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December 12, 2008 07:51 AM UTC

Now what?

  • by: DavidThi808

from ABC News

A $14 billion emergency bailout for U.S. automakers collapsed in the Senate Thursday night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

A House-passed bill to speed $14 billion in loans to Detroit’s automakers stands on shaky ground in a bailout-weary Congress, undermined by Republican opposition that could derail the emergency aid in the Senate.

(AP Photo/Getty Images )The collapse came after bipartisan talks on the auto rescue broke down over GOP demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

If there was an easy & obvious answer then we’ld be doing it. This truly is a hard question. Normally the answer is let the market winnow out the winners and losers. It worked great in the .com crash (although it was rough on individuals – like me and everyone I know).

But do we want this many people thrown out of work in the middle of a serious recession? And do we want to stop building something as fundamental to our economy as cars?

We’re definitely not seeing the blind unthinking rush we had with the 700B TARP program, and that’s a good thing. I also think we may need to wait for GM & Chrysler to declare bancruptcy so that management and the UAW start making the truly hard decisions they’ve both been avoiding.

Wonder how the markets will react tomorrow?


66 thoughts on “Now what?

    1. You can’t have a solution when your labour input is 1.8x that of your competitors.

      There is a lot more to it then that … work rules, etc…

      I still say if the UAW thinks things are so great (US federal loan) then they should step up and take over ownership themselves.

      1. Jared must “fucking toe the party line,” as SPX says. Why am I always thinking Congressmen can think for themselves?! That’s just for Senators, silly.

          1. Since you use the same fingers for S and X, it’s easier to slip the P in while the left ring finger is moving from S to X.  I knew high school typing class would come in handy someday!

            Of course, it could be because we are inhibited people who feel uncomfortable typing two-thirds of the word “sex.”

      2. It was always much more important to bash the lefties than to think about the bigger picture. It was always more fun to fantasize about the Perfect Plan than to worry about strategy.

        In real life, nobody really cares all that much about what you or I think (although in fake life people seem to care a lot about what I think). In real life, we have Republicans who have vowed to filibuster everything Democrats propose.

        Would Polis’ plan work if he were in charge of everything? If he could also force automakers to increase fuel efficiency, protect unions, etc. Maybe. I doubt it, but what do I know? What do any of us really know about the future?

        What I think will actually happen, and why I was so unhappy with the Perfect Polis Plan, is that Obama, Pelosi, and Reid will propose something that you and I might even agree on. Maybe Jared Polis will agree on it too. But Republicans will want to obstruct it, because that’s what they do, and they’ll try to filibuster it, and they’ll say “Even Jared Polis thinks this plan is a bad idea.” And that’ll be true whatever Polis actually believes when the real plan happens.

        I’d like to see Jared Polis propose things here or elsewhere locally if he really wants to see what his constituents think. Or maybe propose it to some of his fellow legislators. It’s great that he has ideas. Some of them I may end up liking. But I don’t like this idea of starting at the top to get a lot of attention for something that nobody else has yet endorsed, because I really do think it’s dangerous.

        1. I think it was Congressmen NOT thinking for themselves that got us into the Iraq war.

          Unfortunately, you’re right about Republicans. They’ve recently decided to be against everything simply to be against it. My opinion: let ’em. It’s partially that attitude that led to their overwhelming defeat this cycle. The American people want leadership, not nags.

          Furthermore, as Democrats we’ve always embraced a diversity of ideas. Cracking down on anyone who doesn’t toe the party line is what Republicans do, not us. It’s why getting Democrats to line up behind an idea is often compared to “herding cats,” but it’s one of the important ways we differ from the other side

          Writing an OpEd in the WSJ certainly got Jared noticed, and I don’t think there’s anything wrong with that. It’s a good idea that I expect to see elements of in whatever Congress comes up with next. If he’d just written it as a commentary in the Camera no one who actually makes decisions in Washington would have read it.

          Jared’s having an impact, which is far more than I can say for most freshmen members, and I think that’s a good thing.

          1. I think we’ve been successful lately because Democrats have been much more united than we historically are.

            I have no problem with new ideas, even if I think they’re terrible. I have just tried to make clear that jumping straight to a right-wing rag like the WSJ with an idea that right-wingers really like is bad for the party. And as much as I want Jared Polis to succeed (it’s kind of bugging me to refer to him as “Jared”; it seems disrespectful, and I know that sounds weird coming from me), I think this was a serious mistake. I wanted him to learn from it. Maybe he’s only learned not to listen to bitchy constituents. I don’t know.

            If Jim DeMint cites Jared Polis in two months when the actual plan is proposed, will I be proved right?

            And yes, it was Congresspeople claiming they were independent and wouldn’t listen to Democratic orthodoxy that got us into the Iraq war. If Democrats had been united against it, it would have been less likely to happen. That’s how I remember it, anyway.

            1. I really don’t mean this at all sarcastically, but yeah, it’s funny you don’t want to call him Jared. 🙂

              I have a different opinion about the WSJ’s readership than you do. (see below) And just because Polis’ idea would appeal to fiscal conservatives does not make it a bad idea. You and I just disagree about who would best turn the company around: a government bureaucrat or a businessman who specializes in turning companies around. I look back at history and see that command economies don’t work in even more spectacular ways than ours doesn’t work right now.


              I first heard this years ago and laughed my ass off:

              The Washington Post is read by those who think they run the world.

              The New York Times is read by those who think they should run the world.

              And the Wall Street Journal is read by those who actually do.

              1. Seriously, it’s in finding a way to make the companies work well enough to save those jobs. I think our goals may be genuinely different. I don’t care about the stock price of GM or even its profitability. I just want the jobs.

                Remember the 80s? Great economic success? My dad spent much of that decade bouncing around from shit temp job to shit temp job. He wasn’t a bad worker; in fact he was really ambitious, a budding entrepreneur, who like most budding entrepreneurs just wasn’t successful in his business. And when that didn’t work out, he needed a job, and because of the great successes of lots of rich people, it didn’t make sense for anyone to actually hire him.

                So at some point this stuff gets personal for me, especially when the proposal is to have exactly the same “turnaround experts” who know nothing except firing people, and make money because the people who buy stocks know nothing except “firing = profit!” I have no confidence in our captains of industry OR in our captains of turnaround.

                I genuinely believe the rules have to change. You look at the Soviet Union and say it didn’t work. I see that, but I look at our deregulation economy for the past 40 years and say that obviously doesn’t work either. And I look at the incoming government and see it has potential, and it really makes me angry that someone might make a move that seems so unwise, purely strategically. Obviously that part of my argument is not making any sense to you or David, so I’ll stop making it. No point in staying this pissed off if it’s not going anywhere.

                1. …the differences in our economic thought.

                  My interest is not in turning the company around

                  Seriously, it’s in finding a way to make the companies work well enough to save those jobs.

                  Wouldn’t that be the definition of turning the company around?  If the company is profitable, they can add even more jobs, while if they’re forced out of business by not being able to pay the labor contracts, all the jobs are lost.  The problem here is not sales, or bad cars.  It really isn’t.  All I’ve seen is anecdotal support of that line of reasoning – the sales were fine until the gas crunch and then the credit collapse (which affected all the automakers).  If people want hybrids more than they want SUV’s, someone will make money off of it.  If there’s a main reason many would prefer a Toyota or Subaru to a Chevy, it’s reliability and resale more than anything, and that’s nothing to do with being “green”.  If people are going bananas for electric cars, GM will make an electric car.  Part of their problem is the length of time it takes to get a car from drawing board to sales floor.  I expect a that in a new GM that will change, or they will fail completely.

                  I genuinely believe the rules have to change. You look at the Soviet Union and say it didn’t work. I see that, but I look at our deregulation economy for the past 40 years and say that obviously doesn’t work either.

                  What happened to the Soviets over the last 40 years, and what happened to the US GDP over the last 40 years?  The problem is that when the hand is working, some people lose as opposed to everyone losing when you try to control the outcome.  The great thing about this country (or the way it’s supposed to be, anyway) is that even if you lose, you can try again.  You’re not owed anything, but the cream (and little particles of shit, from time to time, ahem…Governor B..) float to the top.  If you make yourself valuable, you will have value.  It doesn’t need to be bestowed upon you by the party, whichever party that is.

                  Our country is set up to enable equality of opportunity, not equality of outcome.  There is nothing good about the reality of a Communist economic system, and it’s scares me that it only took 20 years for people in this country to get misty-eyed about ‘the good old days’ of the most brutally ineffective economic system the world has ever seen.

                  This really is a fundamental difference in thinking.

                  I heard a good quote the other day:

                  “The problem with capitalism is capitalists, the problem with communism is communism.”

                  1. a misty-eyed endorsement of communism? Seriously?

                    I’m advocating that the government use various means to help the private economy provide jobs in a way they haven’t been able to. My position is the popular one, and pretty mainstream as well. Why do so many people on this blog seem like they’re still living in 1979, and Ronald Reagan is just about to save us?

                    1. I’m with you on the bonuses for execs, which is your link, but can you explain your point, then?

                      You talk about changing rules – what do you mean?

                    2. was the support for massive government spending as a stimulus in the later part of the article. Should have made that more clear (or used a better link; it was the first I found).

                      I think we’re at the point where Reagan’s “I’m from the government, and I’m here to help” is no longer really all that scary to the vast majority of people. If it ever was.

    1. .. is the answer. The conservative Republicans were right to oppose the TARP. But now that the TARP funding has been awarded, the Republicans should be ensuring that TARP funds are used for the automaker loans and not worrying about squeezing a few bucks out of UAW worker’s pockets.

      Give them TARP money then implement the Polis Plan. Where do we sign up to help Jared?  

  1. From NRO.

    NRO:  First we heard that we needed to bail out the banks, and then we were told we needed to bail out the auto industry. What is the case against this?

    SEN. JIM DEMINT:  We don’t want any of these auto companies to fail. And they won’t fail unless they completely ignore their responsibilities and wait for the government to bail them out instead of doing what they need to do – what they should have done a while back. GM had its best sales year ever in 2007. It sold over 9 million cars around the world – the same number as Toyota. But Toyota made $20 billion, and GM lost $40 billion. Their viability is not going to change if the cost structure is such that they cannot succeed. Until they restructure, we’d just be throwing good money after bad to prop them up for a few months.

    Government should not be in the auto industry. We’ve set up laws to deal with companies that are financially strapped, and we’ve got bankruptcy protection under Chapter 11, which would allow them to restructure their debt and their union contracts under the authority of a bankruptcy judge, who could help them make the hard decisions that would create a sustainable business.

    We’ve got those laws in place. For us to come in arbitrarily and make up new laws based on one situation sets a precedent for us to do it in other places. I lived in the South and saw the textile industry, which was our major industry, destroyed without any government help. And there are people all over the country right now losing their jobs and their health insurance as the economy falls. The federal government can’t save everyone.

    Because the auto industry is so big, they’re saying we have to change our laws and do something special. But the government shouldn’t do it. And the fact is, they can’t do it. We can’t even run what we have to do now; the idea that we’re going to have a “car czar” who is going to help run the auto industry is so ridiculous that it’s hard to believe people are taking it seriously. We need to let the market work through it, let our laws work, and if the companies that own Chrysler and others won’t invest in them, the American taxpayer shouldn’t, either.

    NRO:  Can the Big Three survive if Senate Republicans stop this now, as it appears you will?

    DEMINT:  We’ve been told that GM cannot make it until Christmas. I hope they’ve been doing their homework and they’ve made preparations for Chapter 11 bankruptcy. If they haven’t, it’s going to go right up to the wall and there’s going to be a disruption. There should not be a disruption in production if there’s any kind of management ability there now.

    Americans have come to know that airlines – and a lot of other companies – have gone through the bankruptcy process and come out the other side. I think frankly they’d have more confidence buying a General Motors product if they knew they were going through a bankruptcy process than if they’re being propped up by the federal government. . . . These companies are businesses. They are not government agencies.

      1. In a compromise, it’s generally considered good if no-one likes everything, but everyone likes something.

        Telling GM to go to bankruptcy court to solve their problems, but that the Federal government will be there to provide a helping hand, seems to meet that description: conservatives don’t like Federal involvement, while progressive don’t seem to be in favor of letting it hit Ch.11.

        It’s a tough problem with a tough solution.  Letting the company go under is probably enough to trigger the next round of recession fears.  Letting it stay nearly as-is is almost certainly lunacy.

        1. Sen. Jim Demint (what a great name for a repub by the way) obviously doesn’t understand bankruptcy laws.

          So GM declares Chapter 11, then what?  They are able to pay part of their debts to their top 100 suppliers?  The rest?  just left holding the bag.

          That is what amazes me about this entire fiasco.  There is no problem writing blank check to financial institutions who have shown to be reckless and imprudent.  Add in now that they have the money, they have tightened or eliminated virtually all lines of credit (including to auto suppliers).  However, an industry that employs a great many people and makes a product is told to go to hell.  

          The Big 3 is saddled with unfair trade agreements and the reality of actually taking care of their workers.  If you competitor is allowed to sell vehicles in your market, yet you are prohibited from selling in their, that is a major disadvantage.  If they are able to pay their workers lower wages and marginal benefits, thats a disadvantage.  Real jobs with real wages and benefits is something that we all should be fighting for.  

          Also, this idea that the car companies should be punished for “fighting change” is ridiculous.  They are protecting their interests, its what companies do.  Companies don’t voluntarily take on greater regulations.  They also don’t make products that are “the right thing to do” for shits and giggles.  They make products that people buy.  If you’re a GM shareholder in 1997, you want them making as many SUV’s as possible, you don’t want them rolling out as many GEO Metros as they can.  They made efficient products, people didn’t buy them, so blame the American public, not the company.

          I have never been more disgusted with the American government as I am now.  Shame on our elected officials and their cowardice and malice.  Shame on the American people for letting them do it.  The UAW helped raise wages in all sectors across this country, they fought hard to make unionization a possibility for everyone, for that they should be punished?

          And yeah, I grew up in Michigan.  I lived through the Reagan years when everyone was out of work, watched my town and countless others like it crumble and saw families like mine broken apart.  However, it was the auto industry that sent me to college—the first in my family to go—so that I may have the opportunity at a better life, a life not working on a line, in a mill or in a truck.  It will be a somber Christmas for all families in Michigan like mine, all realizing that there is no light at the end of the tunnel.  For that, I hope that folks like Sen. Demint, Baucus, Shelby, Biden, etc go to hell.  

          1. The first of which is, GM doesn’t appear to be a fiscally sound company.  GM took in $181b in revenue last year, which translated into a $37b loss.  They made somewhere over 9 million cars last year.

            If the numbers being floated around are correct, and the cost of labor (including all of those costs for retired workers plus overtime and benefits, i.e. the $73/hr. number) for each car is 8% of the total cost, then even eliminating the entire labor force and cutting out all health care and pensions for retirees would leave GM bleeding money.

            There is a fundamental problem somewhere within the company, and it runs much deeper than labor costs.  A normal company would file Chapter 11 in those cases, because it can’t expect to recover from that kind of problem without serious debt re-negotiation.

            And it’s not just about the suppliers, or the workers; a bankruptcy would likely hit the credit industry just when it can least afford to be hit.

            Letting GM file for bankruptcy without some kind of Federal “insurance” is, to my mind, economic insanity.  But throwing money at GM and expecting them to fix their problems isn’t the right answer either.

      2. Who will provide the loans to continue operations for chapter 11? It will be at least 14 billion. Ford and GM are down 40% in Europe. GM is part of the DOW.

        Chapter 7 equates to the liquidation of the industry. I suppose McConnell and Shelby think we can have Toyota and Honda build tanks and other military vehicles.

        Your flat wrong about the 700 billion, of which roughly 350 has been spent. The world faced total banking collapse. Germany did the same with Duetsche Bank, London did the same with the Royal Bank of Scotland and HBOS prior to the House passing the bill.

        How would you have functioned if your money was no good and your credit cards were useless too? The market dumped 777 points on the failure of the bill in the House. That equated to a trillion dollars of equity. Granted, Congress should have put language in the bill to stop Paulson from giving away 100 billion to his cronies without stipulation.

        A trillion dollars in equity was just the start of the cost for the foolish idea to permit liquidation of the auto industry.  

        We have a situation in which Republican excess and lack of regulation has caused a major economic downturn and you support ideas which punish labor?

        The UAW agreed to cuts but only after their current contract ran out. I suppose that the American Indians know a bit about the integrity of the government in maintaining contracts. Nevertheless, contract law is the very basis of our society.

        If Rep. Elect Polis can organize a private loan to the industry then I suggest he do it within 2 weeks.

        The oil companies have the profits this year to easily loan the auto industry 14 billion.

        You won’t see them stepping up to the plate.

        The Republicans are not financially conservative. They are reckless.

  2. from eWeek he has some great examples including…


    Thank goodness the feds decided to bail out Webvan from its 2001 bankruptcy with a $10 billion cash infusion. Unless the online delivery grocery business was preserved, it was clear what a terrible food crisis we would all be now having. While people would be able to order their groceries online, without Webvan there would be no way to get those groceries from the stores to the homes. Grocery stores would be awash in undelivered inventory as no one could think of a way to travel from a house to a store to get those packages. There would have been a food surplus (at the store) and a food shortage (at the home) of unimaginable proportions that the United States would have had to fix.

    A few entrepreneurs may have considered an economy where people drive to the stores with a shopping list, but economic experts didn’t see much of a chance of this catching on. Government economists estimate that it costs the Treasury $150 to deliver every $10 order of beer and chips, which is expected to decrease at 1 percent per year.

    The American car companies have fought change rather than taking advantage of it – every step of the way. The critical thing now is not that GM survivies, but that we retain, or more to the point, regain a vibrant innovative successful auto industry.

    1. The problem with the Big 3 is the same as it has been for over a decade, outside of full sized trucks and SUV’s, the American auto industry has not been competitive with foreign manufacturers.  The quality has been lacking when put next to a foreign brand, and when compared with similarly priced foreign vehicles of the same class, you had fewer “options” that came standard with the base price.

      The warning signs have been there since Chrysler dropped Plymouth in ’01 and GM Oldsmobile in ’04.  The same-old-same-old of American automobile manufacturing isn’t going to cut it.  There has to be change, and frankly, having politicians decide what the American auto industry builds would probably kill it faster than the people running it now could.

  3. We’ll probably see a Democratic full court press to suborn some of the $700,000,000,000 financial bailout for the Big 3.  The White House was in favor of the bailout and Dick Cheney was apparently lobbying hard for it.  

    The vote for cloture was 52-35, where were 13 of the Senators on this and who were they?  I don’t think voting “present” on this will keep them from catching heat from the Ray Springfield/sxp151 wing of the Democratic Party.

    1. While I may disagree entirely with the SPX crowd about how to solve our problems, we do agree on the end goals: help the poor, protect the environment, make the world a better place. We just disagree on how to get there.

      Plus, I don’t think I’m quite as angry as those folks. I certainly don’t swear as much. Well, in public anyway.

    2. The Administration could choose to lend some of that cash to institutions willing to lend to the automakers.  There’s not really any oversight of that money right now, so long as it stimulates lending and stabilizes the credit industry.

        1. If he can lend out to companies sending their execs on posh meeting trips, and with no other oversight or reporting…

          We’ve got parts of the $700b going to purchasing troubled banks, other parts going to purchasing healthy banks, some going to buy up bad securities debt, and still more to restructure mortgages.

          Allocating some of it as a loan guarantee against creditors actually loaning money shouldn’t be that hard.

    3. A few make sense:  Biden, Craig, Hagel, Kennedy, Smith, Stevens, Sununu.  Except for Kennedy, they’ll all be gone come next month anyway.

      You’ve gotta figure Alexander, Cornyn and Graham would have voted “No” anyway.

      But what’s up with Kerry and Wyden?  That’s your 12 (remember Illinois is short a Sen.).

      At best, there are probably 5 “Ayes” in there so it didn’t really matter since they were 7 short (Reid voted “No” for procedural reasons.)

      1. You had 10 Republicans voting for cloture, and Harry Reid still couldn’t wrangle the votes to go forward.  Why wouldn’t Biden vote “Yes”?  You would think that the Democratic VP elect would vote for it.  Was Kennedy present, or did his illness prevent him from being there for the vote?

  4. The big problem for a lot of campanies (not GM – their fundamental problem is they don’t know what they’re doing) is a lack of credit.

    What if the government created something like the FDIC for quality rated corporate bonds. It would have to be restricted to debt on real things (ie none of that screwy paper that crashed the banks), would only guarantee say 90% so people still were harmed by a default, and there was an insurance charge on the covered debt.

    This would give people a floor for their potential losses when buying bonds and could get that market moving again. Yet it leaves the market in charge and the government isn’t buying anything or making decisions that affect the market.


    1. Of course, with credit default swaps and mortgage derivatives receiving AAA ratings, trusting a quality rating service right now might not be in the government’s best interest.

      Nice fresh idea, though.  I don’t think I’d want to see it around as a long-term entity, though.  More like the short-term RTC or HOLC.  (And bringing back the HOLC wouldn’t be a Bad Thing, either…)

  5. PATCO in Reverse?

    Hmm. Why shouldn’t the bailout deal include an explicit reopening of labor contracts? If the new “auto czar” can order the companies to restructure, tell them to build smaller cars and veto any expenditure over $25 million, shouldn’t he or she be able to require the UAW to give up the precious work rules that have rendered the domestically-owned industry inflexible and inefficient for decades?

  6. can’t they wait 3 and 1/2 more weeks?  This had dragged out for so long that the 111th Congress starts that freakin’ soon.

    Why not make the first order of business this same bailout?  Dems were basically 2 or 3 votes short with a 51-49 split (Look at those not voting).  Come the 6th, this should pass w/o a problem in a 58-42 Senate.

    GM and Chrysler have been saying for weeks that they’re “weeks” from collapse.  How true that is, only they know, but if this is what needs to happen, Dems can make it happen a month from now…  

  7. Republicans wanted wages at GM to decrease so they’re in line with what Toyota workers earn. But they are! Wages are about the same, $30 per hour. Benefits for current workers are about the same.

    It’s GM’s higher costs for retired workers that are much higher, primarily because, uh, GM has retired workers. Toyota doesn’t, in America.

    So what exactly did Republicans want? That GM start paying minimum wage so that, if you include all retired worker benefits, it averages out the same? Anyone else think that’s just stupid? Like, record-settingly stupid, even for Republicans?

  8. japan finally figured out it doesn’t have to bomb the US, it just has to buy the senators from Alabama, Tennesse and Kentucky.

    What a neat enemy alliance; the south and the japanese….

    This hits home for my family….not that we haven’t taken an economic hit in the old retirement…like everyone else….but this is the god damm big one…

  9. Listening to so many “economic” experts on the blogs has provided one shimmering bird splat on why the economy is in the cesspool. Letting politicians and bloggers pretend to be CEO’s, COO’s and CFO’s is the death of any macro economic planning.  

    I’ve been watching CNBC for the last couple of hours (it is 4:28 am) and it has been interesting to listen to the analysis of what Mitch McConnell has done to the U.S. economy and the world economy.

     There is a big fear of GM going under.  If it happens even the foreign manufacturers in the South that are being subsudized by the states will suffer or close as the parts suppliers close.

     The anti-union, anti-manufacturer sentiment has created an economy based on clouds, the clouds are turning to rain now and it is not a pretty drenching all over the world.

      1. ’cause the CEO’s don’t seem to be doing the job.

        On a more serious note, if this were just an everyday business failing, we wouldn’t take note of it.  The reason there’s so much clamor to get the government involved is that letting any of the Big 3 fail – but especially GM – is a ticket to a Depression.  Cheney had it right (for once): failing to do something is a ticket to “Herbert Hoover time”.

  10. Vice President Dick Cheney brought to a closed-door Senate GOP lunch Wednesday, reportedly warning that it’ll be “Herbert Hoover” time if aid to the industry was rejected, according to a senator familiar with the remarks

    It sounds llike Bush realizes that a BK for GM is fatal to the economy. Both the treasury and the White House announced that they stand ready to stop it.

  11. This is the political party that says that the government shouldn’t pass laws that tells anyone how much they should make….unless it’s a union, at which point we’re free to regulate every aspect of your life from the amount you make to how you can allocate your paycheck.

    I bet that there was no part of the negotiations that capped CEO pay at 2000% of the highest line worker’s salary, or a limit on how much corporate money that could be donated to PAC’s and Lobbyists, or eliminated bonuses for recruiting executives to higher-level management.

    Because, you know, only evil unions need to have that kind of oversight..

  12. what is the average pay (salary+benefits) for employees of the financial services field that we just spent nearly 50x the amount requested by the auto industry to bail them out and why was that not an issue to Senators McConnell, Corker and Cochran?  

      1. but, they’d also argue that the financial folks are being rewarded for having college degrees whereas the auto workers, with “minimal skills” and often only a HS education, are making way too much for entry level talent.

  13. So the average MSRP on, say a Ford Taurus is 23-28k. According to the NYT article posted here a few days ago, labor costs IN SUM represent 10% of the cost of the vehicle, ie. 2.3-2.8k.… Now, David Leonhardt also claims that the legacy costs represent $800 on an average vehicle, around 3% of the Taurus, though if we took this as a percentage of the labor costs it would be less than this.

    Accepting that EVERY other category besides legacy costs were brought in line with the Japanese auto makers, this would represent $1/hr from benefits, $5 from paid leave, and $3 from wages, for a total of $9/hr. This figure represents %13 of the total labor cost or 1.3% of the total cost of the vehicle. In the case of the Taurus, this is ~$250.

    Recognize, the conservative argument here (if taken at face value and not as an ideological ploy to hurt workers) is that reducing the cost of a Taurus by $250 (and other vehicles similarly) will restore the Big three to viability, despite the fact that people don’t want to buy gas guzzling POS’s in this economy no matter what the price. Furthermore, as the article notes, the autos are often sold at a price $2500 less than that of comparable Japanese vehicles. It takes a severe lack of perspective to take this argument seriously.

    Nor is this the only issue in which the conservative consensus has been suspect. We are also led to believe that despite having 3% of proven oil reserves and 25% of oil demand that the US is in a place to reduce price on the supply side. Similarly, we are to believe that the biggest problem with the federal budget is $17 billion in earmarks (according to the OMB) or 0.6% of proposed 2008 expenditures. I think I may follow their lead and fight the rise of sea-levels attributed to global warming by bringing a bucket with me to the coast.

    I’m sympathetic to the ethic of personal responsibility and limited government intervention. However, in an era when excesses of those have led directly to the current financial crisis, it’s time for some that peddle these ideas to face a dose of reality.  

    1. The automakers are due to make a huge (tens of billions) payment to the UAW for the pension fund in 2010, and they don’t have the money.

      As soon as you guys get off the propaganda vernacular about ‘wanting to hurt workers’ and ‘working families’ we can try to resolve this mess.  Nobody wants to hurt workers. Workers and business owners are all going to have to make major concessions, and to this point, Labor has had a scorched earth policy on being forced to do much of anything – see: poison pill amendments this summer here in CO.

      A great NHL GM once told me that a great trade is one where both teams felt a little pain.

      1. It’s to transfer to the UAW many of the increased costs they’re facing vs. the other manufacturers (i.e. pensions and retirement health care).  The UAW has agreed to handle those costs in the future; for that, a one-time charge is a bargain.

        And agreed – both sides will need to make some concessions.  I think the union will have to agree to acceleration of the new work rules from 2010 to 2009 as Republican Senators wanted.  They’ve already made significant concessions on pay rates, and they’re taking over the pension plans to relieve a significant burden from GM’s bottom line.  Now what exactly has GM conceded?

        1. …when you make them give you the money for it.

          It’s funny, Dems look at Labor as an arm of the government (or God, to be more realistic), and Repubs look at Labor as an arm of the Democrat party.

          1. Read what I said:  “The UAW has agreed to handle those costs in the future; for that, a one-time charge is a bargain.”  The UAW isn’t getting a good deal on this; they’re going to be taking on a huge burden managing these plans.

            Now back to the ideology…

            Union labor represents ~8% of the total workforce, and their actions benefit most of the workforce regardless.  Democrats look to labor – not as government or God – but as the vast majority of the voting public.  They look to Unions as the major coordinated voice of that labor pool.

            The Republican Party, by and large, sees Unions as (a) an arm of the Democratic Party, and (b) standing in the way of the businesses the GOP has traditionally favored over Labor.

                1. I’ve actually been under the impression that women in childbirth were responsible for all of these crazy overpaid auto workers!

                  Thanks for clearing the LLabor thing up for me.

                  See you Sunday.

      2. I can’t find it here. All I find in your posts is sniping at unions which comprise 12% of all workers, down from 20% in the early 80’s, hardly a boogeyman despite your protestations, which you failed to back up with a single number. Yet you insist that wage equality will solve things. How? The VEBA, the only argument you cite, will actually DECREASE the big three legacy costs by turning them over to a trust that they would make an investment in. This is precisely what the conservatives wanted to do with soc security, but we see what reaction people like you give when “big bad labor” does it. Once again, equality of labor cost will make no difference. I have demonstrated this quite clearly.

        I will agree that the UAW is culpable in that they long joined the big three in opposing fuel economy standards that were necessary for future viability. For that reason, it is entirely possible that the big three will fail in the future and if so, so be it. However, the best way to throw gas on this economic fire is to allow these companies to go bankrupt, fire many of their employees, stop paying pensions, and kill the economy of Michigan. Like it or not, the adults in the room aren’t going to let that happen.

        If you have further comments try to make them factually based and not out of objectivist-cloud-cuckooland. Even Greenspan has rejected Randian philosophy and I’m embarassed for you that you invoked it a few days ago. Furthermore, your claims of not being anti-worker would hold more weight if you didn’t post diaries laughing at the mere possibility that some at the SEIU were involved in the Blago scandal.

        I’ve seen a labor union I was in go to bat for a worker who was going to be fired (illegally) because she was pregnant. Unions fill a necessary role in society and are the only reason most workers get vacation time today. The reason that their tactics are severe and at times indefensible is because their opposition is worse.  

    2. Are American cars being sold for ~$2500/car less than their comparable Japanese models?  Is that for comparable features, too?

      Changing the pricing model still won’t get them to profitability – it’s about the same as the total labor cost, and less than their loss last year – but it will get them closer.

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