House Speaker Nancy Pelosi says bankruptcy is not an option for the Big Three U.S. automakers.
Why not?
Bankruptcy protection, while a last resort, can allow a company to survive and even reinvent itself. A great number of companies have done so. What makes the automakers any different?
We'll tell you what: the unions. Pelosi and other Democrats are bought and paid for by the unions, and want to do everything they can to protect them. They realize that bankruptcy could result in a totally changed landscape for the United Auto Workers. They don't want that.
Guess what: It's coming anyway. The landscape has already changed.
Cars are being made just fine elsewhere in the country for much less, due to the lack of union strangleholds. Union-based manufacturers are wilting under the pressure; why aren't others?
In Canada, union workers make $27 an hour more than their counterparts. In the U.S., UAW workers make $73 an hour compared with $48 or less for others.
This we should bail out?
Yes, the UAW has graciously agreed to new talks and a few concessions -- including, get this, an end to a job bank in which laid-off workers essentially get most of the pay they got at their jobs.
Given history, Congress and the White House would be crazy to grant the carmakers their $34 billion requested bailout to Detroit at the mere promise of union talks -- or at the pledge of CEOs working for a buck a year and top executives eschewing merit increases. No investor worth his salt would pour money into the status quo in Detroit, or sign the dotted line without knowing precisely what the union has agreed to in the way of concessions.
Many of us are becoming convinced, contrary to Madam Pelosi, that bankruptcy might be the best option for the Big Three. It might be the best route for shaking off the unions.
"Frankly, nothing will get the attention of the automakers more than a 'managed bankruptcy,'" says economist Mark Skousen. "That really is the only workable solution at this stage.
"A government-managed Chapter 11 bankruptcy is probably the best course of action to take without causing wholesale job destruction. It would allow the auto firms to (drastically) cut the average labor cost from $73 to $44, what foreign transplants pay their workers. Right now $2,000 of the cost of a new American car goes toward worker benefits (health care and retirement). Reorganization will force the unions to accept much less."
So, far from it not being an option, it may be the best thing.
Unless you're more interested in preserving the unions as opposed to the companies that put bread on their tables.
Comments
The U.A.W. became a very strong union and is now a big business itself. It is also one of the big supporters of the "end to secret ballots for unions". They've sucked too much from the auto industry and it looks like only bankruptcy will cure the problem. I see the death of both businesses...U.A.W. and the Big Three. Competition is the union's worst enemy. The Big Three will die from not having the parasite treated soon enough.
Nobody is angrier than I that automobile makers did not build efficient cars & CONGRESS BACKED OFF MILEAGE REQUIREMENTS. Anyone who witnessed the oil crisis of the 1970s should have been aghast at the advent of gas guzzling SUVs in the early 1990s. I take umbrage at The Augusta Chronicle editorial staff (ACES) telling anyone what they must do. ACES has supported every Republican tax initiative that has helped bring down the U.S. economy. Now they try to blame the collapse of the U.S. automobile industry on the workers just like they tried to blame the collapse of the U.S. financial loan industry on borrowers & on Congressional efforts to mandate fairness in lending practices. The unions did not decide to build gas guzzlers. That decision was made by management. Do UAW workers actually make $73 an hour? I understand that hourly workers make around $28 an hour plus benefits. According to Felix Salmon: $73 "is a ridiculous number obtained by adding up GM's total labor, health, and pension costs, and then dividing by the total number of hours worked. In other words, it includes all the healthcare and retirement costs of retired workers." Universal healthcare would reduce these costs.
I agree with the AC. The Big 3 and the UAW have run themselves into the ground. Why should we pay for their mishandling of the industry? Just because they now claim to "have seen the light"? They knew what trends were coming for years but thought they knew best. Well, that proved to be wrong so how long do you keep inept workers even when they are management and union bosses especially when they do not perform for the good of the company?
As much as I would like to see the unions broken, bankruptcy for the big 3 has more far reaching effects. Outstanding payments to suppliers would be included, driving many of them out of business. Many are on the edge now because most all of the suppliers have cut their pricing as a result of take it or leave it negotiations with the big 3. It's hard to build cars and trucks without parts. Those who do happen to survive probably will implement a c.o.d. policy for parts shipments, further depleting the big 3's cash reserves. I guess they can buy what they need from China. There would be wholesale bankruptcies at the dealer level as incentive payments, warranty payments and a whole host of other reimbursements would vanish. Most dealers do not have the cash reserves to survive that kind of financial hit. Unfortunately, breaking the unions may well break the entire automotive industry at every level. Maybe building non-union plants in the South and closing the union plants in the north is the answer. It's a more long term solution, the union contracts may prevent it, but filing bankruptcy will have more far reaching effects on our economy than any of us can imagine.
You seem to be right Mr Cain. The average UAW worker makes $28 an hour plus benefits. The problem with the union contracts seem to the the so called "job bank" where workers who are laid off are paid 85% of their pay to do nothing. This prevents the big three from scaling back production to meet demand as they will have the burden of unproductive workers. As a result they continue to make cars and slash prices to keep the demand at the same level as production. It is killing them. I agree with you JimCox bankruptcy is not the best solution.
Factchkr, just how did the UAW mismanage the auto industry? Did they bring out dinosaurs and get paid billions in bonuses for it? Did they refuse to retool and receive bonuses for it? Did they decide they needed a fleet of jets, many of them like the ones for commercial passenger travel, to go on vacation with? I agree with you, we need to save our money just in case the bankers need some more for bonuses and other expenses. We need not worry about banks using the money improperly, we all know the only spend it on useful and needed programs, like partys travel and Bonuses. By the way was any stipulations given the banks on how they were to spend the, What is it now, 300 - 700 Billion? Oh well I'm sure they will come up with a good way to manage it. Now if only the uaw can come up with a program for the, what is it, oh yeah 35 billion, then maybe we can save a few million jobs. Oh and for those that didn't know TOYOTA has union plants in the USA and Mexico. Is't it amazing that Mexico Toyota unionized, I wonder why?
disssman - I never said that the banks deserved the bailout either. I think they should have given all taxpayers a big rebate like $100,000 each and with that money and then we could pay off our own mortgages or bills that would go to the financial institutions. It would help the taxpayer instead of just the businesses. When people pay down their debt they pay more in taxes without the deductions and have more money to spend on products. More products means more jobs. More income and sales taxes means there is a rise to replenish the initial rebates. Everyone wins.
And the unions have caused inflation year after year after year. The bigger the contracts the higher the operating costs. The more operating costs the higher the price of the product. The higher the price of the product the less number of people that can afford it. THe less people that can afford it the less product that is sold. THe less product sold means that less workers are needed.
Does the Chronicle ever stop lying? $73 an hour? Please. That's over $150,000 a year. How many idiots truly believe that assembly line workers are making that much? What the chronicle really wants with bankruptcy is to eliminate the "legacy costs", also known as pensions. Those workers worked for 30 years for their pensions. The Government is in financial trouble as well. Should we eliminate the pensions of state, federal, congressional, presidential, and military retirees as well?
It doesn't matter that wages, pensions and health care are figured into the UAW hourly wage. It is ALL a cost to the manufacturer that they can not sustain. Paying people that don't work is ludicrous and not found any where else. Toyota unionizing in Mexico has nothing to do with the UAW here who have been allowed by the inept CEOs to suck their profits and build cars folks either don't want or can't afford. A high school drop out wrench turner is not worth more than a PhD University professor. Ford built a modern plant in Brazil tha produces exellent cars and is NOT unionized. Hearing the testimony by the UAW this morning on C-SPAN concerning "negotiations" while begging for tax payer dollars just made me support allowing them to go bankrupt in order to do away with the union. That's what I recommended to my Congressmen. BTW Diss, I did not support the Wall Street bailiout without the strings needed which has not done anything to reinvigorate our economy.
THere have been companies in this country that have filed bankruptcy and survived.This has occurred with some of the major airlines.What we are talking about here is an entire industry.From the automakers themselves to the suppliers, dealerships, etc.If they do file bankruptcy, the taxpayers would still be on the hook for the pensions.With that and the loss of millions of jobs and the devastation to communities with suppliers and dealerships,it may well cost more in the long run to have to have them file bankrupcy than to bail them out, Would you buy a car from a company in bankruptcy knowing that they may go under?The US automakers do make some good cars even though management has made some bad business decisions.If Americans would buy American we might could have avoided this mess.Years ago before Sam Walton died,Walmart had many products made in America.There were signs over them and they were proud to offer them.That is now history. We are buying our country down the drain.There need to be restrictions but we have no choce other than to save this industry,if nothing else for national security.Do you trust Japan,Germany,Korea, or China to build our vehicles in time of major war?
They could have saved our economy. But they would have had to give that 700 Billion to the taxpayer. They weren't willing to do that because they(Politicians) would not have seen "their" part of it soon enough to suit them. Giving it to Businesses who will no doubt give it to them through lobbyists was the fastest way for them(politicians) to get their hands on it. And you and I will suffer higher taxes and higher costs for everything else to "Pay" the money back that the politicians loaned the busineses to "Save" them. Look for this to become a common practice.
Jack, in all your ravings you still really can't find fault with bankers being bailed out. By the way the cost for the union workers per hour is because the big-three didn't put miney in the bank for retirees (their choice) rather they elected to budget and pay it year by year. I guess that is the unions fault in your mind, but I think it was a way for top management to reap huge bonuses. BTW, TOYOTA has union shops here in the good old USA and HONDA to. I also think a PHD isn't worth a penny when your plumbing is broken, then you need a good H.S. Graduate. Man you are sure worried about unions, kinda looks like a little jelousy on your part. You are a real CONservative because you only hear that part of the story as related by the great RUSS, do yourself a favor and look at the wages those folks actuall take home.
"The Bush administration and Federal Reserve Chairman Alan Greenspan were sounding the alarm about the potential threat to the nation's financial health if the fortunes of the two mammoth companies (Fannie Mae/Freddie Mac) turned sour." Dec 7, 6:09 PM EST By PETE YOST Associated Press Writer
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