Auto bailout is a Union bailout, no if ands or buts about it
The big talking points of the past week have centered around the Auto Industry and most people seem to be of the opinion that the gas-guzzling SUVs caused the domestic auto companies' current woes when people stopped buying them.
In all actuality the truth is just a little bit more complicated than that.
The Big Three automaker's struggled to transition out of SUVs when gas prices killed demand for them because union-negotiated retirement benefits had already wiped out any financial flexibility the companies once had. Decades ago.
Good news in we all need cars, so we need automaker's to keep making them, bad news is that we don't need to keep throwing good money after bad and continue to put an old splintered splint on the UAW's labor system that went bankrupt a long time ago.
Remember what AIG did with their bailout money, well this is one hundred times worse, if we bail these guys out not only will be paying for the fat lifestyles of union thugs, but we will be condoning it. It's kind of like "tough love" folks, have you ever seen a rebellious child just all of a sudden "straighten up and fly right" after his parents continuously bail him out of jail, pay his fines, buy him new cars to replace the wrecked ones and pay his rent, (since they don't trust him in their home), and give him spending money so they don't have to deal with his begging phone calls for money. These kids are normally called a "Trust Fund Babies" and they are no different than the Execs that have milked the Auto Industry with their Mafia style UAW. The lame stream media that is run by the Liberal Democrats would have you to believe that those "Gas Guzzling SUV's" have put the Domestic Auto Industry into this pickle when we as consumer stops buying them, so they pull at our heart strings to make us feel sorry for them, but its not working this time.
I wish it was only that simple but its much more of a complicated issue. Here's some "right to the point" points to summarize it for you.
1) Starting Note: These companies lost their financial flexibility years ago when there union-negotiated retirement benefits wiped it out.
2) Domestic Auto Makers struggled a little to little a little to late in transitioning out of "gas guzzling" vehicles when bloated gas prices killed demand.
3) Domestic Auto Makers have been continuously rewarded executives with fat payouts following a year of massive job cuts and attacks on the wages, working conditions and benefits of auto workers. These Figures were reported in 2007 for 2006
Some Examples are:
-GM's Rick Wagoner got restricted stock valued at $2.8 million and 500,000 options worth $1.4 million.
-GM Vice Chairman Bob Lutz, head of GM’s global products operations, got 60,000 restricted shares and 250,000
options.
-GM Chief Financial Officer Frederick Henderson got 60,000 restricted shares worth $1.8 million and 250,000 options.
-GM all together 18 executives received stock awards.
-Chrysler Group gave Top-level executives like CEO Tom LaSorda received $3 million in compensation, including a $1.1 Million annual and also received $2 million worth of so-called phantom shares that can be redeemed in 2010.
4) Domestic Auto Makers refused to heed warnings as far back as the 1990's that they needed to move in the "economy vehicle" area quickly to keep up with demand and compete with their Import competitors.
Not only did Domestic Auto Makers blatantly ignore the warnings but they actively worked with the Oil Companies to fight very efficient conservative fuel-efficiency standards and NOW they've decided they need a US taxpayer bailout to compete with Toyota and Honda? Edward Manfredonia of BSN wrote a good History, persae', a few days ago, and here's a few blurbs from that;
In the 1980s Lee Iacocca dared Japanese car manufacturers to open auto manufacturing plants in the United States-a step, which the Japanese automaker's did not wish to take. Iacocca was hoping that had the Japanese responded the United Auto Workers (UAW) would end up unionizing these plants; he was hoping to lure them into a trap. Challenging the manhood of Japanese manufacturing companies was a mistake. And they responded like samurai.
Honda and Toyota took up Iacocca’s challenge and opened automobile manufacturing plants in the United States. But Iacocca's vision of Japanese auto manufacturing plants being overrun by the United Auto workers Union never occurred. Iacocca had forgotten the history of Japanese labor unions; namely, that during the American occupation of Japan the American government had assisted Japanese manufacturers in defeating Japanese unions, which had been overwhelmingly Leftist.
Honda and Toyota opened automobile manufacturing plants using lean production method and statistical quality control. My 1971 Toyota, which was manufactured in Japan, was more reliable than either my father's Lincoln or his Chevrolet station wagon. Honda and Toyota are not encumbered by inflated union salaries.
Salaries at Honda and Toyota are roughly 70% of salaries at GM and Ford. Auxiliary benefits are not as generous. Prospective employees of Honda and Toyota are required to take standard examinations that test their statistical ability. Honda and Toyota were able to choose their employees on the basis of their knowledge of mathematics, something that the UAW would protest. One disadvantage, which Toyota and Honda do not have, is legacy costs. General Motors and Ford are mandated to pay generous pensions and health care for their retirees. (Health care costs are to be assumed by the union in 2010 with assistance from GM and Ford under new arrangements.)
The major problems with General Motors and Ford are basically that these companies never addressed the issues of fuel efficiency and small cars. Due to the influence of the Michigan congressional delegation to DC, exceptions to the fuel economy were always made for American cars; fuel efficiency was not enforced for American cars. Example: The Chrysler PT Cruiser is technically considered a "car" for emissions purposes and a "truck" for fuel economy—trucks are allowed to get fewer miles per gallon. Or consider this: the Toyota Prius has a 55 mpg rating while a Ford Explorer has 17 mpg rating.
General Motors and Ford have visionless management. At the back of the minds, they remember Richard Nixon's bailout of Chrysler, so they believe someone will always have their backs. Instead of using profits for innovation, the profits were wastefully distributed in dividends.
The eventual cost of GM and Ford bailout will be $100 billion; the measure will only delay and increase the cost of the final reckoning. The ideal solution, is for General Motors and Ford to declare bankruptcy- with Federal guarantees so that their suppliers remain solvent and they will have the breathing space to re-negotiate the union contracts; suppliers account for billions of dollars in business and more than a million jobs. Only then can GM and Ford successfully address their problems.
Heritage.org said it best in a recent article;
"I see no end to this personally. It will extend the pain (the downturn) for years. It is also clear, watching Paulson twist and turn the other day trying to explain why he's not going to do what he said he was going to do with the $700 billion, that despite all the high-flown rhetoric, these guys haven't a clue. They're shooting in the dark and are on track to spend 5 trillion dollars they don't have. Where is the line and how does one draw it now? Most likely, as the Heritage Foundation says, there will be little if any line drawing: Of course, once you’re bailing out banks and automaker's, there will be no justification for excluding other big businesses from feeding at the taxpayer trough. Airlines, hotels,
construction, computers — all these industries are hurting as consumption retracts, and all of them have just as good a case that they need to be bailed out to protect jobs as the auto industry. Then there are the spendthrift states like California and New York that all want federal money not to mention all the major U.S. cities who are equally deserving. The bailout parade has no end. I certainly don't see any - do you? "
Kevin Herrick and Townhall blogger recently enhanced what Heritage.org has pointed out "Where will these bailout requests end? Is the airline industry next? How about the entertainment industry when people cut back on going out , will they get on line with their hands out? The auto industry should not expect Americans to sacrifice and allow our dollars to dig them out of their hole they dug without THEM making sacrifices and re-negotiating bloated union contracts is a good first place to start. "
CNN recently publish an article from by Daniel J. Mitchell with the Cato Institute " A bailout also would be bad for General Motors, Ford and Chrysler. The so-called Big Three desperately need to fundamentally restructure their practices. More specifically, the car companies need to endure some short-term pain in order to restore long-term viability. But that won't happen if politicians raid the treasury. Getting access to taxpayer money would be akin to giving an alcoholic the key to a liquor cabinet. It also would be bad for American taxpayers and the American economy.
For instance:
In all actuality the truth is just a little bit more complicated than that.
The Big Three automaker's struggled to transition out of SUVs when gas prices killed demand for them because union-negotiated retirement benefits had already wiped out any financial flexibility the companies once had. Decades ago.
Good news in we all need cars, so we need automaker's to keep making them, bad news is that we don't need to keep throwing good money after bad and continue to put an old splintered splint on the UAW's labor system that went bankrupt a long time ago.
Remember what AIG did with their bailout money, well this is one hundred times worse, if we bail these guys out not only will be paying for the fat lifestyles of union thugs, but we will be condoning it. It's kind of like "tough love" folks, have you ever seen a rebellious child just all of a sudden "straighten up and fly right" after his parents continuously bail him out of jail, pay his fines, buy him new cars to replace the wrecked ones and pay his rent, (since they don't trust him in their home), and give him spending money so they don't have to deal with his begging phone calls for money. These kids are normally called a "Trust Fund Babies" and they are no different than the Execs that have milked the Auto Industry with their Mafia style UAW. The lame stream media that is run by the Liberal Democrats would have you to believe that those "Gas Guzzling SUV's" have put the Domestic Auto Industry into this pickle when we as consumer stops buying them, so they pull at our heart strings to make us feel sorry for them, but its not working this time.
I wish it was only that simple but its much more of a complicated issue. Here's some "right to the point" points to summarize it for you.
1) Starting Note: These companies lost their financial flexibility years ago when there union-negotiated retirement benefits wiped it out.
2) Domestic Auto Makers struggled a little to little a little to late in transitioning out of "gas guzzling" vehicles when bloated gas prices killed demand.
3) Domestic Auto Makers have been continuously rewarded executives with fat payouts following a year of massive job cuts and attacks on the wages, working conditions and benefits of auto workers. These Figures were reported in 2007 for 2006
Some Examples are:
-GM's Rick Wagoner got restricted stock valued at $2.8 million and 500,000 options worth $1.4 million.
-GM Vice Chairman Bob Lutz, head of GM’s global products operations, got 60,000 restricted shares and 250,000
options.
-GM Chief Financial Officer Frederick Henderson got 60,000 restricted shares worth $1.8 million and 250,000 options.
-GM all together 18 executives received stock awards.
-Chrysler Group gave Top-level executives like CEO Tom LaSorda received $3 million in compensation, including a $1.1 Million annual and also received $2 million worth of so-called phantom shares that can be redeemed in 2010.
4) Domestic Auto Makers refused to heed warnings as far back as the 1990's that they needed to move in the "economy vehicle" area quickly to keep up with demand and compete with their Import competitors.
Not only did Domestic Auto Makers blatantly ignore the warnings but they actively worked with the Oil Companies to fight very efficient conservative fuel-efficiency standards and NOW they've decided they need a US taxpayer bailout to compete with Toyota and Honda? Edward Manfredonia of BSN wrote a good History, persae', a few days ago, and here's a few blurbs from that;
In the 1980s Lee Iacocca dared Japanese car manufacturers to open auto manufacturing plants in the United States-a step, which the Japanese automaker's did not wish to take. Iacocca was hoping that had the Japanese responded the United Auto Workers (UAW) would end up unionizing these plants; he was hoping to lure them into a trap. Challenging the manhood of Japanese manufacturing companies was a mistake. And they responded like samurai.
Honda and Toyota took up Iacocca’s challenge and opened automobile manufacturing plants in the United States. But Iacocca's vision of Japanese auto manufacturing plants being overrun by the United Auto workers Union never occurred. Iacocca had forgotten the history of Japanese labor unions; namely, that during the American occupation of Japan the American government had assisted Japanese manufacturers in defeating Japanese unions, which had been overwhelmingly Leftist.
Honda and Toyota opened automobile manufacturing plants using lean production method and statistical quality control. My 1971 Toyota, which was manufactured in Japan, was more reliable than either my father's Lincoln or his Chevrolet station wagon. Honda and Toyota are not encumbered by inflated union salaries.
Salaries at Honda and Toyota are roughly 70% of salaries at GM and Ford. Auxiliary benefits are not as generous. Prospective employees of Honda and Toyota are required to take standard examinations that test their statistical ability. Honda and Toyota were able to choose their employees on the basis of their knowledge of mathematics, something that the UAW would protest. One disadvantage, which Toyota and Honda do not have, is legacy costs. General Motors and Ford are mandated to pay generous pensions and health care for their retirees. (Health care costs are to be assumed by the union in 2010 with assistance from GM and Ford under new arrangements.)
The major problems with General Motors and Ford are basically that these companies never addressed the issues of fuel efficiency and small cars. Due to the influence of the Michigan congressional delegation to DC, exceptions to the fuel economy were always made for American cars; fuel efficiency was not enforced for American cars. Example: The Chrysler PT Cruiser is technically considered a "car" for emissions purposes and a "truck" for fuel economy—trucks are allowed to get fewer miles per gallon. Or consider this: the Toyota Prius has a 55 mpg rating while a Ford Explorer has 17 mpg rating.
General Motors and Ford have visionless management. At the back of the minds, they remember Richard Nixon's bailout of Chrysler, so they believe someone will always have their backs. Instead of using profits for innovation, the profits were wastefully distributed in dividends.
The eventual cost of GM and Ford bailout will be $100 billion; the measure will only delay and increase the cost of the final reckoning. The ideal solution, is for General Motors and Ford to declare bankruptcy- with Federal guarantees so that their suppliers remain solvent and they will have the breathing space to re-negotiate the union contracts; suppliers account for billions of dollars in business and more than a million jobs. Only then can GM and Ford successfully address their problems.
Heritage.org said it best in a recent article;
"I see no end to this personally. It will extend the pain (the downturn) for years. It is also clear, watching Paulson twist and turn the other day trying to explain why he's not going to do what he said he was going to do with the $700 billion, that despite all the high-flown rhetoric, these guys haven't a clue. They're shooting in the dark and are on track to spend 5 trillion dollars they don't have. Where is the line and how does one draw it now? Most likely, as the Heritage Foundation says, there will be little if any line drawing: Of course, once you’re bailing out banks and automaker's, there will be no justification for excluding other big businesses from feeding at the taxpayer trough. Airlines, hotels,
construction, computers — all these industries are hurting as consumption retracts, and all of them have just as good a case that they need to be bailed out to protect jobs as the auto industry. Then there are the spendthrift states like California and New York that all want federal money not to mention all the major U.S. cities who are equally deserving. The bailout parade has no end. I certainly don't see any - do you? "
Kevin Herrick and Townhall blogger recently enhanced what Heritage.org has pointed out "Where will these bailout requests end? Is the airline industry next? How about the entertainment industry when people cut back on going out , will they get on line with their hands out? The auto industry should not expect Americans to sacrifice and allow our dollars to dig them out of their hole they dug without THEM making sacrifices and re-negotiating bloated union contracts is a good first place to start. "
CNN recently publish an article from by Daniel J. Mitchell with the Cato Institute " A bailout also would be bad for General Motors, Ford and Chrysler. The so-called Big Three desperately need to fundamentally restructure their practices. More specifically, the car companies need to endure some short-term pain in order to restore long-term viability. But that won't happen if politicians raid the treasury. Getting access to taxpayer money would be akin to giving an alcoholic the key to a liquor cabinet. It also would be bad for American taxpayers and the American economy.
For instance:
- A bailout will hurt the overall economy by misallocating resources. When politicians grant special favors to a certain industry or a particular union, such decisions necessarily mean that market forces are being replaced by special-interest deal-making. This type of interference with free markets is why nations such as France, Germany and Japan tend to grow more slowly and enjoy less prosperity. But if America goes down this same path of government intervention, it is inevitable that we will suffer the same fate of stagnation and higher unemployment.
- A bailout will encourage other industries to seek taxpayer handouts. The Wall Street bailout was a disaster in many ways, most notably as measured by the weak stock market and economic volatility. But another negative aspect of the bailout is that other industries have now decided that it is OK to stick their snouts in the public trough, as well. First Wall Street's high fliers get a bailout. Now the inefficient management and union at the Big Three want a handout. Who will be next in line to pillage taxpayers? Giving handouts in exchange for political support is akin to getting high. Once politicians decide they like the buzz of campaign contributions, they'll turn into junkies with ordinary Americans footing the bill.
- A bailout is a perverse transfer from poor taxpayers to rich taxpayers. America's Founding Fathers surely never envisaged that the federal government would take money from one group of Americans and give it to another group. Yet much of the federal budget is devoted to redistribution programs.
- A bailout will encourage other industries to seek taxpayer handouts. The Wall Street bailout was a disaster in many ways, most notably as measured by the weak stock market and economic volatility. But another negative aspect of the bailout is that other industries have now decided that it is OK to stick their snouts in the public trough, as well. First Wall Street's high fliers get a bailout. Now the inefficient management and union at the Big Three want a handout. Who will be next in line to pillage taxpayers? Giving handouts in exchange for political support is akin to getting high. Once politicians decide they like the buzz of campaign contributions, they'll turn into junkies with ordinary Americans footing the bill.
"Bailouts are a particularly bizarre form of redistribution, however, because the corporate bureaucrats at the Big Three are among the very richest Americans. The UAW bosses make extravagant salaries, as well, and even regular union workers make an average of approximately $70 per hour, far higher than the average american."
In summary, the auto industry has shown no initiative to save themselves, and in all reality their workers have done more to compromise than they themselves have, they got theirselves into their current mess, and they need to get themselves out.
Taxpayers should not be continuously forced to foot the bill for Corporations who stand idly by and watch the storm come in and do nothing to prepare for. The damage is done the storm has devastated them and they are in their storm cellar waiting for us to build the house back over their heads again and its wrong on so many levels. It is up to management and its employees to fix these problems. If they want their businesses to succeed than they must change their business model, if they want to keep their jobs then they must make it work, NOT the American taxpayer. One of my favorite quotes of all time is the definition of Insanity. "Doing the same thing over and over again and expecting different results."
Chapter 11 protection may be exactly what these auto companies need. Bankruptcy laws are designed to give companies an opportunity - under court supervision - to reduce costs and
streamline operations. However Bankruptcy would not be popular option ,of course, the management structure would then be forced to streamline and hence many overpaid executives would be looking for new jobs. UAW also, would be not be happy, as bankruptcy would force them to revisit their extravagant pension benefits and the ineffectiveness of the workplace itself. But bankruptcy is akin to getting an alcoholic to put down the bottle, the short term discomfort is a small price to pay for the long time benefit.
The bailout of the "Big Three" will (notice how I used the word 'will' ) be a mistake, just as the bailouts of homeowners or any others would be. If our elected politicians genuinely want to help the economy, they should focus on reducing the burden of government, not increasing it, unfortunately I don't see that happening anytime soon at least not in the next four years.
Comments