Or maybe the question should be:
"Should We Bail Out The United Auto Workers Union?"
It has been a while since Ford, GM, and Chrysler CEOs flew to Washington, tin cups in hand, asking for $25,000,000,000.00 (that's what $25 billion looks like when spelled out). They were told by Nancy Pelosi to come back and show us (read that as US Tax Payers) a plan before we show you the money. Tell us why you won't be back in three to six months asking for another handout.
But the lingering questions are why do they need the money? Who will it really benefit?
A recent republished article in the business section of the Austin (TX) American-Statesman addressed "6 myths about the Detroit 3" which showed that Detroit is holding their own in terms of volume, quality, fuel efficiency, and hybrids.
What is the difference that is causing the problems? The major difference between the Detroit auto makers and the foreign auto makers is the UNION. In Detroit the UAW workforce and the Corporations have an adversarial relationship. With foreign auto makers, the workforce works for the company and work hard to see it succeed. They are a stakeholder.
Another item is the wages paid the UAW workforce vs the workforce for foreign auto companies. It is roughly stated as $70/hr on average for union work verse $40/hr for non-union. There seems to be a lot of controversy about this. Most of the arguments state the pay for the fully employed worker is roughly the same including wages, benefits, vacation, etc. But the way Detroit figures their hourly wage average includes all benefits for retirees (pension and health care) divided by the number of full time workers. So it would again seem that wages are about the same except Detroit carries a greater load for benefits for retired UNION workers.
All things being equal, it looks like the real root cause is the United Auto Workers Union. I believe that if the Big Three were allowed to get rid of the UAW that they would become more competitive in the world market. As proof text here is a video from detnews.com (The Detroit News) on how Ford's most advanced assembly plant operates in rural Brazil.
So back to the questions of should we bail out the Big Three and the UAW. I strongly recommend against a bailout. The best way for Detroit to get going again is to file for Chapter 11 bankruptcy. All the pundits scream "no-one will buy a vehicle from a company that is in bankruptcy". Well, to that I say HOGWASH. Anyone who wouldn't buy a vehicle from a company in Chapter 11 most likely would not have bought a vehicle from them anyway. Chapter 11 will allow Ford, GM, and Chrysler to reorganize/restructure under court supervision. One of the main benefits would be breaking with the UAW and dumping/reducing benefits for workers, including retirees.
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3 comments:
From an e-mail I received:
Mr. Bernstein,
The problem is not the Union! The problem is that the US, alone among modern Industrialized Nations, doesn't have single payer health care. This lack places our companies at a huge competitive disadvantage with foreign manufacturers, given the soaring costs associated with healthcare industry. The Union has made major concessions on several occasions to the Manufacturers, but this is rarely reported. Some Americans eagerness to cast blame on the Union for maximizing rank and file worker wages and benefits in confounding, people act like this is in some way a bad thing-some sort of aberrant behavior! In actuality, all workers benefit in the long run from these gains. If the UAW is broken by letting the American Auto Manufacturers go into Chapter Sever bankruptcy, the Conservative's, and by proxy the National Association of Manufacturers' and American Chamber of Commerce's, dream, you will see the loss of approximately three million jobs.
Allen Brooks
As a tactic, people ofte throw out the number of 3 million jobs lost if one of the Big Three goes under by filing Chapter 7 Bankruptcy (i.e. shutting the doors and going out of business, liquidating all assets). I doubt that the number is that big. Lets say the worldwide demand for automobiles is 100 million per year. Auto plants around the world are working to meet that demand. This does not imply that they are working to full capacity. So if GM had been supplying 15% or 15 million cars but went out of business, the demand didn't go away. So the slack would be taken up by the remaining auto manufactures. That could mean an increase in the output of the US facilities and the demand for more workers. True, most likely non-union workers.
What about GM suppliers? Well that would now have to increase their capacity to supply parts to their customers and again that means an increase in their labor force. So yes jobs would be lost but a lot of demand for workers would be result.
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