Just Say ‘No’ To A Government Bailout of The Auto Workers Unions
Senator Schumer was in town earlier this week, salivaning over the oppurtunity to put the auto industry under the control of the federal government… though he called it “oversight,” it actually looks and smells an awful lot like socialism.
The proposition of a bailout of the auto industry isn’t really about bailing the industry as it is about bailing out the autoworkers unions. With above market wages and ridiculous benefits packages, they drive up the costs of assembling cars the same way union contractors drive up the costs up construction.
The Buffalo News looks at the options:
If the government doesn’t bail out GM, the cash-strapped company will likely be forced into bankruptcy. Many experts say that this would prompt a cascading collapse that would deeply damage parts suppliers, dealers and other automakers – adding millions to the unemployment rolls.
But others argue that a government bailout of the American auto industry would amount to throwing good money after bad and that bankruptcy is GM’s best option.
“Spending billions of additional federal tax dollars with no promises to reform the root causes crippling automakers’ competitiveness around the world is neither fair to taxpayers nor sound fiscal policy,” House Minority Leader John A. Boehner, R-Ohio, said Thursday.
The debate over a proposed $25 billion bailout of America’s Big Three automakers is likely to culminate next week, when Congress tackles the issue in a special session.
Of all the bailouts the federal government has considered in these troubled times, this one cuts especially close to home. GM employs 1,389 at its Tonawanda Engine Plant, part of a grand total of 8,200 Western New Yorkers who work for the Big Three or their suppliers.
Add to that countless GM retirees, and it’s clear that the Buffalo-area economy would suffer deeply if GM were to fail.
And I am not interested in taxpayers bailing out the unions. Let them fail. The unions need a reality check, and bankruptcy is the best option in the long term. It might be tough in the short term, especially for WNY, but we to think of long term solvency, not a quick fix that will only empower the government and the unions… that doesn’t solve a thing.
Meanwhile, labor union officials worry that if GM or another automaker were to go bankrupt, it would give a judge freedom to nullify labor contracts, creating more doubt for workers and retirees.
“We already experienced this with Delphi,” said Kevin Donovan, assistant director of UAW Region 9. “We don’t want to experience it with GM or Ford or Chrysler.”
Yet to critics of the Big Three, the shredding of union contracts would be one of the advantages of a GM bankruptcy. “Private equity or strategic investors would buy the assets, shut down some plants, fire some union and exempt workers, and probably use the leverage of Bankruptcy Court to get a better deal from the unions,” conservative blogger Jim Manzi wrote on the National Review’s Web site Thursday.
In contrast, “a bailout of GM would be a pure exercise of political power to deliver taxpayer funds to one organized group of citizens at the expense of the country as a whole,” Manzi wrote. “It should be avoided.”
On Capitol Hill, grave doubts have been expressed about an auto bailout.
“I have automobile plants in my district. They pay $25 to $35 per employee per hour,” said Rep. Spencer Bachus of Alabama, ranking Republican on the House Financial Services Committee. “I am sure that I am going to be asked, ‘Congressman, I work at Honda or Mercedes, I make $40 an hour; why are you going to take my taxpayer dollars and pay it to a company who pays their employees $75 an hour?’
Bailing out the auto industry sends the wrong message to the unions. It tells them they can just continue doing business as usual because the taxpayers can just pull them out of the hole the unions dug themselves into.
2 Responses to “Just Say ‘No’ To A Government Bailout of The Auto Workers Unions”
It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn’t have any real effect.
This time it’s the car industry.
While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable – so this time let’s target unemployment, create AMERICAN jobs and pump up the economy all at one time.
Consider the following:
Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that’s not all direct but due to suppliers. GM alone has over 1300 suppliers. (That’s a lot of jobs!)
1 in 10 Americans makes all or part of their income due to the automobile industry.
Money turns over 5 times in a year.
Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
(This isn’t magic, it’s simply how the economy works.)
Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.
Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
Foreign competitors have worked off-shore collectively to meet various US gov’t. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.
Make no mistake; it’s no surprise that once again government has been a major part of the problem.
Here’s the solution.
Instead of either shipping cases of cash off to car makers; or sending us all another check:
Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that’s domestic. (Civic = 70% Ford Explorer=80%)
Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.
This would bail out the car industry without giving them a dime directly
Further it would reduce the overall age of the nation’s cars which would in turn;
increase overall fuel economy & decrease pollution.
Strengthen the dollar!
Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported …like gas!
Jobs
Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
That would give the economy good swift kick right where it needs one!
Pays for itself!
Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
What is the income tax on 65,000 anyway?
(Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)
Another Stimulus Package?
I’m sure you’ll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV’s usually made in Malaysia or some such place.
In the case of the auto-makers’ bailout, it’s a relief to have a national issue that is so straightforward: American cars tend to break down and fall apart therefore people are not buying them. If GM and Ford don’t want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.