Even as Detroit\u2019s Big Three automakers teeter on the brink of on collapse — General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking $25 billion from the government to get them through the worst sales slump in 25 years, with GM particularly short on cash and reporting an inability to borrow more — United Auto Workers President Ron Gettelfinger announced on Nov. 15 his workers will not make any more concessions. <\/p>\n
\u201cThe focus has to be on the economy as a whole as opposed to a UAW contract,\u201d Gettelfinger told reporters on a conference call, noting the labor costs now make up 8 percent to 10 percent of the cost of a vehicle. <\/p>\n
Other number-crunchers report that for the Big Three, contractual long-term health care obligations, alone, add nearly $5,000 to the cost of each new vehicle. <\/p>\n
Mr. Gettelfinger called on Congress to act quickly on a bailout for the industry, saying action is necessary before President-elect Barack Obama takes office in January. <\/p>\n
He said if one automaker were to file for bankruptcy, the others could follow. The union chief said the automakers would then find it difficult to restructure under bankruptcy laws and instead could end up out of business. \u201cWould you buy a car from a bankrupt automaker?\u201d he asked. <\/p>\n
Well, did American commuters buy tickets on the famously \u201cbankrupt New Haven Railroad,\u201d or more recently on airlines which were reorganizing under bankruptcy protection? Yes they did. <\/p>\n
Why this bum\u2019s rush for a congressional \u201cbailout,\u201d really? Why this demonizing of the well-established option of bankruptcy protection, when this is precisely the circumstance for which our bankruptcy laws — the envy of the world\u2019s economies — were designed? <\/p>\n
If the current bank bail-out is a model, the word \u201cbailout\u201d has essentially now come to mean (quite literally, to the denizens of Washington) \u201cthe government will purchase shares of your stock as a way to bolster your balance sheets.\u201d <\/p>\n
That\u2019s the form of economic central planning made popular by Mussolini and Hitler. Is that really where we want to head? <\/p>\n
What was the last thing Congress had to do \u201curgently — no time to waste\u201d? Oh yeah, they had to hand Shifty Paulson $700 billion, right away before the election, to buy all those \u201cpoisoned mortgage-based securities\u201d and get them off the balance sheets of his friends the investment bankers. Remember? <\/p>\n
Had to do it right away, remember? Otherwise the economy would collapse. That was a month ago. How many \u201cpoisoned assets\u201d has the Treasury Secretary now bought? None. Changed his mind. <\/p>\n
But look! There\u2019s another wolf! No, I just saw him, behind that tree! You\u2019ve got to believe me! <\/p>\n
The best thing Congress could do to \u201cbail out\u201d Detroit — at no financial cost to taxpayers, and at a considerable benefit in highway safety — would be to repeal all \u201cfleet fuel economy\u201d standards (the imposition of which exceeds Washington\u2019s constitutional powers, anyway), allowing auto makers to build exclusively the safer, more attractive, more solid cars and trucks U.S. consumers want, without the artificially imposed mandate to crank out low-powered, easily-crushed little wind-up toys on which the Big Three lose money on each unit. <\/p>\n
But that\u2019s never going to happen if Washington becomes MORE directly involved in auto plant management, rather than less. <\/p>\n
There are plenty of U.S. auto plants with addresses considerably south of Detroit that still manage to turn out fine cars at a profit, because they pay only about $48 per hour in wages and benefits to their mostly non-union workers (hardly a starvation wage), as opposed to a number approaching $75 in Detroit. <\/p>\n
Congress is granted no authority in the Constitution to \u201cbail out\u201d failing private enterprises, and for good reason. To do so stymies the orderly working of the free market, which \u201cwants\u201d (if we may anthropomorphize that unseen entity, for a moment) the assets of such failing firms to pass into the hands of new managers with plans to make an honest profit giving the public what it wants. <\/p>\n
There is an established way for a company to shed unmanageable accrued debts and obligations and \u201ccome out the far side\u201d as a sleeker, streamlined and newly profitable venture. It\u2019s called bankruptcy, a system under which management receives temporary protection from creditors while a new business plan is developed. <\/p>\n
The first thing any competent bankruptcy judge would examine, in the case of Ford, Chrysler, and GM, is their unsupportable labor costs under their current union contracts — and not so much their basic hourly wages (though those may also exceed market norms), but especially their long-term health care promises. <\/p>\n
Shed those (even without a repeal of the so-called \u201cCAFE\u201d standards, though that would also help), and the industry might very well be profitable again. <\/p>\n
If union members seek someone to blame, talk to a Congress that\u2019s been busy regulating the size of our toilet tanks, the innards of our lightbulbs, and … oh yes, how much of the gas we pay for (and pay taxes on) we\u2019re allowed to burn, each mile we drive. While they block new drilling, new refineries, new coal-fired plants, new nuclear plants … <\/p>\n
Once Congress steps in and forestall the orderly, deliberative process of bankruptcy relief, we\u2019ll likely end up with white elephant auto plants in Detroit that will never again compete on true cost and quality with free-market factories elsewhere, instead turning out \u201cfuel-efficient, green\u201d cars consumers don\u2019t want, under management by a consortium of federal bureaucrats and the labor unions, abetted by a bunch of hollow public relations happy-talk. <\/p>\n
Do you suppose they\u2019ll do as well as the Russians did with their Lada? Will they rival the VA hospitals in innovation and customer service? <\/p>\n
And how will Congress then deal with the refusal of consumers to buy their lovely new models, the \u201cRayburn,\u201d the \u201cJohnson,\u201d the \u201cMeany,\u201d and the \u201cHoffa\u201d? By piling punitive \u201cwindfall\u201d taxes onto their remaining free-market competitors to \u201clevel the playing field\u201d? <\/p>\n
Fortunately, chances for a rash move toward nationalization before January are already fading. Till then, the Republicans still have 49 senators, and they\u2019re balking. <\/p>\n
\u201cThe financial situation facing the Big Three [auto makers] is not a national problem, but their problem,\u201d said Alabama Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, last week. <\/p>\n
In the House, Minority Leader John Boehner, the Ohio Republican, assailed the proposed aid to Detroit as \u201cneither fair to taxpayers nor sound fiscal policy.\u201d <\/p>\n
Senate Banking Committee Chairman Christopher Dodd, D-Conn., replied that he knew of no Republicans who would support the $25 billion proposal by Democrats, and he was disinclined to move a bill without bipartisan support. Majority Leader Harry Reid finally canceled the vote a few days ago. <\/p>\n
Good. You wouldn\u2019t buy a used car from a salesman who told you, \u201cThis offer expires in 10 minutes!\u201d We should be at least as cautious about a bum\u2019s rush to nationalize a major part of the U.S. economy. <\/p>\n","protected":false},"excerpt":{"rendered":"
Even as Detroit\u2019s Big Three automakers teeter on the brink of on collapse — General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking $25 billion from the government to get them through the worst sales slump in 25 years, with GM particularly short on cash and reporting an inability to borrow more — […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[18],"tags":[],"class_list":["post-134","post","type-post","status-publish","format-standard","hentry","category-economics"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/pWqFl-2a","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/134","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=134"}],"version-history":[{"count":0,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=\/wp\/v2\/posts\/134\/revisions"}],"wp:attachment":[{"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=134"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=134"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vinsuprynowicz.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=134"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}