of unemployment benefits and supplemental pay from their employer for 48 weeks. If they remain laid off beyond that, they move to the jobs bank, where the company provides about 95% of their pay and benefits.
Faw said most people don't understand that he had received overtime pay for several years straight before he went into the jobs bank. The jobs bank pay is based on 40 hours without any overtime and represents a significant pay cut from those days.
He said he's taking home about $600 a week now after taxes and other deductions. His wife lost her job in 2003 and started a family printing business. They've already gone through much of their savings.
Faw said he's stayed in the jobs bank because he'd like to retire after 30 years at Chrysler. What happens if the jobs bank and Chrysler stall out?
"I have eight years to go," Faw said. "And the way things are going right now, it's not looking too good."
You know, I feel for anyone who has lost a job.
However, this guy has not actually worked in about five years and apparently doesn't intend on working for another eight years - until retirement.
And around and around we go.
Bankruptcy reorganization combined with repeal of the idiotic provisions of CAFE that restrict flexibility in product choice/design is the only real answer. Put them on the government teat, and they will never leave.
I think that one condition of any bailout plan should be that the entire Michigan congressional delegation resign and forego any congressional pensions. Seriously, morons like Levin, Stabenow, Conyers and Dingell are just as complicit in the failure of the Big Three as are the UAW and management and they've benefited handsomely over the years from campaign contributions from both labor and management, time for them to suck it up along with labor, management, stockholders and bondholders and of course the American taxpayer.
Regardless of the sticking point of wages, even if the proposed bailout passes eventually, it will not prevent the big 3 from filing for bankruptcy-- merely delay the inevitable.
Among a slew of other problems, basically, the financing arms of the auto makers are in big, big trouble. One of the lesser discussed items of this whole auto mess is that GMAC has been deemed ineligible for bailout money and has been crushed by reckless lending to sub-prime consumers. Without the ability to extend credit to customers to buy their vehicles, the auto makers will not have future buyers. It's a real disaster for the auto companies and emergency loans will not be able to keep these companies solvent. They might as well declare bankcruptcy now and stop wasting our time.
It is essential to point out that it is the threat of unionizing that enables these workers to make that kind of money-- which the workers in question and Toyota have both acknowledged.
Convince me that threat is made less credible by one or more of the Big 3 entering bankruptcy.
I long ago gave up the fantasy that life was fair and justice prevails in the long run. But from a purely moral standpoint, Ms. McArdle is practically advocating devil worship.
Okay, the car companies are poorly run, their workers are overpaid and their products aren't as good as they should be. That pretty much describes 4/5 of corporate America and 100% of journalists. You (with your Libertairan bias) completely overlook healthcare costs which are probably the single biggest reason the big 3 are unprofitable - but regardless, how do you possibly justify bailing out AIG and Bear Sterns but throwing GM to the wolves? And don't give me that B.S. that 'fin-nance' is so integral to our economy because we've seen the benefit of stuffing failed banks with taxpayer cash - none. I also loved your description in a previous post of Bernard Madoff's 50 billion dollar ponzi scheme as a "sideshow". Yeah sure; what's a measly 50 billion to the economy? It's not like any of this is, you know, connected in any way.
Boy Megan, they sure could have used you on the Titanic. 'Throw the women and children overboard but make sure the captain and the iceberg spotters have plenty of caviar and champaign for their lifeboats.'
"how do you possibly justify bailing out AIG and Bear Sterns but throwing GM to the wolves?"
AIG and Bear Sterns never personally fu*ked me over.
Even Stiglitz agrees with bankruptcy:
Financial Times
Time for Progressives to destroy him - start writing!!!!
Call Keith, you can't have this kind of betrayal from your ideological brethren.
What cramdowns are the shareholders' taking (aside from Cerberus) at this point. Last I checked the combined equity market cap of GM and Ford was about $9.5 billion. When the common goes to zero and the debt holders accept a restructuring, talk to me about a bailout.
MikeF, the Detroit auto companies are going to shed a large part of their workforce in the next few years no matter what happens, and the remaining production workers will have to accept very large reductions in pay and benefits to avoid a Republican fillibuster of a bailout bill in the next Congress. The UAW will shrink and will either disappear as a separate union or at the very least lose its clout as a bargaining agent. At this point Toyota, Honda, and the other foreign companies will be able to cut wages and reduce benefits. This will be great for Senator Shelby, Megan, and other right wing class warriors, but not so good for the country.
It's not like anybody is talking Chapter 7 for the Big Three, just Chapter 11 reorganization. The only substantial argument that's been made against Chapter 11 is that buyers will avoid buying from a car company when warranties are in question (causing such a collapse in sales that it would force conversion to Chapter 7). That could be solved much more simply by establishing a Federal guarantee of the warranties.
The specter of American automakers ceasing to exist is a scare tactic designed sell the idea of opening the Federal coffers. Outside of the existing minority of UAW-owned politicians, handing bags of money to UAW retirees isn't a popular idea; accordingly, it has to be sold some other way.
h-dawg writes:
I think the workers at Fremont would dream of it.
Fremont CA is UAW.
http://www.nummi.com/us_roots.php
Most of the bleeding hearts here continue to remain conspicuously silent about the tens of thousands of bank employees who have already lost their jobs and benefits. The over-paid unionized American automobile worker must be protected from reality at any cost, however.
No need to worry about the unions, Megan. The people who enjoyed their benefits are dying off -- along with our mass market, consumer based economy. Judging from our current situation, American workers long ago passed the point where they could easily afford even what Walmart's selling (without borrowing on imaginary assets).
As an alternative to a healthy mass market, an economy that offers an ever wider variety of niche choices for a limited number of people -- the most upscale consumers -- may seem ideal to the people who produce the Atlantic. But it's not an ideal that's likely to support many workers -- in the US or elsewhere. No matter how many wage concessions those workers may make.
The South's low wage strategy is workable only as long as there are higher wage markets to sell into.
I think you have the bias backwards, Randy.
The midwestern manufacturing core in auto and auto-related industries initially sought $34B, and after being publicly flogged and forced to bring in new business plans, etc. were forced to settle for $15B, which still failed to pass.
Over that same time, CitiGroup alone was given first $25B, then another $20B, and then a staggering $300B in guarantees - no strings attached, no public floggings, no need to prove they would/could reform their profligate ways or prove their viability or that they wouldn't again engage in foolishly risky behaviour.
Sure pays to be white collar and east-coast-based!
So let me see if I have this straight. The GOP demands that the workers affected by this massive industry wide f*ck up caused primarily by poor management take the brunt of the financial hit. The union (whose job it is to advocate on behalf of the workers by the way) wants to soften the blow on the workers by easing these cuts in pay and benefits over two years. The GOP demands that the cuts come all at once in 2009.
And somehow you think this is the UAW's fault. Maybe you should haul out another story about how your well paying consulting gig didn't work out to justify this, because that makes no sense to me.
I guess 3 million workers wandering the cold midwest jobless with no tranferable skills suckling at "the public teat" as many have so eloquently put it is a far preferable than shelling out $15 billion to keep one of the last vital REAL industries we haven't outsourced yet alive.
At least you guys kept it real though. I mean this is the same sort of backwards thinking that got us into the mess to begin with. We don't need to have any programs in place for the middle class, they're just the ones that the stuff that keeps the economy moving. Keep on your course no matter what guys. We've hit that iceberg and I'm sure we'll reach the ocean floor any day now. Be sure to toss a few billion to the finance industry along the way. That'll be money we see again.
Idiots.
I was chaperoning a high school class through a GM assembly plant some time ago. One of the little snots observed that he had to do more thinking and hustling in his job waiting tables than the line workers did. When informed of the wages they made, he replied "Cool racket."
If Wagoner goes, then so should Gettlefinger, the Michigan congressional delegation, and whomever dreamed up CAFE. For about $5 billion, the government could buy up all outstanding GM shares at a nice premium and gift them to the workers as an ESOP. Then let them find their own management to run GM, negotiate wages, design autos, cope with regulatory policies, deal with militant dealerships, etc. etc.
I don't have it backwards, zeigeist. You appear to not care about workers unless they are the right kind of worker, IOW, over-paid unionized workers.
Sure pays to be white collar and east-coast-based!
Tell that to 52,000+ former (or soon to be) Citigroup employees, 20,000+ former Lehman employees, 30,000+ former (or soon to be) Bank of America/Merrill Lynch employees, 10,000+ former (or son to be) JPMorgan/WaMu employees.
Creech, BudFox2,
Absolutely. Even though it would make me wince to see the UAW with more power, the only shot that GM has is to have the workers run the company. If they want the rights to such a large share of the money, then they need the responsibility of running the company properly.
Normally, the whole employee ownership of the company thing comes about via stock options or the like, but in this wacked out scenario, this may be the only way.
The UAW may squawk that this presents a conflict of interest, but that's BS. It would actually eliminate the conflict of interest (compensation vs. company performance) inflicted on their rank-and-file by the union all of these years.
your response is based on an unfounded assumption that i must have opposed help for the financial sector workers. while i think those bailouts could have been handled much better, i didn't particularly oppose them at the time and based on the relative lack of good options. indeed, i think the auto bailout proposals have actually been the better handled, and think the financial sector bailouts should have been handled more like the auto, not vice versa.
i note, however, that you make no effort to justify what clearly is very different treatment -- and why the manufacturing entities have been treated much more harshly than the service entities. because the most obvious reason is that there are a lot more Wall Street alums in key government positions than former residents of Dearborn and Flint - which is to say, no good reason at all.
Let's also remember, the reason the financial companies were bailed out is that BY LAW if they go bankrupt they must be liquidated and can't be reorganized. A liquidation of say, Morgan Stanley, would cause major technical devaluation of all securities and destabilize the financial system. There are no such structural restrictions to GM or Ford or Chrysler going bankrupt. They can be restructured.
Now, the argument against restructuring and bankrupcy for the Big Three is that it will hurt their brand image, but that's markedly different then legal barrier to restructuring, no? Also, Corker, et al. didn't say no bailout, bankrupcy only, period. They said, you can be bailed out with a bridge loan, but only if you accept bankrupcy-like conditions. Essentially, have union contracts torn up, as what would happen in bankrupcy restructuring, have dealer contracts renegotiated, etc.
The issue is that the Big Three and the UAW don't want bankrupcy-like restructuring (even if the firms don't officially go into bankrupcy). If AIG, Bear, MS, GS, etc could be restructured, by law, in bankrupcy, then I'm sure the govt would have let them fail. And I'm not even a big fan of TARP or the financial industry bailout. But to conflate the two is nonsense.
Also, as for wage decreases. Actually, Andrew Cuomo is rattling lots of sabres, demanding that the finco's justify any bonuses paid this year. It has been pointed out that bonuses aren't what caused Lehman to become insolvent (though I do admit the compensation structures incentivize the causes for its insolvency). And furthermore, not many bonuses are going to be paid on Wall Street these days. So, don't worry, the bankers took massive hits (also don't forget, most bankers' bonuses that are sufficiently large get paid pretty substantially in stock... have you seen what has happened to the stock of C, MS, GS, etc. this year? these people took a plenty large paycut -- for this year, last year, and the year before).
One more point; people are arguing that labor cost isn't the only problem with the Big Three. They have engineering issues, bad design, etc. But I recall Mickey Kauss, no right-wing firebrand, writing about a year ago how one of the Big Three, Ford I think, had a special team of engineers that after designing a car model were tasked with going in and removing features and cutting corners because their labor costs were so high. The Economist ran a similar story about a year ago. So, it's not that union workers are lazy and do bad work. No. It's that their contracts made it necessary to stay alive even this long, for the Big Three to make the cars with fewer features, worse designs, and worse engineering because that cost less.
So yeah, Japanese cars have a better brand since they don't have such teams and they don't have to remove features and cut back on engineering R&D because they don't have to pay lavish benefits to retirees or have rubber rooms for laid off workers.
This may sound strange coming from a libertarian, but I don't think -- for many of the union benefits -- they should have to give up anything at all.
I mean, think about it: a long time ago, many of the workers agreed to work in exchange for some deferred compensation. At this point, they have already provided the work. As it stands, the compensation they are owed is no longer negotiable for the same reason the money I paid the supermarket last week for fruit is no longer negotiable. That money is no longer mine to take back.
If this requires auctioning off every piece of GM's carcass, so be it.
It is an unacceptable injustice for any worker to be stiffed so that a *later* creditor can get paid.
As I don't support almost all of the government bailouts nor the way they have been structured, I feel no need to justify the different treatment of one form over the other. At the same time, pretending that GM's problems just snuck up on them yesterday, or that the union is not as culpable as its bloated management, is not a fantasy I choose to believe in. The writing has been on the wall for decades. The crash of '08 merely brought the inevitable forward a year or two at most. Your point about old school & job ties may be true but it is irrelevant to the issue. Like it or not, whether or not they get bailed out, the Big 3 will end up being the Big 2 soon, and then the Big 1.5 or smaller not long after that. No jobs will be saved long-term, no equity will be saved long-term, the ridiculously generous health plan will not be saved long-term, and the pensions probably won't be either. But we'll spend billions propping all of them up long-term, I am sure.
Gene2: But I recall Mickey Kauss, no right-wing firebrand, writing about a year ago how one of the Big Three, Ford I think, had a special team of engineers that after designing a car model were tasked with going in and removing features and cutting corners because their labor costs were so high.
Good point, Gene2, and thanks for bringing that up. Not enough people appreciate this point. The fact is, problems with poor engineering are *not* independent of the legacy cost problems. Rather, the legacy cost problems, given that competitors don't have them, are what makes them unable to do the engineering part well.
Think about it this way: even if you were, at some point, able to wave a magic wand and convert every engineer at GM into a supergenius, that *still* wouldn't improve the engineering, as counterintuitive as that may sound. The reason is that these new supergeniuses would then just run off to work for someone that can afford to pay them what they're worth.
This is why I recognized long ago that they had to somehow, using whatever tools available, get the legacy costs off the balance sheet. If they had started this 30 years ago, when it was clear there was a problem, they could have gradually built up enough money to pay a third party to take over the health care an pensions. But, they're complete idiots, so they didn't. Go fig.
Tony - I stand corrected. You would never know it was a UAW plant the way it operates.
If anything, though, this reinforces my attitude of "who needs GM?" It also begs the question of why the UAW, seeing the benefits of a "house union" agreement at Fremont would continue to insist on "pattern agreements" for the Big 3. The answer is probably the same as why GM, with complete access to Fremont's operations, including training on the Toyota methods, choose to continue to operate the GM way. (The answers to those questions are probably deeply intertwined.)
Those MuthaF***ers are making $40 an hour! No wonder their ship's sinking. I know that $40 an hour includes benefits, but that's still a lot of money. There's nothing wrong unions trying to get workers' a fair stake in the company but after a cretain point it's nothing but greed. Unproductive greep.
Since a big 3 vehicle retails at a substantial discount to other makers, yet requires about the same amount of labor, big 3 labor is less productive and so the wages of big 3 workers should be LESS than the average of other auto workers in the USA.
We keep hearing about how the UAW is "giving back" all these concessions. The current situation reminds me of someone eats 4 pizzas a day and now only eats 3 a day. Yes, he has cut back but still eats more calories than he needs. If he wants to lose weight, he needs to not only eat the same as a normal person, but needs to eat LESS THAN a normal person to correct for the years of overeating.
Silas,
Funny you should mention "deferred compensation."
Now look up the term "substantial risk of forfeiture," and how it's used in connection with deferred comp.
Nobody has an ironclad claim to deferred comp. There's always a risk. If there were no risk, it would be immediately taxable to the employee. These workers' retiree health care set-asides were not.
I'd like to see Megan cite some evidence for the proposition that the dealers are actually costing the Big Three money. They are not employees of the Big Three, but their customers. I'd also had that Honda and Toyota seem to have no problem making money with these state franchise laws.
re: contracts
Yes, the Big 3 entered into contracts with UAW workers and should be held to them, including pensions etc. However, the Big 3 also entered into contracts with dealers, suppliers, bond holders, share holders, and executives.
If everyone wants their contract enforced to the letter, the business will be liquidated under Ch. 7 bankruptcy, for pennies on the dollar.
As it stands, everyone is willing to enter into something like Ch. 11, where they agree to modify the terms. Everyone except UAW.
The Senate Republicans were never interested in helping Detroit to begin with.
If they were, they wouldn't have refused to participate in the negotiations between the White House and the Congressional Democrats.
The only thing that peaked their interest was the possibility of breaking the unions. The UAW knew that and refused to play their game.
Of course, while we fiddle in Rome, the other industrial countries are working to help out the car companies in their countries.
http://blogs.motortrend.com/6379958/government/the-bailout-collapse-what-do-we-know-that-the-rest-of-the-world-doesnt/index.html
Nathan: Okay, the car companies are poorly run, their workers are overpaid and their products aren't as good as they should be. ... You (with your Libertairan bias) completely overlook healthcare costs which are probably the single biggest reason the big 3 are unprofitable ...
Not overlooked — healthcare is one component of the pay package of the workers.
Yeah, Randy, screw those guys! Sickos and old farts, let 'em die! God bless America!
Jason_Van_Steenwyk:
Yes, there is a risk of losing a promised benefit due to inability of the debtor to pay. Of course. Nevertheless, many of the workers earned (and thus were owed) their payments long before any of the other creditors, *and* the workers lack the ability to back out at this point, like secured creditors can.
Furthermore, management told the unions that they would get their benefits, with no predication on future profitability, so they can't use their financial situation as a reason to get out of payments they are capable of making.
"...if the wage differential is small than the auto-workers aren't really being asked to give up much, are they?"
Seriously McCardle?
You make a cogent argument that moves me in light of today's events and then you end with this elementary caveat. You obviously know what comes next...if it's that small then why are Corker and Shelby bemoaning it.
k1
ryanculver.blogspot.com
I had not had time to write a post about this before the UAW tanked the Senate bailout.
Sigh.
"Let me shoot you in the face and I'll give you a bailout."
"Uh, no."
"Look! He tanked the bailout!"
Nevertheless, many of the workers earned (and thus were owed) their payments long before any of the other creditors, *and* the workers lack the ability to back out at this point, like secured creditors can.
I agree with you that the retirees are going to get screwed here, but in this particular case it's the UAW that screwed them. It was their UAW representation that negotiated deferred compensation and defined benefits. That it seemed like a good idea at the time (to both sides) doesn't matter now.
Nor does it matter how strong the retirees moral claims are. GM simply doesn't have the money to keep meeting them. You can't get blood from a stone.
I could see a justice-based argument for chapter 7 with the retirees holding senior position, but not a good public policy argument.
It's not like anybody is talking Chapter 7 for the Big Three, just Chapter 11 reorganization.
I've heard plenty of talk of Chapter 7. The thinking seems to be that their already dismal sales will plummet as consumers understandably eschew purchasing automobiles form firms whose future is in doubt. This sales plunge will eat away much of the debt reduction advantage of Chapter 11, and the Big 2 will continue to bleed. And in the current financial climate, they won't be able to secure the financing normally available to firms in the midst of a reorganization. And then they'll liquidate. Or, who knows, perhaps at that point (some time in 2009) the Obama administration will provide a Chapter 11 financing facility -- larger Democratic senate majority and all that -- but by then there will likely be plenty of collateral damage in the form of failing parts manufacturers and suppliers -- and greatly intensified public resistance to the charms of GM and Chrysler cars. Wouldn't want to own a lunch counter in Lansing right now, that's for sure.
But if it's his job to scuttle a very generous bailout that most Americans don't want in order to avoid making any concession at all on hourly wages, then as far as I'm concerned, it's his job to preside over the gutting of his contracts by a bankruptcy judge...
Megan: Kevin Drum and others are reporting the UAW indeed was willing to make "major concessions" on wages and other items; they merely wanted these paycuts to occur in 2011 rather than 2009. I don't see what's so unreasonable about that. I mean, heaven forbid we give people some advance warning of an impending collapse in their living standards, and heaven likewise forbid we delay a massive wage reduction until after the current recession ends. And Gettlefinger is probably reading the tea leaves correctly: Treasury or the Fed will cough up the lousy $15 billion and then it's in Obama's court. And Obama, of course, will have the Senate votes to enact something longer term and more robust.
I agree with you that the retirees are going to get screwed here...
Can someone in the know answer a simple question for me: aren't there federal laws on the books that require that firms set aside monies to provide for future pension checks? Indeed isn't there a federal agency that steps in to guarantee pensions when firms go belly up? I don't think reneging on private sector medical insurance is much of an outrage given the existence of Medicare, but screwing an 83 year old who fought in the Bulge out of half of his income strikes me as downright criminal.
I agree with you that the retirees are going to get screwed here, but in this particular case it's the UAW that screwed them. It was their UAW representation that negotiated deferred compensation and defined benefits.
No kidding. The UAW doesn't deserve privatized gains and socialized losses more than anyone else.
Can someone in the know answer a simple question for me: aren't there federal laws on the books that require that firms set aside monies to provide for future pension checks?
It covers a capped amount of pensions dollars, and does not cover luxury medical plans.
Kevin Drum and others are reporting the UAW indeed was willing to make "major concessions" on wages and other items; they merely wanted these paycuts to occur in 2011 rather than 2009. I don't see what's so unreasonable about that. I mean, heaven forbid we give people some advance warning of an impending collapse in their living standards, and heaven likewise forbid we delay a massive wage reduction until after the current recession ends.
Heaven forbid that the country's productive workers be unwilling to pay for a three-year-long make-work program for bloated, entitled UAW members who make something nobody really wants.
Heaven forbid that the country's productive workers be unwilling to pay for a three-year-long make-work program.
This has precious little to do with what "the country's productive workers" want or don't want. Every poll I've seen indicates small majorities favor some sort of government assistance for Detroit, and large majorities oppose bailouts for the financial sector. This is all about Old Confederacy senators sticking it to evil northern socialist labor unions. What I don't get, though, is, why are they bothering? What do they gain? The White House has already announced it's wisely going to sidestep the legislative process and secure the money -- thereby passing on this issue where it belongs -- to the new administration. Do Demint and others think the appearance of "stiking it to the working man" (while we provide billions to keep investment bankers employed) helps the cause of the GOP? If I didn't know better I'd almost say it looks like the GOP is headed the way of Britain's Liberal Party.
What I don't get, though, is, why are they bothering? What do they gain?
Oh yeah, I almost forgot. They're concerned about riots.
Liberalrob:
Your interpretation of my remarks is inaccurate. My contention is that the health plans will end up in the dust heap with or without a bailout, and the pension plans may as well. While it may be convenient for you to pretend that the retirees will be left without health insurance, that is not true. They will have Medicare, the same plan most Americans use upon retirement. As for their pensions, if the plan does end up insolvent, they will get benefits from the Pension Benefit Guarantee Corporation. (As the maximum payout from the PBGC is around $40,000 some will see benefit reductions.) I'm not suggesting that is fair, but life isn't fair. Ask the retirees of Bethlehem Steel. Or United Airlines. Or Lehman Brothers, for that matter. IMO, that the politicians allow corporations and unions to intentionally underfund pension plans is unconscionable, but that is another argument for another day. As a lifelong Democrat (per your website), you might want to revisit legislation enacted during the Carter Administration, which some argue is the root cause of these underfunded obligations.
Every poll I've seen indicates small majorities favor some sort of government assistance for Detroit,
Citations, please. Most recent poll I've found, here, shows 61% opposed.
Jasper, you are full of BS. All of the polling shows clear majorities opposing the Detroit bailout. They also opposed the financial bailout.
"John B- Great idea, I was thinking along the same lines. Buy out the automakers' equity on the open market and give the companies to the UAW."
"For about $5 billion, the government could buy up all outstanding GM shares at a nice premium and gift them to the workers as an ESOP."
You're both forgetting about the automakers' debt. The enterprise value (which takes into account net debt) of GM is about $32 billion; the enterprise value of Ford is $136 billion.
Re: Yes, the Big 3 entered into contracts with UAW workers and should be held to them, including pensions etc.
This does not apply to pensions, but when a company files bankruptcy any money due to employees for past labor, including accrued vacaion time, is very near the top of the food chain. The bankruptcy lawyers come first, then the IRS, then the workers.
I worked for a company that did Chapter 11, and was let go at the time. My last wages were paid, but not my vacation time (I had nearly two weeks). Using pay stubs as backup I filed with the court, and 14 months later I received a check from the trustee for every last penny of it.
Re: They will have Medicare, the same plan most Americans use upon retirement.
There are a lot of retirees who are too young for Medicare. Many of these people took the buyouts with the specific understanding that their health benefits would continue. Unless you want to place a huge burden on our healthcare system at a time when it too is near to financial meltdown, I would suggets that the younger retirees should have their coverage continued as agreed upon, at least until Obama can get his universal healthcare plan through Congress and in place.
You know, one way or another the taxpayers will end up on the hook for billions in this mess. Why not have those billions spent saving these companies and a large fraction of the jobs? The government made a profit (eventually) on the Chrysler bailout in the 80s. I don't see why that couldn't happen again.
And all that said, the Detroit-haters are going to be disappointed for now since Bush is preparing to use TARP money to keep the auto industry from going down-- and I expect a more compehensive rescue when Obama takes office. I never thought I would say this, but Mr Bush is now the most responsible Republican in Washington, looking out for the nation as a whole, not partisan advantage or the settling of old scores. Compared with Shelbey, Demint and their ilk he is a sage elder statesman.
Even Dick Cheney is talking sense when he gave those cretins a chewing out over their idiocy in this business! OK, expect news stories about flying pigs, sunrise in the west, and the Great Blizzard of 2008 in Hell.
From the New York Times:
"In a statement Thursday night, the union said it was “prepared to agree that any restructuring plan should ensure that the wages and benefits of workers at the domestic automakers should be competitive with those paid by the foreign transplants. But we also recognized that this would take time to work out and implement” using programs like buyouts and early retirement offers to bring in new workers at lower rates."
Yup... expect GM to "buy out" (as in pay extra money) to get the old expensive guys to retire and then bring in cheap new labour with the new lousy benefits. Then expect this new work force making less money to support gold-plated medical and pension plans for the retirees. This has absolutely nothing to do with labour solidarity. This is all about making sure that the current membership, who vote today, get as much as they possibly can. And then they have the nerve to bitch about union busting - as if they wouldn't screw over their grandmother for an extra couple thousand bucks in their pension.
No pity from me.
I also have no pity for the managers or dealers. They have all been complicit in creating this mess and are equally sickening in their desire to use taxpayer cash to finance their failed business model.
The only argument I can possibly make for the bailout is psychological. Letting them fail may cause a further crisis in confidence that will further damage the economy. Anyone who believes that markets are rational grossly underestimates the human fear and greed factors.
I could only imagine that the failure of the Big Three would eventually result in a massive expansion of the Toyota, Honda, Subaru, VW, Nissan, etc. plants in the some states of these senators.
The failure of the Big Three would mean an economic boom in many depressed areas of the south.
What's not to love - bring home the bacon to your district and stick it to the UAW.
What's with pushing wages down to comparable companies? The Big 3 are dying. The wages should be less than what is paid by Toyota, Honda, etc. Significantly LESS. When GM, Ford and/or Chrysler start turning a profit, then raising wages makes sense. But when they are bleeding cash like disemboweled hemophiliac, they gotta realize that cutting costs to less than the competition is an important step to recovery.
Jasper, you are full of BS. All of the polling shows clear majorities opposing the Detroit bailout. They also opposed the financial bailout.
Rachel Maddow featured one last night that showed -- IIRC -- a slight majority of those having an opinion favoring the aid to Detroit. Cherrypicked? Maybe, just like the one you Ayn Rand groupies located. At any rate, it's all moot now, because sanity has prevailed, and the good guys have won. Thanks, Mr. President. (-:
Here's one backing up my claim that a majority of Americans favor aiding Detroit*:
http://www.cbsnews.com/htdocs/pdf/dec08a-cars.pdf
*For the record, I'd favor letting them go bellyup myself were it not for the presence of 1930-like conditions. I just think it's reckless and risky to let them collapse in an anarchic fashion -- especially when we're going to be spending hundreds of billions on stimulus anyways -- and I furthermore strongly suspect that extending a modest amount of aid -- enough to see them through 2009, say, -- might well be cheaper for the taxpayers then letting them fold.
Wisconsin Reader wrote:
"You are going to kill an industry because they made benefits promises to employees years ago? But, let's pay promised bonuses to Wall Street guys even though their companies lost billions?"
Yes. Here's the thing, GM may have made those promises, but I didn't. I'm having to fork over enough dough keeping Medicare and Social Security (you know, those raggedy old programs the rest of us have to settle for) going. Why in the hell should I pay taxes to fund gold plated programs for these workers? If they want to settle for what the rest of us get, that's fine. Just say no. Just say no to your local or state government workers retiring at 52 at 90% pay, just say no to funding better retiree benefits for a select few industries, and yes, we should have said no to bailing out Wall Street morons who didn't understand or didn't care what they were selling to people.
DaveinHackensack - "You're both forgetting about the automakers' debt. The enterprise value (which takes into account net debt) of GM is about $32 billion; the enterprise value of Ford is $136 billion."
Dave, I'm not forgetting anything. The reality that GM faces doesn't change a bit whether the current management runs it, the UAW runs it, or some stupid car czar runs it. It's just that if the UAW runs it, they can face down the debt in a way that they think is acceptable to their workers. (The chances are very high that GM will still end up a smoking heap of rubble in a very short time.) I'm just sick of the union reps talking about how it's everyone else's fault. If they think they can do better, let them. But, none of the reality changes. The fact remains that they have a sucky product, no revenue, and breath-taking obligations.
Of course, if your complaint is that the other creditors should get some of the equity as well as the UAW, that has some merit. However, if GM or the other car companies have any chance, they need the worker's to be fully on board. The only real way to do that is not through some cushy union contract, but real ownership. Too late for that you say? Well, yeah, of course it is. Wish the GM management had thought of that long before and offered meaningful equity to their workers long ago. Instead, they genuflected to these absurd contracts. The UAW's rank-and-file would have been far better served with ownership than with unrealistic and unsustainable compensation. And that's a failure of both the car companies' management and the UAW.
I'm watching a CNBC special about saving GM and they have an interview with a guy who has worked for GM since 1977. And I quote "In the old days if their was a bolt missing or a part missing, we didn't care, we'd just say ship it. Nowadays we don't do that."
People say it isn't the fault of the guy on the line that the cars sucked - but actually in many cases it is. Some sick combination or decent workers and decent managers caught up in some dysfucntional corporate hell bred a f*ck the customer mentality. But each time a worker on the line or an executive in the office made a f*ck the custmer decision he was digging his own grave. The UAW and management are equally guilty. The management and the UAW are partners in crime... And, I think the UAW and GM management, to this day, share that same - f*ck the customer mentality.
Bankruptcy is the first step required to remove Detroit's management (and that includes Mr. Gettelfinger) from the picture.
The pieces left will be more valuable without them around. Their inability to focus their thoughts even as the nooses goes 'round their necks proves it.
The technically proficient workers (machinists, engineers, etc.) are a valuable commodity, though. Obama should target a big part of his public works program toward keeping their skills alive. He has a short window in which he has a good chance of getting them to work on the things he finds valuable (mass transit, green energy, whatever).
John,
I don't disagree with you about the folly of the UAW contract. Take a moment and click on the link I provided in my previous comment.
Megan,
"I think it's entirely fair to fire Rick Wagoner, but firing Rick Wagoner is a symbolic gesture; it is not going to make GM either more or less profitable unless you know where we can get some fantastic auto management talent that wants to lash itself to the mast of a sinking ship."
Someone already found "fantastic auto management talent" willing to lash himself to a sinking ship: Cerberus convinced Jim Press -- the former president of Toyota's North American operations and the first non-Japanese ever appointed to Toyota's board of directors -- to serve as co-president of Chrysler last year.
I mentioned this in a recent post ("Great Moments in Business Journalism") in response to Tom Friedman's and others' glib suggestions that putting someone like Steve Jobs in charge of the auto companies (in their current form) would turn them around.
Coming late to the party here, but I didn't hear anything about MANAGEMENT agreeing to take pay cuts until they are being paid comparable to ( or less than) Toyota execs. somehow all these libertarians here don't seem to care a good goddamn that the managers are being paid WAY more than their equivalents at Honda, Toyota, etc, for making worse business decisions. Nope, thats the free market at work.Its all the UAW's fault. The hypocrisy is pretty amazing, here.
When the so-called libertarians here start agreeing to management compensation being lowered to Honda-Toyota levels, then I'll start listening. Until then, the UAW should stick to their guns. .
"Coming late to the party here, but I didn't hear anything about MANAGEMENT agreeing to take pay cuts until they are being paid comparable to ( or less than) Toyota execs."
All three Detroit CEOs have offered to work for salaries of $1 per year if their firms get bailed out.
All three Detroit CEOs have offered to work for salaries of $1 per year if their firms get bailed out.
Yup. Because everybody knows there are only three managers currently working for the Big Three.
"Coming late to the party here, but I didn't hear anything about MANAGEMENT agreeing to take pay cuts until they are being paid comparable to ( or less than) Toyota execs. somehow all these libertarians here don't seem to care a good goddamn that the managers are being paid WAY more than their equivalents at Honda, Toyota, etc, for making worse business decisions."
Tell you what. Let's fire all the managers and all the workers and see if you can replace them at the current salaries. If you get more qualified applicants than spots, drop the price offered until job seekers equal the positions.
Wonder which group will end up being paid closer to their current salaries?
Jasper and the other socialists are missing a key difference between managers and union workers: managers are not represented by collective bargaining. Therefore, managers are already paid competitively with the market.
If you cut a union worker's pay by 20 percent, they will stick around because they can't find another job at even that lower rate. If you cut a manager's salary by 20 percent, the good ones are gone to the next best offer, and all you're left with are the worst. If you overpay for your line workers, you're underpaying for everything else, including management, which actually explains a lot about why the American auto companies are where they're at.
CERBERUS Is Leveraging Billion Dollar Connections In Congress
For Chrysler, if the bailout was Structured effectively, the Cerberus share position would be rendered irrelevant.
http://pacificgatepost.blogspot.com/2008/12/leveraging-billion-dollar-connections.html
The Deal Structure is always, always the key.
"I could see a justice-based argument for chapter 7 with the retirees holding senior position, but not a good public policy argument."
Yeah, we wouldn't want concerns about justice making their way into public policy arguments.
Megan complains about use of the word "Glibertarian." I'm inclined to use much harsher language after a comment like that.
Color me confused. I think the Big Three might have an easier time "competing" if there wasn't a massive system of state subsidies propping up their foreign competitors. I would have an easy time running almost any business if the state would constantly hand me bribes, oh excuse me, "business incentives", just for existing. Funny how all these self-proclaimed libertarians seem miss that...
---------
In 1992 South Carolina ushered in the new wave of investment by foreign carmakers in the South by offering BMW a package that was ultimately worth an estimated $150 million. A decade later, the state put up an additional $80 million in infrastructure aid when BMW decided to expand its operations in the state.
In 1993 officials in Alabama lured a Mercedes-Benz facility, the first foreign auto plant in the state, with a package worth $258 million.
In 1999 Alabama put together a $158 million subsidy deal to land a $400 million, 1.7 million-square-foot Honda plant. In 2002 state and local officials provided an additional package worth $90 million, including $33 million in tax breaks over 20 years, when Honda decided to expand the facility.
In 2000 officials in Mississippi lured a $950 million Nissan plant with a $295 million subsidy deal. While the plant was still under construction, the company announced an expansion of the project that also involved an increase in the subsidy package to $363 million.
When South Korean carmakers Hyundai staged a competition for a $1 billion plant, various states put together bids, but it was Alabama that won the contest in 2002 with a package worth $252 million.
In light of autoworkers' inflated salaries, who among you here are also making too much money?
Are you willing to take a paycut to save your industry?
Maybe the UAW should have made political contributions to some Republicans instead of just the Dems, eh?
Thank you, Beem. You have demonstrated that all of the benefits provided to profitable, right-to-work states equal about a couple billion dollars. Much less than the $15b we're talking about, and hundreds of billions less than what the American automakers really would need.
Oh, that wasn't your point, was it?
Tut, tut. My list was an indicative, but hardly exhaustive, display of the the massive network of state subsidies which prop up foreign auto companies. Personally, I find "a couple of billion dollars" of free money a pretty goddamn big business advantage - it is virtually impossible to fail if you are given vast amounts of $ while your rivals are not. I would hope a true libertarian might have something to say about that, but apparently not! You also seem to not be able to distinguish between a loan and an outright handout...again, not terribly surprising, but please review basic financial terms before you try to criticize others - then you might actually make a coherent point.
Re: Therefore, managers are already paid competitively with the market.
If there is a significant pay gap between management salaries at Toyota in the US and management at GM, this would be proof positive that your hypothesis is not true.
Re: If you cut a union worker's pay by 20 percent, they will stick around because they can't find another job at even that lower rate.
Actually what they will do is go on strike or petition the government for redress of grievances (it's called "breech of contract"). I have to say I'm with the first poster on this: if sacrifices are required they should be required of everyone, management as well as labor. And given how these companies have been mismanaged, maybe we'd be better off if some of thsoe overpaid managers took themselves elsewhere. Toyota managers are willing to work for less and they produce better results. Sounds like a bargain.
Beem - I think you are the one confusing "loan" "outright handout." A loan is something you give someone with the expectation of getting paid back, plus interest. A handout is something you give without any real likelihood of getting paid out.
Now, quiz, what do you think the states provided to the foreign-owned plants versus what is being asked by U.S. auto makers of the federal gov't?
* paid back
(and please don't make the error of thinking the southern states have gotten nothing back from their investment)
Yeah, we wouldn't want concerns about justice making their way into public policy arguments.
The point is that there are no good choices. There are going to be some losers. We could choose to make the creditors (including the retirees) whole or we can keep some variant of the company operating and current workers employed.
Speaking of justice, either of these options is going to require taking money from people who had no part in the auto industry. Taking money from relatively poorer workers today to fund the retirement of someone who was better paid is a larger injustice. Two wrongs still don't make a right.
Since you're going to take money from uninvolved 3rd parties, the question has to be asked what's the best use of that money. Given Medicare, SS and the PBGC, the retirees aren't going to put out onto the street. Nor are the retirees adding value at this point, where as the workers are. If were going to use public funds, the best use of those funds are to help those who are productive and have less of a safety net.
It's unfortunate that the retirees will take some of the loss. But given that the labor contracts they negotiated have contributed to (note: I didn't say caused) the problem, it's not unreasonable that they eat some of the loss.
Nor are retired autoworkers unique. This has happened to airline workers and steel workers. Should we have made them whole? What makes autoworkers special?
Megan complains about use of the word "Glibertarian." I'm inclined to use much harsher language after a comment like that.
What's the correct term for those who don't want to face the fact that hard choices need to be made? Or is it your position that are no hard choices? In that case, I think "delusional" applies.
"Sanctimonious" seems to fit you in any case.
You know, the sheer arrogance, ignorance and pig-headedness of many of the pro-bailout or pro-union posts is just hardening my opposition to the measure.
I've got my own sense of justice, thanks. It doesn't include giving up money I need to support my mom, who will be on medicare and probably medicaid eventually, and won't have a cushy health care program or pension, in order to support these clock-punching job-bankers, some of whom were paid not to work for years, so they can have a special deal on health care.
I'm also busting my ass to fund my own retirement and health care so I'm not a burden to my fellow taxpayer in out years. And you dumbasses want to complain to me about justice?
Blow me.
Has anyone factored in cost of living in Michigan and Ohio versus Tennessee and Georgia? Just think of housing costs alone.
If wages are reduced to the level of southern e autoworkers wouldn't the UAW workers essential have a lower standard of living than their counterparts?
Add innumeracy to the list of your typical libertarians' failings. All other things being equal, if one manufacture receives a subsidy that allows them to sell their automobiles for, on average, $1,000 less per unit, then they will over time drive out their competitors. Despite the total difference being 'only(!?!?!?) a few billion dollars.'
Which necessitates a bailout of $15 billion years later.
As an aside, I can't believe how willfully dumb libertarians can be. The difference between a shoddy bolt and a good one can be, oh, maybe $0.15, yet if the bolt fails in a piece of equipment, it can cause thousands of dollars of damage. This is an abstruse concept? One that is difficult to grasp?
Well, maybe if you're a libertarian.
What's the correct term for those who believe it's always the same class of people who must suffer the brunt of these hard choices?(As I recall, there was a great deal of bitterness amongst the pilots and other employees that management was not taking commensurate hit in their pay and benefits when they were asking others to 'sacrifice for the good of the country'.)
Or is your position that management should always be the last group of people to take the hit in any industry or business?
Since you seem to be so ready with the insults, I'd say "blithering and willful idiot" fits you to a T. Or is this yet another instance where it's perfectly okay for you to demean other people, but that disparagement going in your direction is completely uncalled for? There's a word for that too. A not very complimentary one.
If the democrat's had managed their business the bill would have passed with a filibuster proof majority. Final vote was 52 for 35 against.
10 republicans voted for it. 4 democrats voted against it (including netroots stalwart tester)
Four Democrats did not vote: Biden, Kennedy, Kerry, and Wyden.
All Reid had to do was get 3 more democrats to show up and vote and the bill would have passed.
The Senate Vote
Since you seem to be so ready with the insults, I'd say "blithering and willful idiot" fits you to a T. Or is this yet another instance where it's perfectly okay for you to demean other people, but that disparagement going in your direction is completely uncalled for? There's a word for that too. A not very complimentary one.
I assume this is intended as self-deprecating irony. No one could possibly be so self unaware.
It's a nice joke. I appreciate it when someone can laugh at themselves. I frankly didn't know you had it in you.
Translation: caught red-handed being jerk because he wanted to be one, SG wants to pretend he can't comprehend simple words and phrases to justify his behaviour. When the general thought is that libertarians are quick to hand with gratuitous verbal abuse, it might be a good idea to, y'know, not be so quick with the gratuitous verbal abuse.
Just sayin' ;-)
Are you really that self unaware? You've clearly demonstrated your inability to pick up on sarcasm, but that shouldn't have surprised me given your demonstrated lack of reading comprehension. (Hint: I wasn't quick with an insult; I was responding to one directed at me. You had to have seen the initial insult - you quoted it.)
How can I make this more clear for you? Can you point out where in this exchange with me *you've* done anything other than hurl insults? As you said, "Since you seem to be so ready with the insults, I'd say "blithering and willful idiot" fits you to a T. Or is this yet another instance where it's perfectly okay for you to demean other people, but that disparagement going in your direction is completely uncalled for? There's a word for that too. A not very complimentary one."
If you really can't see how this applies directly to your behavior in this exchange, well, frankly I'm stunned. And given that approximately every single post of yours is insult-laden, for you to be complaining about a lack of civility is particularly rich. If you want to see fewer insults, I suggest you lead by example. As soon as you choose to engage in good-faith discussion, I'll be more than happy to respond to you in kind.
I'm not holding my breath...
Right. You're so sure you were insulted, but you can't even be bothered to quote where you have been. And in case you still don't get it, you stupid, stupid little man, I included the words you were responding to. I don't see any insults there, any name-calling. Hint: saying 'inclined to use much stronger language' is not an insult.
So unless you're able to actually, you know, show where you were insulted, why don't you just quit now and apologize for your bad behaviour?
Were you confused by the quoting conventions? Generally paragraphs in italics are not written by me, they're other people's writing. If you can't understand the meaning of the very words you are quoting and responding to, you have an issue that is beyond my ability to address in a blog comment.
You know, if Cynical Again took offense to my flaming back I'd apologize. Sure, he took a single sentence of mine (out of context) and used it as a springboard for an insult, but "he did it first" isn't a compelling defense for my bad behavior and I probably up'd the ante (his insult was oblique whereas mine was direct). In any case, my response didn't move the conversation in a productive manner.
But I'm not apologizing to you for my posts. You post nothing but insults and bad faith. Clearly you're free to be an asshole for as long as it gives you pleasure, but you've forfeited the right to complain about anybody else's assholishness. (and yes, my flaming was assholish, I freely admit it.) In my defense, at least I had 3 reasonable posts here before I gave in to into my baser instincts. How many did you have? I count 0.
But...I will gladly agree to bury the hatchet and join you in pledging to try not to insult others in future postings. If not, enjoy having the last word.
Sigh. What you quoted was:
That is not an insult. In no way shape or form. If you think it is, you've got an extremely thin skin. And if this is the case, perhaps you'll start calling other libertarians on their insulting, and very bad behaviour. But I'm willing to be open: just why do you think is an insult? Because this, on the other hand, is definitely insulting:
Oh, and since we're going on personal assessments here with nothing to back them up, let me just say that I've found your contributions to less than satisfactory, and mine to be salient, topical, on-point, and incisive[1]. Gee, isn't offering up an opinion with nothing to support it fun.
Iow, when I complain about your bad behaviour, you actually agree that it is - "my flaming was assholish, I freely admit it." But somehow, I'm not allowed to say it. That's me behaving badly. Uh-huh.
[1]You must not be looking very hard. For example:
I'm going to assume that you're taking me up on my offer. There were no insults in your last posting.
First: Of course "Glibertarian" is an insult. So are "Dhimmicrat" and "Rethuglican". And "much harsher language" is (obliquely) more insulting. But what raised my hackles was that he didn't even attempt to address the substance of my argument. It was dismissed with a single out of context quote and a label.
But, as I acknowledged, his insult was oblique whereas mine was direct. I turned up the heat and that was assholish.
I refuse to take netiquette lessons from you, however. Here's the sentences before and after your "salient, topical, on-point, and incisive" comment:
Add innumeracy to the list of your typical libertarians' failings. [salient, topical, on-point, and incisive comment elided]. As an aside, I can't believe how willfully dumb libertarians can be.
In a better world, perhaps we would (all) be able separate the message from the messenger. But no one I know lives in that world. Rod Blogojevich isn't about to get a second job as an ethics teacher.
The thing I like about this forum is that it's not an echo chamber. There's nothing interesting in listening to a bunch of people agree. There's nothing interesting in a bunch of people agreeing. But there's nothing interesting in name calling or condescendingly "sigh"es either. I welcome respectful disagreement, and I try (clearly not always successfully) to post in that manner.
But I'm not the net police. It's not my job to police anybody else. Nor is it yours. If we share a desire for a more respectful tone, we can only lead by example. You're not going to flame someone into good behavior, it's counterproductive at best.
So, how many of you are going to rush out and buy a car in the new few years? How are the auto makers going to stay afloat until you do? We will be bailing auto companies out for the next 5 years! I'm sorry, no one is going to bail me out and make sure I still get a pay check during the next few years. I think free enterprise needs to take it's course. Isn't that what we stand for? Oh I forgot, auto companies are exempt, how silly of me to forget.
I favored bankruptcy over bailout as many Democrats did, including economist Joseph Stiglitz and three Democratic Senators (not counting Senator Reid, who voted against it for procedural reasons). The UAW would have survived (most of their workers don’t work for GM or Chrysler anyway), and with the changes in Washington you can be sure card check is on the way. If GM and Chrysler go bankrupt it will be Cerebus, the bondholders, the shareholders, and the overpaid top executives that will probably take most of the hit, and I won’t be shedding any tears.
However, the fact that the Republicans were demanding concessions from the UAW shows how out of touch they have become. GM has lost $15 billion and took in $166 billion in revenue in the last four quarters (thus total costs were $181 billion). The total compensation paid to its 74,000 UAW workers and an unknown number of UAW retirees in the last four quarters amounted to about $10.8 billion. In other words less than 6% of the cost of a GM vehicle is due to the people who actually assemble them (or assembled them in the case of the retirees). The total cost of that compensation was less than the amount GM lost last year. Slashing union worker compensation will not solve GM’s or Chrysler’s problems. Why didn’t the Republicans demand that top executive pay get cut? The top 30 executives at GM collectively make about $100 million in compensation. Last year the CEO of GM, Rick Wagoner, made $15.7 million alone. Does anyone think he actually earned that money? By trying to bust the UAW all the Republicans did was remind everybody that they are the party of the fat cats. I’m already wondering how many seats they’ll lose in the Senate in 2010.
By the way, guess how many autoworkers in Japan are unionized? The correct answer is all of them (the Confederation of Japanese Auto Workers or JAW). The Japanese autoworkers are not less productive because they are unionized and in fact several research studies have concluded unionization increases productivity due to the effect of efficiency wages. All the “right to work” laws in the south have done is to succeed in setting up a system where foreign corporations can exploit our relatively cheap labor as though we were a third world country.
Also, how much do auto company executives get paid in Japan? The CEO of Toyota, Katsuaki Watanabe, only made $900,000 last year, and his company actually earned a profit. If American executive pay were truly determined competitively how do you explain Rick Wagoner’s bloated compensation package?
"Of course "Glibertarian" is an insult."
But rather a mild one, don't you agree. I mean, I usually refer to libertarians as "soulless, Satan-worshiping pig-people" which has the twin advantages of being both more evocative and more accurate.
The Unions have given up every advantage they had over non-union labor.
http://emptywheel.firedoglake.com/2008/11/15/what-the-ap-left-out-about-the-uaw/
http://emptywheel.firedoglake.com/2008/11/15/what-the-ap-left-out-about-the-uaw/
From the link:
In its contract last year, the UAW made painful concessions, adopting a two-tier wage structure, such that new employees make just $12 to $15 an hour. The move is projected to bring the American manufacturers in line with their Japanese rivals’ non-union labor costs in the near future.
In addition, the union has taken responsibility for providing retiree healthcare, thereby eliminating one of the last remaining competitive disadvantages for the American manufacturers’ unionized workforce as compared to their Japanese rivals.
With these agreements, the UAW has managed to save jobs, while still providing the superior labor force that leads most segments in terms of the most efficient plants measured in hours per vehicle.
The UAW’s workers have made deep concessions to ensure American-owned auto industry remains competitive with its foreign competitors. Now that the American-owned manufacturers have eliminated some of the structural disadvantages that gave foreign competitors a market advantage, it would be a terrible waste for its country not to do what’s necessary to sustain American manufacturing though this tough financial period.
———
All information sourced in the link.
While everyone enjoys hurling insults and accusations of greed toward their American blue
collar workers, perhaps you should get some of
your facts straight.
We are in our 60s, retired. My husband worked
for 46 years in the UAW at the Ford Glass Plant/
Visteon and worked ALL the overtime he could get.
He never made more than $17 per hour and the overtime pretty well served little profit after
the government took their unfair share.
Am I completely daft to expect that the pension that
he paid into for 46 years actually be there for our
use? And the health care...we ARE on Medicare and
Bc/Bs is the secondary insurance. With the current contract we have deductibles, larger
copays etc....and that is only right as everyone
and I do mean EVERYONE should pay back into the
system and have no free rides.
Im really amazed that few people are looking at
the bigger picture. What did Japan do to get
their foot hold in this countrys electronic
manufacturing???? They produced electronics
at less than cost, flooded our markets with
those products and drove American companies
into the ground or over seas for slave labor.
See anything remotely familiar with this plan?
Get rid of the Big 3, then lower their labor
costs by cutting the workers wages and peddle
their transplanted vehicles to whoever is left
with enough money to actually buy something new.
Oh for joy, a level playing field and the cars
will still cost as much or more but the blue
collar middle class worker will be pushed to
the poverty level. Dont believe me. Just watch.