If The Government Gives The Auto Industry A Bailout, It Should be Accompanied By An Apology
November 19th, 2008 by JR Griggs
Image by Josh Bomb
Let me first say that I am completely against a bailout for the auto industry. The best thing that could happen is that they file bankruptcy and restructure. Kick the unions out of there and reorganize with a better labor force that they can afford, in order to keep up with foreign competition. The worst thing that the government could do, is to throw away billions by just prolonging the inevitable. The bailout will only temporarily help the industry and we will be right back at this point shortly after. A report was just released that on average U.S. auto makers are paying about $30 more per hour to their employees, than foreign auto makers. How do we keep up with that kind of difference? How can we expect Detroit to put out the same or better quality of vehicle at competitive prices? The answer is that they can’t and a bailout will only guarantee the end of the U.S. auto industry!
That being said, part of me feels that the government may owe the auto industry. It was the government that helped create this mess! As usual, when the government gets involved in something, it goes really bad. It is the government who has made it so easy for unions to form and so hard for businesses to get rid of them. It is the government who instead of letting the free market and competition set fuel regulations, forced laws onto an industry that was not capable of complying inexpensively. We tell them to build safer cars but we also want them lighter and more fuel efficient! Then we take drastic actions to stop an event that is still in debate about it’s legitimacy, “global warming.” We tell Americans that they are bad for driving the #1 selling vehicles in the U.S.. We tell them how evil they are for driving their S.U.V.’s and trucks. We threaten taxes on those vehicles. Surely this had no effect on the industry, right?
Free market always wins. Fuel economy would have gradually improved without government intervention. As competition would have naturally done so, all the auto makers would have had to increase theirs due to the competition. When Ford sees that GM is selling more of a certain vehicle because of fuel economy, naturally Ford would make changes to compete. And it would work this way with one significant difference. This would have happened with the technology. Making it cheaper to do so, rather than forcing it and paying higher prices for the technology. This ultimately would have made everyone happy including environmentalists.
Unions are killing many industries here in America. They are not allowed to pay what the going rate is for the position. The unions decide that now. I know, I know, “we only want a fair wage for our work”, well that fair wage is about to get you unemployment! Companies with union labor, cannot make pay adjustments to keep up with competition, because they fear their workers will strike. In the end this has hurt the companies and now the union itself is going to get hurt by it. And let’s not forget that Obama’s plan is to make it easier for the unions to form.
Unfortunately the bailout will not help the auto industry, but the government owes them a huge apology!
Posted in Politics | 6 Comments »
November 19th, 2008 at 11:02 pm
You raise some good points.
Let me start by saying Chrysler is an example—39 years later—of a company that benefited from government loans. And, by the way, that’s what the auto industry is asking for: bridge loans, not a bailout. Unlike Wall Street, the auto industry intends to pay the taxpayers back.
While I’m not pro-union, I realize they were essential for worker safety and welfare once upon a time. Like any organization, they seek to survive. And, while times were good, everyone was happy. For the last decade or so, however, unions have been ponying up along with the auto makers. The larger issue is the so-called legacy costs—the cost of pensions and healthcare. It’s easy to blame the unions or the Big 3 for this, but how much is government sponsored with the foreign auto makers? And, let’s not forget the foreign auto companies started with a zero balance about 1950, but the US companies already had 2 generations under their belt.
I have mixed feelings about government regulations for safety features, mpg, and such. I do believe the government has some culpability with the costs borne by auto makers, but this balances out across the playing field. Foreign manufacturers are not exempt from the standards if they sell cars in the US. So this, by itself, doesn’t disadvantage the Big 3 versus Toyota, Honda, BMW, and the rest. In fact, government regulations tend to lead to innovation. For example, the government mandated front airbags, but I drive a vehicle with both front and side airbags. Neither would be there without the initial regulation.
We’d better hope a government bridge loan will ensure the survival of the auto industry, which really means manufacturing in the US. Period. Otherwise, our only hope is Paulson and his ever-shifting $700 billion to fix a worthless paper sham.
December 3rd, 2008 at 4:59 pm
Hi Josh
My husband is a current Chrysler hourly employee and my dad is retired from Chrysler. The information stating that US auto-makers pay their employees $30 per hour more than foreign auto-makers is completely false; not unless the foreign companies have their employees work for free!
My husband’s current hourly pay is $29.10. That’s it and he’s at the top of the pay scale, so many workers make less than that. Any newly hired employee would only make $14 per hour.
While I do not agree with a free hand-out type bail-out, I do agree that a conditional bridge loan (like Chrysler received in the early 80′s when Lee Iaoccoa ran the company) would be acceptable. Under a bridge loan, the government could actually make money, as they did when Chrysler did a bridge loan previously, by accepting stock options.
The Big 3 need to be held accountable and have a solid plan of action in place before they are given any money. The union is meeting today to determine what concession they can make to help. The job bank (aka: sub pay) is already gone, as is the tuition assistance and I’m sure a cut in pay and plant closings will be next.
We shall find out over the next couple of days whether the Big 3 get their bridge loans or not. If not, the effects on the economy – not to mention the employees – will be devastating.
December 3rd, 2008 at 5:29 pm
I believe the figure was what it costs them to employ each employee not what the employee makes. From what I have read it is all the extras that cost so much. I also heard that GM actually is paying more money to people who do not work there anymore through pensions, than they are to current employees. In another report I read, it stated that if GM wants to lay someone off to lower costs, they have to pay 80% of that persons wages until they find a new job.
I worked for a company that was using union labor and what we paid each person was sometimes quite a bit more than they actually received the rest was union dues and other fees. We had a much higher profit on our jobs when we got rid of union and started paying per job to subcontractors.
December 3rd, 2008 at 5:56 pm
Again, I believe the figure being toss out as to what the cost per employee, including benefits, is inaccurate. While at one time, it may have been true that it cost $70 or so per employee INCLUDING benefits, that is no longer true. For each of the last few contracts, we have lost benefits. Where it used to be we could walk into the doctor’s office, hospital or pharmacy and not pay a dime out of pocket; we now pay 50% of an office visit to go to the doctor. Not a $10 or $20 co-pay, but HALF! That’s a huge concession.
As of today, that 80% of the pay for laid off workers you mentioned (aka: the job pay or sub-pay) is no more. It’s been eliminated. Another concession.
The original purpose of the union was to see that all workers received fair pay and safe working conditions. They have achieved that; but I personally believe the union has become more of a political entity (and a greedy one at that) than being all about the worker.
I don’t think the problem is that the workers make too much, or have to many benefits; I believe the executives dropped the ball in not making more energy efficient vehicles sooner.
Of course, the economic collapse is a big contributor to all this and fuel efficient or not, the inability for consumers to get a loan for anything was the nail on the proverbial coffin.
I hope a solution can be found to resurrect the auto industry and our economy.
December 3rd, 2008 at 6:31 pm
Yeah, it’s gonna be a long messy time getting things right. I know that throughout the next 4 years Bush will continue to get the blame even when Obama’s policies make things worse. Funny thing is that I never heard the media in the last 8 years mention Clinton’s recession that Bush inherited, but I bet we hear all about Bush’s recession that Obama inherited!
I just hope for America we stay strong and don’t let the Democrats use this to turn us into a Socialist country.
February 25th, 2009 at 3:42 pm
[...] Once again it is not the governments job to “re-tool” any company. Get the union out of the auto industry and stop giving US automakers standards that imports do not have to meet, problem solved. I have an article on this as well. [...]