Pardon my ignorance, but isn’t the driving force behind subsidizing unionized Detroit saving jobs?
GM’s total request now tops $18 billion, with $12 billion in loans and
an additional $6 billion as an emergency line of credit should the
economy continue to worsen. In return, GM pledged to shed four of its
U.S. brands, nine factories, up to 31,500 workers and roughly $30
billion in debt through 2012, all to make a profit excluding taxes by
2011.
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123 Responses to “Auto Bailout Madness”Search
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The big three are meeting with the auto workers union today. This program looks like it will be scrapped.
You get laid off and those checks just keep coming? Wow what a deal.
While part of Ford’s success in Europe may be attributed to producing smaller, more fuel efficient cars, and part of GM’s success in China is from a workforce with a lower standard of living, that’s not the complete answer. What is the elephant in the room that the leaders in Congress don’t want to talk about and the Big 3 executives are too frightened to bring up?
Obviously there are many other issues that come into play but at some point the UAW is going to have to realize that the days of holding a gun to the head of management to guarantee themselves lavish contracts are over. It’s no longer a pistol, it’s a nuclear bomb, and pulling the trigger will kill them all.
Just file bankruptcy and reorganize, what’s so hard about that. It doesn’t cost the taxpayers anything, they get to bust those bloated union contracts and oh, the union employees get to keep their jobs but at a competitive rate. That’s the rate they are going to get when they have to go looking for another job anyway, if they can find one.
Oh that not true, if they had to do to work somewhere else they are mostly unskilled workers with a high school diploma. What does Walmart and Burger King in Flint pay?
I’m sure the auto industry will still pay alot more than they could earn elsewhere. Just look at Nissan in Jackson, Ms or Toyota in San Antonio. The southern auto manufacturers pay a higher wage to unskilled to avoid the unions getting in and ruining things.
BJ
Uh, no.
The primary focus in saving a company must be to make a profit. Everything else is subsidiary to that consideration regardless of whether a bailout happens or not. If the company doesn’t or cannot make a profit, there will be zero jobs.
Of course, that is assuming the company is worth saving and that is a very interesting question. I think it is pathetic the automakers are being forced to make decisions now they should have made many years ago.
Mr. Texpat,
Uh, wouldn’t that be the focus of the shareholders? Are subsidies, in the form of guarantees from non-shareholders, now considered profits?
Mr. Texpat,
BTW,
You might want to pass that along to the people pushing for the bailout. There are very few quotes out there from politicians that reference wanting to help GM, Ford and Chrysler make a buck. Whereas there are a multitude of them talking about saving American jobs.
BJ
If somehow you have the impression I am advocating a taxpayer bailout for these clowns, you are mistaken. The saving jobs meme is just so much political cover for the morons in DC.
A blogger recently wrote (Doug Ross or Jules Crittenden ?) that any private sector organization deemed “too big to fail” is too damned big to exist in this society and should be dismantled.
No company deserves a safety net in a capitalistic system. If they are too fat to walk the tightrope, they need to quit the circus.
Others call it creative destruction - take your pick.
There seems to be a form of “blackmail” out there. If we don’t save the Big 3, we won’t save JOBS. Well what good is it to save those JOBS if the company can’t make a profit. Instead of a BAILOUT maybe the BIG 3 ought to be asking for SUBSIDIES!!!! The Congress is good at doling out subsidies, too.
#4 billybeer…I have knowledge of 2 people who work in the Ford plant who are SKILLED laborers. Don’t assume just because they work in a plant, they are unskilled. I also have acquaintence with a Texas A&M graduate mech engineer who was unable to find employment for over 12 months due to no past experience and his older age and ornery personality. He ended up working as a customer service rep for a large company. Let’s not assume these UAW people are unskilled and unqualified.
I’ll reverse the idiotic statement by Barney Frank about “white collar bias and not saving blue collar jobs also”.
Not once, not ever did I hear one single politician cry about saving jobs on Wall Street during the bailout madness in October. It was about keeping the system from crashing, restoring confidence, injecting liquidity, etc.
Now, when it comes to saving automakers in Detroit, it is all about saving the jobs of assembly line workers. What a bunch of crap. Many of those autoworkers make more money, have better retirement plans and live a higher standard of living than the tens of thousands of office workers who have lost their jobs in Manhattan.
Umm… yes and no. If the big three go out of business the 3 year impact is 7 million jobs and $400B. There’s a lot more here than union jobs.
Note the labor costs in the article, this is how much labor related cost are in each car. These guys labor costs are $70/hour/vehicle. The average union wage is $28 with worker support costs (health, pension, etc.) of $10/hour; for a total of $38/hour. The remaining $32/hour/vehicle is the overhead cost associated with pensions, health care, etc. for the company; and this includes pension for the 18 CEOs that GM has had in the last 30 years.
In other words if the UAW started working for free tomorrow the labor cost per car is $32 per hour, a number that isn’t subject to negotiation. The big 3 are in Washington to get government coercion in negotiating their union contracts, but it’s only a small part of the cost figure.
As to the job bank, as repugnant to those of us with a christian work ethic, the total cost for the 2000 workers if they earned $100,000 (they don’t) comes to $200,000,000/year or less than the salary of the CEO.
What’s missing and no one I’ve seen addresses this, what about the board of directors? These are shareholder companies what does the board of directors have to offer here?
As to what appropriate costs are, it’s hard to believe that the car companies are a business. If they see a produc for more than their cost of production they make a profit. Automobiles are not their only product.
these guys figured with the cost of labor they could make a profit. The economy went south - Whoops!
I see no reason to bail them out. Baknruptcy or consolidation works for me. Why subsidize inefficient American car companies when Toyota-America survives?
When the Big 3 first went to D.C., hat in hand, looking for taxpayer dollars to pull them out of the quicksand, the UAW announced that it was unwilling to make any concessions to help those companies become profitable. Oooops. Now the Big 3 say they are talking with the UAW. Why aren’t the rocket scientists that sit on the Congressional panel talking to the UAW? Simple answer, the UAW fills the campaign coffers of Democrats.
It also doesn’t take a rocket scientist to figure out why the foreign automakers are in better shape; they have moderinzed their plants, which the Michigan UAW fought and won since jobs would be lost; they are located in “right to work” states and states with no state and city income taxes and they are located in states where the cost of living is less. If you work in Detroit, making $70K a year, you can have the same quality of life style in San Antonio for $58K/yr. Add to that the Detroit worker pays approx. 6% in state and city income tax plus two hours a month in union dues, and who is better off?
In 2007, Honda built a new plant that employees 2,000 workers for $550 million. In the same time frame, GM was required to give laid off workers (from closed plants such as the one in Wentzville, Mo.) 95% of their salary for an indefinate length of time that cost GM $497 million. These are workers that do not work, are not required to relocate to a new plant in order to stay on the payroll (as the UAW claimed that was oppressive and would create a hardship on it’s members to have to relocate) and basically sit on their tails at home drawing 95% of their $35/hour salary. The 1,000 Wentzville workers account for almost $7 million a year in “reserve work force” payments from GM. Chrysler pays out even more with 1,500 laid off workers from their Fenton, Mo. minivan plant and 500 workers from their north St. Louis pickup truck plant.
Sorry, vlou, but most UAW workers are non-skilled except for their jobs on the line. Since the UAW has implimented “job specific” titles, a line worker who puts tires on a vehicle all day cannot go up the line and install dash boards. If the tire installer is out sick, then the Big 3 are required to call on their “surplus work force” sitting home on thier asses and give them a job for the length of time the “tire installer” is out sick, but only if the “surplus” employee is assigned to that particular plant.
GM is paying for a retired work force that is almost double what the current work force is.
My personal opinion is to allow the Big 3 to file bankruptcy, turn the management over to the UAW and let them go under within a year. If union officials could run a business, they would being doing that, not running unions. But hell, the UAW cannot even run it’s tony golf course resort that has lost over $13 million in the last five years.
Pardon my ignorace but NO company is too important to save. Once that mindset kicks in, economic fascism will decrease and real economics (capitalism) will increase to take its place. Fascism is doomed to fail. capitalism is sustainable indefinitely.
If GM falls, it’ll be due to stupid business practices. They’ll either restructure or contiue to fail even more. If they fail completely, all of GM’s “stuff” could easily be gobbled up at rock-bottom prices, by other companies that weren’t stupid or as stupid as GM. In the end, better business rules the day. ALL auto manufacturers are experiencing a significant downturn in sales. Only our proud big three are asking for some dough. The main difference is union controle, A.K.A., “stupid business”.
ShaWiki,
For the thousandth time, bankruptcy will not result in 100% job loss or ceasing operations. Bankruptcy would allow them to restructure these legacy costs that everyone claims is stifling their competitiveness.
Let it happen and deal with it.
Ah remember the oil crash of the 80s and how concerned Congress was about saving jobs in the Oil Patch? No? Bailout talk? Nope. But maybe that’s because it was Texas, Louisiana, Oklahoma, Alaska, etc, you know, flyover country. “Freeze a Yankee in the dark” still lingers in the recesses of oil patch memories.
#16
If there is a bankrutcy and not a loss of 100% jobs the total impacts are 5 million jobs and only $276B. There’s only so much that can be put in a post.
And that’s assuming that people will buy cars from a company in bankruptcy. Also seeing as capital is tight the government has to underwrite the loans, which they are reluctant to do. No one will sell them parts on credit.
Yes, let it happen.
#17 Adee
That was the day of a $25 import tax on imported oil to save US jobs.
Yeah, people never buy products from and vendors never sell parts to companies in bankruptcy. That never happens.
#20
So you are equating the public’s purchase of a 4 hour cross country airplane ride with a 5 year investment in an automobile. Man, is there a job waiting for you in Detroit!
However you may have a point. Anyone else willing to buy a Chrysler if the company is going bankrupt and the government does not arrrange for credit?
Not quite the same as your assertion of no one will sell them parts. I’ll explain how business works in another post.
I never had a problem extending short term credit to a firm in Chapter 11. They pay quite well since they are overseen by a court appointed trustee and have to abide by fairly stringent operating rules. The trick is to not get caught with receivables at a company getting ready to file Chapter 11.
#12 Shemale:
Which Big 3 CEO makes $200MM/year?
STOP MAKING STUFF UP.
Shamaal #18;
Even if these figures are true, that’s true chump change compared to bailing them out (future bailouts will be inevitable) and further allowing stupid business to continue. The financial cost of bailing the auto industry out will be astronomical and GM, ford, Chrysler will continue to establish auto plants outside the US.
These automakers have the map of success before them. It’s call Toyota and Honda. Both of which have auto plants in the US, neither of which “need” a bailout.
People will. Bankrupcy would be a legal door for the automakers to get out of Union contracts. Doing so would drive the cost of their products down, from my understanding, by thousands of dollars. OF COURSE people would buy their cars. Why wouldn’t they?
You ain’t from this planet, are you?
2007 Operating revenue
Chrysler - 49 billion
American Airlines - 22 billion
The airline industry isn’t just some mom and pop country store.
Matt 23;
Dude, thats low!!!!
#25 - Shalien?
What about the backlash from people like me that are completely against a bailout. I can tell you now if they get a bailout, I will never buy another American made car from the big 3 ever again.
I am so disgusted with this socialist mentality, when we have a system in place to help failing companies restructure. Its called bankruptcy.
#27 Shalien! I like it.
We got caught holding a substantial amount of receivables for one of the big power generation companies when they filed Chap. 11. We actually wrote the bad debt off. Four years later after they emerged from bankruptcy they paid the debt penny for penny.
#23
My mistake I was thinking Wall Street. Even though I didn’t say an automobile CEO, the inference was there.
Actually I don’t mind being held to a higher standard. My data’s available and doesn’t come from talking points. And if the ad hominems somehow makes one feel better about the indefensibility of one’s position on an issue, I have a reasonably thick skin.
#25
Chrysler and American have different products they sell. It’s really straightforward you see.
Chysler paid off their last government backed loan. Credit’s tight now, does the government underwrite their out at the risk of them going out of business? That is can the government running Chrysler make a profit than the current Board of Directors.
I think not, let them go out of business.
Ah, playing the old martyr card. Everyone has defended their position quite well here today…except you. You just continue to make up numbers and say “my data’s available” like that’s the same as producing it. Must we subpoena the data?
OKay we just spent $1 trillion bailing out the financial industry, much of which was also mismanaged. A GM bailout would cost a tiny fraction of that. While there may or may not be a systemic financial risk losing GM, the jobs risk, could potentially be several million jobs gone there between GM, it’s suppliers, and then the ripple effects. Much higher than the 31,500…
So if the purpose of the financial bailout was to prevent the economy from falling off a cliff, then a much cheaper GM bailout serves the same purpose.
20 - Citing a couple of companies from the airline industry does not enhance your argument.
The head dude at GM says Bankruptcy is not an option. I say a BAILOUT is not an option.
Oh, and the driving force behind the bailout is DEMOCRATS paying off the UAW for electing them and an incompentant as President. Any Republican voting for a BAILOUT should be flogged.
So we’re back to the cost of the cars being shifted to the government.
The resultant cars will be purchased base on price not performance or operating costs. Maybe, I thing Toyota does well because they make a quality product. But maybe you’re correct, maybe people will buy Lincoln Navigators when the don’t have a job, can’t get a loan, gas is $4/gal if the price is low enough.
There’s a place in Detroit for you too.
I’m still driving my 1991 Mazda Navajo and I can barely afford to drive that.
#33 hamous
What data are you missing?
#35 trl3
I saw that too. Maybe someone ought to ask him exactly why he seems to be of that opinion.
Step away from the kool-aid.
There are a number of competing plans My Summary
Democrat - loan them the money and not expect it back
Republican - loan them the money and don’t ask any questions
Either way BOHICA
#36 shamaal
How exactly would the cost of the cars get shifted to the gov’t in the event of a bankruptcy? In a bailout the cost would get shifted to the gov’t (i.e. the taxpayers), but not in a bankruptcy.
Cars will always be purchased on price for a given level of features (I’ll lump quality in with the features). The problem with the Big 3 is that their costs have driven them to price cars higher for a given feature level than their competitors do. Or alternately, at a given price point, the Big 3’s cars have fewer features.
#38
He has said this before, I’ve repeated it above and hamous thinks he wrong.
Would you loan money to or buy a car from this man?
He could be bluffing or he could be right. I think he’s right. If they go bankrupt (Chapter 11 or 13), GM ceases to exist other than selling the naming rights.
Perhaps it’s time.
What’s Chapter 13? I thought restructuring was 11 & liquidation was 7.
If the unions don’t get with the program, there won’t be any option.
Cost of cars without any wage labor $38/hour. See#12 for breakdown.
Of the $38/hr the major costs are pensions and health care.
Depending on the nature of the bankruptcy, the government will be the first creditor. They will seek the pension money first and the health care money next.
Pulling this much money out of the company pretty much means they’re dead unless they receive massive government loans. FWIW that’s the nature of the ongoing discussions in Washington.
So, the $38/hr cost of the car shifts to Washington. Union concessions pale in comparison. If it’s a loan the burden on GM actually increases it is just spread out over a longer time period. Using the figures in the article it looks like around $8/hr. I don’t recall if the Toyota cost quoted is wage or labor.
If GM throws in the towel pension plan goes belly up the government pays for it. Health care is not a government obloigation but the government will ensure that the UAW is first in line rather than pass the costs on to the states.
Why are people who may be uninsured themselves and who have no pensions being asked to prop up such plans for others?
Chapter 13 is for individuals, my mistake.
The unions are pretty much out of the loop (other than lobbying) until this shakes out. GMs position is that the concessions they received in 2006 - e.g., transferring health care costs to the union, provide them with the opportunity to be profitable if they can just get over this hump. I haven’t seen a credible plan and neither has Congress. The products are not in demand.
You are not allowed to ask that question.
Just be happy you can help out.
#43 Sham
So how would you Fix it?
Just want to know what you would do to resolve the issue.
This is not about saving manufacturing jobs. It’s about saving unions, and the jobs of the fat cats who run them. The manufacturing jobs will still be there after the Big 3 file chapter 11 and reorganize. On the other hand, the fat union contracts and the people who pimp for them, will be gone. This prospect makes democrats on the Hill very nervous.
It’s considered part of creating a beneficial business climate. I gave a history in one of my earlier posts.
We (taxpayers) also insure bank deposits, the space shutlle if it lands in downtown Miami, and nuclear plants if they melt through the center of the Earth. Incidentally liability on nuclear plants is limited to $500m, a significant sum in the 50s when it was established.
#47
My knee jerk reaction is to let them go under, pull the UAW obligations and pension plans off the top and let the assets be sold to anyone who coughs up the money. Sort of like Enron. Two Chinese companies have received permission to bid on the companies and there’s a number of foreign investment funds with cash. Unfortunately with the global economy in the shape it currenly is, there aren’t too many buyers.
Needless to say, this would make me very unpopular.
Shamaal
No. We’re back to the market deciding how much cars will cost. Obviously the cost of producing one, big 3 style, are too high to be sustained.
Precisely why I buy pretty much exclusively Toyotas for my day to day drive. They last ‘forever”. In fact, myine is a ‘97 with over 202,000 miles and has never needed repair except for the O2 censor (which is really minor) and starter (replaced by Pepe Boys initially and didn’t last long. Second go around was a nauthentic Toyota part and has outperformed Pep’s product nearly three fold). There’s a leak with my oil (normal for en engine of this duration) and transmission fluid pan. Again, minor (or expected) stuff.
I grew up on Chevys. In and out of the repair shop they were. That stopped when Dad bought his first Honda. Mom and Dad bought a Dodge Grand Caravan and two months later the transmission crapped out.
Quality is yet antoher map to success the Big 3 can learn from.
Regardless of my preference, people WILL buy more cars of they are cheaper. Even if their quality matches teir Japanese rivals, the fact of the matter is that their costs are way higher than what is sustainable. Bailing them out will only continue this stupid business practice.
No, there is no place in Detroit for me. Despite my limited experience in the business world (pretty much zero), I’d make far better business decisions than what is permitted in Detroit. The unions, and apparently the COEs would drive me out in chains if I made the decisions for them.
Darren10 says
Told ya to use Jose’s Boys.. You never listen.
#14 retiree and others,
I always find it interesting that the unions are given the bulk of the responsibility for what are clearly poor management decisions.
The management of the Big 3 accepted these contracts. They did not have to. They were in a market with little competition and were arrogant. And yet they get a pass. As do the Board of Directors that hired them. As do the shareholders that elected the boards of directors through the years.
They should lose their investments because they made poor choices.
Let them fail.
#34 Houstondem
I don’t need to enhance the argument that companies can declare bankruptcy, restructure, and emerge a more financially sound organization. Our history is chock full of examples. Any person with a brain bigger than a pea knows that.
The more I think about this ridiculous statement by houstondem the more it really bugs me. Why on earth would such a point even need to be argued? This is nothing more than an attempt at obfuscation due to lack of anything substantive to add to the debate.
Squawk, if you’re around, who was the left-leaning commenter we used to have around here you knew from the trucking industry? He was the one that had some common sense and was honest. I miss him.
#53 BigJolly, very well stated.
At the rate the big 3 are burning money a bailout would only postpone the destiny that they have secured for themselves through years of poor management and bad decisions on labor contracts.
In the 1990’s many large companies recognized the dangers associated with maintaining post WWII practices in regard to pensions and benefits and undertook difficult and unpopular but quite necessary measures needed to ensure their competitiveness in an increasingly global martkeplace.
The domestic automakers did not.
You called it, dude!
I don’t think it’s ALL the UAW’s fault. I would access blame at about 60% unions and their Democrat stooges in congress and 40% spineless managerial ineptness.
52;
[Suddenly becoming alert]…Huh,ummmmm, what?
53;
I pretty much blame them all equally with the unions.
“Let them fail,” and loose their investments?
Amen to that.
54;
Or bigger than my brain which quite frequently acts as if it were smaller than a pea.
I think we are saying the same thing.
The market determines price, the manufacturer determines cost.
If the manufacturer can shift his costs to the government or anyone else he will at every chance he can, because his competitors will. If he can’t get credit in the market place, he’ll seek it from the government. And with the administration’s nationalization of the capital market it may very well be the same thing.
IIRC GM had a $1B profit in 2000 in their North American operations. The market changed, they didn’t. I think that was the year they cut Oldsmobile also.
Shamaal;
As of recent months, the message has been that they can. But why are Toyota and Honda NOt shifting it to the government?
Toyota and Honda aren’t.
Cuz GM’s stupid in their business practices.
There’s a solid decision from UAW. Just wait until 2010 and things will work out.
That part was for you Shamaal. With love from Darren. It confirms in part what you said in post 62 regarding how GM didnt change ot the market.
XOXOXO
I joined the wrong profession. I’d love $70,000 just to quit.
Article.
I wanna know why the employee pension plans were not funded?
When I was working in a local union, our pension had to be funded, and the union was responsible for investing and dealing with it. The companies we worked for paid into the plan just like they paid wages, and that was the end of their involvement.
GM decided to hold that pension money, that’s the only explanation I can think of. They decided to take responsibility for the pensions, seeing at the time they were only paying out a fraction of the money being made off the pensions plan. Now they are whining because they are holding the bag out of their own ignorance and greed.
Kinda parallels Social Security, don’t ya think? If our Elected Officials had kept their greedy little grabbers out of the till, there would be plenty of money in SS. We wouldn’t be taxing retired folks’ income, and talking about it flipping over in a couple years. Social Security is fully funded, but it’s been drained by leeches until it’s almost dead.
I get disgusted when someone says a worker is greedy when the entire company’s income is based on his sweat. A worker is greedy when he wants to afford to put braces on his kids’ teeth, but we are just now chaffing at CEOs behavior, their retreats, and the company jets. A worker is “holding a gun” to someone’s head for a fair wage, but no one blinks at a Golden Parachute worth more than a hundred workers will make in their lifetimes.
You keep depressing income of the middle class, and there won’t be anyone to buy their d@mn cars. Or houses. Or anything else but a little food.
#49 shamaal
Why should the government be determining who wins that lottery? Those who happened to get into the UAW are somehow guaranteed that their pensions and healthcare benefits are paid, in some cases for life, while those who did not get into the UAW get the shaft? IOW, some receptionist at a small company or a store clerk have to pay extra taxes so some UAW member gets better benefits?
All of these examples have society in general as beneficiaries. How exactly do you square these with giving a bunch of UAW members better benefits than almost everybody else gets?
#53 bigj
The unions deserve a substantial portion of the blame. They are the ones who benefit from forced membership in many Northern states where the Big 3 operate. This gave them excessive leverage that was, in effect, a gun they held to the head of management the last several decades. Prior to the 1980’s it didn’t matter as much because there was very little competition outside the Big 3 in the US. When the Japanese car makers entered the market, the business environment changed, but through sheer inertia things kept rocking along. Now, 20 years later, there is insufficient inertia to keep them going.
i am NOT saying that management is without blame. They did agree to the current contracts and have not made necessary changes to the non-union parts of their companies. Had they tried to cut the union workforce and/or demanded changes in work rules that the union operates under, they would have faced crippling strikes. They would not have had the option that other companies in other areas have had - firing the strikers and hiring replacements because of the mandated union membership. There would also likely have been literal rioting in the streets.
This just in at TheSpoof.com.
#65 /
Define “fair wage”.
I’ll help and give you mine. A fair wage is one at which an individual worker agrees to perform a given set of tasks at a given location, given a mutually agreed-upon set of conditions (environment, safety, etc.).
If they don’t like what they get paid, there is nothing stopping them from seeking a better offer elsewhere. Some auto workers are highly skilled, while others are basically “bolter-onners” (e.g., the guys that bolt tires to the cars). Companies should be free to set wages that will attract the caliber of worker they desire. If they pay more, they will attract better workers.
wagonburner;
There’s no place for you in Detroit.
re: my #55
Gadboy was his name. I miss Gadboy. We didn’t agree on much but he had some common sense. Can we trade in a couple of our current lefties, keep Izzy, and get Gadboy to come back?
#70 darren
Darn.
hamous;
That’s capitalism. Does’t work wit the Left. Now, if you can somehow guarantee equal post time from everybody, THEN, maybe you’ll end up with what you want.
#58 hamous
I’d give it about 90% management and 10% unions/politicians. Sure, there were laws passed that made it easier for unions to control workers but management still had the opportunity, ability and the responsibility to agree to rational contracts.
Classic example is GM’s management after WW2. Rather than improve their companies, they chose to lobby Washington for defense contracts (bloated), import tariffs, etc., and took a go along/get along approach to the UAW. They didn’t reinvest in their plants, spending billions on projects totally unrelated to their core business.
And the unions have zero to do with their dealership failures, their marketing failures and their design failures. Each of which has contributed far more to their demise than have the assembly line workers.
Gaddy’s cool. He likes Knob Creek, Makers Mark and Lorrie Morgan.
This is funny (not ha ha funny):
Now the funny part:
Do you think he gets it? I’m guessing no.
#74 bigj
True enough, but the unions do raise the cost of a vehicle as each price point, resulting in a car that is over-priced for the features it offers or is under-featured at a given price.
The business environment changed so much in the late 1970’s/early 1980’s that comparing to post-WWII conditions is not especially valid. I will grant that anything after say 1983 or so is very fair game on the parts of all parties. How much effect do you think mandatory union membership in their plants had on management? The UAW knew they were the only game in town and could demand and get pretty much what they wanted.
There’s plenty of blame to pass around to all parties involved in this mess. I see no reason why all of them should not suffer the consequences pretty equally.
I have been coming in out of the discussion this afternoon because of meetings. What I haven’t seen mentioned, yet, is one of the conditions that is being placed on the Detriot 3 to get the money. It is my understanding that in order to get the loot they must invest more in alternative fuel and hybrid cars. So we will support the global warming myth, raise the price of corn and food even higher, and create ugly little cars that no one wants. The Detriot 3 go broke anyway and we are stuck with the left over garbage and all those people are unemployed.
This is merely forestalling the inevitable. Toyota and Nissan make normal cars now that beat the hybrids for mileage. The government is merely wasting money on feel good ideas with no merit.
One more thing. Yes many people will lose jobs. They will have to get new ones and may have to move to another part of the country to work. So be it. The right is to persue happiness, not to guaranteed it.
WB
It is completely valid because it remains the mindset of GM management to this day.
They will all suffer if we allow nature to take its course and not intervene in a vain attempt to prevent it. And that is as it should be.
#63 D10
No offense, but I’m not sure if all of us grasp how capitalism is practiced.
Japanese commercial paper utilizes two sources Japan and the US.
Some of those companies are likely to be eligible for the Fed’s new programme, including Toyota and Honda Motor Co, Nikkei said.
Bloomberg reports that Honda has asked for Fed facility but Honda denies it. Honda issues through American Honda Finance Company, which issues to Mitsui, Nikkei, etc. These guys will go whatever is cheapest and as the Federal Government pushes out private capital businesses will seek out the best bargain. And if that means borrowing from the Fed, laundering and using it finance companies on other countries they will.
74 BJ
If we’re in such agreement what’s all the fireworks about? I was saving the dealership mess for the right moment.
Bigjolly - What do think would have happened had the Big 3 tried to stand up to the UAW years ago when it needed to be done and the Democrats ran everything?
Something I want to point out.
I understand the unions have agreed to shoulder much of the pension liability with GM contributions. The problem is not so much pensions as the lifetime medical benefits. Just like SS and Medicare/Medicaid, the long term viability of SS may be tough, but the future outlook for Medicare/Medicaid is bleak and grim.
The most pressing problem GM faces is that pension program lump sum contribution they have to pay the UAW to get out from under the liability. It is 7 billion dollars, due in about 14 months, I believe. They don’t have the money.
The most pressing long term problem is how they are going to fund the continuing medical benefits program to all those retired and retiring baby boomers.
Which is why bankruptcy should be pursued in order to get out from under them. A taxpayer bailout forces people who can’t afford to get their own medical insurance to pay for someone else’s. Why should Susie Secretary or Bob Butcher pay for better medical benefits for someone else than they can provide for themselves?
Hamous,
I think that the companies would not be in the position that they are in today. Yes, there would have been rocky times for them. But they would have been short term.
Would there have been retaliation from the Democrat controlled Congress? Possibly but not likely. Remember, at the time, there were also a bunch of Southern Democrats. Democrats that would not have supported retaliation against companies that relocated to the South.
If you want to know why Detroit failed, look at the professional side of the organizations.
#66 WB
The government set up the Pension Benefit Guaranty Corporation in 1974. Companies (GM) pay in and when if the company goes bankrupt and sheds their pension plan the PBGC pays out. There’s some complicated formulas, but suffice it to say that one doesn’t get everything that the company was promised but you get something. The last biggest default was United Airlines $7.5T in 2005. Overall there have been 3673 plan failures totalling $32.6T since 1975. There have been no taxpayer dollars outlayed as the Corp is self funded. If the levels of bankruptcies begins to rise, the liabilities exceed the assets and the government pays out, like Fannie and Freddie.
A simplistic explanation traces this back to the forties. With their new influence due to war induced labor shortages the unions (Lewis, Reuther) wanted to set up pension and insurance plans. Business paniced at the possibility of mobile workers not beholding to the comapny worked with Roosevelt to come up with the current scheme of business provided benefits and associated government writeoffs.
And yes, it is a simplistic explanation.
WB
If we are to look at a bailout strictly in terms of health care and who bears the burden, I’ll have to agree with ShaWiki that the bailout is the better choice. A bankruptcy will shift the burden directly to the taxpayers - a bailout will shift it indirectly and then only in the form of guarantees in the case of default.
#86 bigj
How do you figure that?
ShaWiki,
I guess it is hard to argue complex issues on a blog but that is simplistic. What the unions wanted was nationalized health care/pensions and companies, large and small, resisted that because of the natural tie to socialism, i.e., they didn’t want to be the next thing nationalized.
Our health care payment system truly is screwed up today. Maybe they were right back then (yeah, I’m gonna get blasted for that one, I know) and we would be better off with a national insurance pool that everyone paid into.
I personally wish insurance was outlawed and everyone had to pay cash for their health care but that is just the libertarian side flaring up.
WB
Um, who do you think is going to pay for the health care costs of retirees that suddenly have no insurance?
#71
Sure.
Why?
Sure.
In a perfect world, wb, I’d agree with you. But I’ve been on scaffolds in plants, and I can tell you that without unions, no one in this country would have anything resembling a standard of living. Companies “attracting better workers” is a pipe dream. Today, with all the unions and worker’s protections, it’s still pretty much “use ‘em ’till they break, then get another.” Companies don’t give a flip about the environment, the workers, or anything else. Enron was just the average corporation squared. A “big business” will cr@p in it’s own water. It has no ethics, no conscience. It’s up to the “managers” to exhibit humanity. And most of those could care less. Too worried about their stock options.
Most of these large corporations have painted themselves into corners with their labor forces because they treated their employees like dirt. OK, worse than dirt. Look at the history, the mine workers, auto worker, anyone that’s unionized did so to protect themselves. Someone mentioned that the non-union plants treat their employees better to avoid the seeds of unionization. They make my point for me. But I can assure you, if the BIG 3 had treated their employees like human beings, they wouldn’t have to worry about union contracts.
The company made a contract with the workers that includes health care. The government does not require plans to be fully funded but can be paid out of future profits. In the case of GM I believe the liability was $50B, the union settled for $30B and they’ll eat the rest. (Don’t get me started on health plans).Incidentally the health plans are not guaranteed by the Feds.
So if the company goes bankrupt why should they be absolved of responsibility? Why should the taxpayers of the state be saddled with the health care costs. The government, the union and the states will press for health care funding to be part of the settlement.
Because he picks on a Taylor and shoots deer! Can’t be all bad.
Your libertarian side includes the word “outlawed?”
I hear where you’re coming from, though. The biggest problem with health-care finance is this:
People don’t care what it costs.
Personally, I have a high-deductible policy that doesn’t pay for every little thing. It’s there in case I get hit by a MetroRail train or have the inevitable Shamaal-induced brain hemorrhage. Everyday stuff is up to me.
Consequently, I care about cost. When it’s coming out of my pocket, I tell my doc to put me on the generic meds instead of the slightly-better but 10-times-more-expensive stuff.
And guess what? My overall healthcare budget is perfectly manageable.
That’s what we need to move back to. Health insurance should be just that — insurance. You don’t make a claim on your car insurance every time you get an oil change, state inspection or flat tire.
#88
The threat of a national insurance pool was the compromise that forced business to provide insurance. I read a quote a couple years ago from John Lewis about it’s just a matter of time before insurance returns to the unions. It took 65 years but he was right.
A sound idea until labor gets tight and business offers to cover the cost for their workers and we’re off to the races.
They used to teach labor relations in school, I guess the Wobblies are no longer the subject of amusement.
I call it my Huckabee-libertarian side.
His plan was pretty much what you outlined. Put the responsibility for costs on the individual. No more $10 co-pays.
Low co-pays were designed to promote “wellness”. They ended up making everyone think they should go to the doctor for a sniffle instead of buying a box of Kleenex.
Compare unionized Detroit to free Houston and tell me who has the better standard of living.
Yeah, let’s stick it to those big bad fat cats! All they do is provide products to their customers, jobs to their employees, profits to their shareholders and GDP to everyone.
But what have they done for ME?
I forgive you, though. And your bacon stuff is on the way.
ShaWiki
I’m guessin’ you missed the “outlawed” part of my utopian statement (the one that Matt laughed at).
Oh cripes. Now I’m allied with the Huckster? Stopped clock, I guess…
Correctamundo. The other really cool thing about high-deductible insurance is the HSA. Pay for that box of Kleenex with pre-tax dollars!
#89 bigj
Um. Them.
Why should they get better coverage than everyone else gets and get it paid for by everyone else. If I’m gonna bail them out, I should not have to give them something better than I can afford for myself.
He still suffers under the oppression of the two-party duopoly.
#94 Matt, you’re sounding just a little like Ron Paul (and I mean that as a compliment.)
The problem with health care is not so much quality or access as it is cost. Much of this cost is non-productive and associated with the more administrative aspects.
The expectation that routine and/or preventive health care “should” be paid for by someone other than the recipient is a root cause of both the excessive costs, and the likelihood that government will continue to meddle where it does not belong, resulting in socialized medicine.
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WB
You are ignoring reality. “Them” cannot (or will not in some cases) pay. Therefore, Susie and Bob (and Cindie and Tracy) will pay, as the do now.
Insurance is pooled risk, by definition a transfer of wealth. When the income is more than the transferred wealth, the insurance companies make money. And boy do they make money.
Aren’t we forgetting the contract that was made? What happened to responsibility?
Instead of receiving $600 dollars cash from the company in wages, the worker opts for a $600 dollar promise of health care (employer administered plan). This gives the company a competitive advantage in the labor market than that another company that does not have benefits.
This is America, workers are still free to choose whom to work for and companies are free to contract with their employees.
#104 BigJolly, Tracie is covered by a high deductible health care benefit plan offered by Cindy’s employer.
I’d like to meet Susie. Do you have her number?
#106 Shalien
Follow the conversation. Read #83.
Shamaal #80;
OK, I do believe I mistook your comment on getting credit from the governent to mean the bailout the Big 3 are seeking. In terms of getting low-interest loans, yes, as long as the government offers them, companies will seek them. despite the fact tha government should stay out of the mainstream lending industry, as long as they are and offer low-interest, yes, industries will seek them.
#104 bigj
If they won’t pay, then why should I buy it for them? I understand there will be a liability for them from Medicare, but Susie, Bob, and I should not be expected to pay beyond providing that.
#108
Conversation followed, my reference to your reply included the originators question you replied to. Hence the Aren’t we forgetting the contract that was made instead of Aren’t you forgetting the contract that was made
I’m not seeing why you are buying it for them. Health insurance is not insured by the Federal government like pensions. The UAW would receive their health care payments from GM as part of the bankruptcy settlement.
And if they don’t the health insurance becomes a community problem like it is now.
#111 & 112 shamaal
Bankruptcy exists so that companies (and other organizations, individuals, et al.) can unburden themselves from agreements, contracts, etc. that have become untenable. If the Big 3 can no longer operate as a company, then the result should be some sort of bankruptcy. Chapter 11 allows them to nullify (with a court’s supervision) many/most/all(?) contracts and renegotiate them. If things continue the way they are, this will cease to be an option; the companies will end up liquidating (Ch 7) and they’ll get absolutely nothing.
If the taxpayers bail out the Big 3 so they can continue to fund their retiree health plans, how is that not me paying for it?
Matt doesn’t have a magic pen or a pleading, whiny voice. But seriously, I keep telling you many folks agree with Luap on many issues. It’s the Pat Buchanan-style isolationism where we part ways
Dhimmicrats are beholden to union thugs for campaign contributions.
Union thugs are beholden to members for dues.
Big 3 automakers need employees to manufacture junk.
Big 3 automakers will get bailout no matter how hard taxpayers scream. But that shouldn’t keep us from putting pressure on Congress.
#110 WB
You shouldn’t.
But you will. That’s just a fact.
#114 Right. And again, there’s a huge difference between Buchanan style isolationism, trade friendly non-interventionism based on market driven mutual benefit, and the seemingly noble goals of the Bush doctrine of foriegn policy, for which nobody has offered a fiscally plausible means of funding.
It may sound like a good idea, but how in the heck do we pay for it?
Sweet! Mmmmmmm, Bacon Salt!
Matt, I don’t propose sticking it to anyone. But the fact is what’s supposed to happen and what does happen has a lot of “clearance.” Every time we turn around another company is getting sued for poisoning a neighborhood. Or cooking the books. The headlong pursuit of money . . . profit at all costs. It’s not kosher.
In fact, Houston’s standard of living can be traced directly back to unions in and around the petrochem industry. Sure, they aren’t the powerhouse they were ten years ago, but they still laid the groundwork for worker’s rights, and a (semi) decent standard of living.
#113
You pay for it only if you buy a big 3 car.
With liquidation GM pays for it, the UAW would be the #2 creditor for assets.
Under court ordered reorg, I do not believe the trustee will permit GM to forgo the debt to the union, I suspect they will sell off assets.
True. But every time we turn around another crooked union boss is going to jail for embezzling funds. Or beating up (or worse) those who dare to oppose them. Union leaders aren’t immune to those human faults.
I’d be interested in seeing the data to back that up.
Lotsa stats there and I won’t pretend to understand what it all means, much less get into a causation/correlation debate. But it sure does seem to go against your assertion that Houston owes its favorable standard of living to unions. I’m grateful every day that I live in a right-to-work state.
But your recipe was #1 on my list. I look forward to trying it out
Damn. Hamous killed the thread.
I noticed that. I killed the Lyin’ Patty thread too.
I hate it when he does that.