Two union tales

People wonder why it is that Detroit is in trouble. I had a friend send me a link to a detnews.com story on a Brazilian Ford assembly plant. Watch that video here. When you finish with that, check out this story by WDIV in Detroit. I've posted this in my blog before, but when you view the two back to back, it brings things into clearer focus.
This is the best illustration of why I think we should not be bailing out the Big Three. Quite simply, as long as the UAW has a stranglehold over the Detroit Automakers, the only way to make them competitive is with protectionist tarriffs, which history shows have never, ever, worked.

My Bipartisan Moment

It's the coldest November that I can remember in quite awhile here in Northwest Ohio. Today I think I found out why. It would seem that Hell has frozen over. How do I know? I know because today, November 20, 2008, I agreed with something Nancy Pelosi said. It's just unthinkable!!

Today, Nancy Pelosi said that before they receive any bailout money, the Big 3 need to show a plan of how they're going to navigate their way out of this mess. I saw that on t.v. and actually found myself saying "Damn right, Nancy!" After watching how the banking bailout went, I'm glad to see that maybe the government is giving some thought to how things are going to work before they go pouring money down a hole.

Wednesday, the execs of the Big Three showed up in Washington to make their case for being bailed out-- via private jets. Apparently they went to the same school of being bailed out as the execs of AIG. I'm sure that they get the gravity of the situation, but it would be a much better appearance if we saw some effort like flying commercial rather than taking their private jets. To me it would show that they're willing to move toward getting rid of the old habits that got them into this mess.

Dont' get me wrong. I still think the Big 3 should not get a bailout. I think the best thing for them is to go for bankruptcy protection and reorganize so that they can come out stronger.

Unfortunately, it seems that this bailout is going to happen one way or another. So, before I see the government thowing my money down the hole that is the Big 3 automakers, I'd like to see a few things...

1) This is a loan. It is only a loan and it will be paid back. With interest. The government will be the lender and will not be a shareholder in any of the companies.

2) Bonuses, golden parachutes, and huge salaries are out the window. If you're steering the ship when it runs aground, you don't get a big bonus for your performance.

3) The execs show their plan to get out of this, including how they're going to sell off foreign properties, and work the assets (such as selling off unnecessary things like private jets) that they have to raise some of their own bailout funds, as well as what changes they're going to make in their lines to be more competitive.

4) When the Big 3 execs come back to Washington in December to make their case, they fly commercial and Ron Gettelfinger comes with them. He gets to testify about the UAW's role in this mess and tell what concessions they are going to make to help turn this around. If he thinks that the UAW doesn't have a part in this and doesn't need to be a part of the changes, he first needs to read my earlier blog about the cost of labor for the Big 3 and look the investigative piece that WDIV in Detroit did on how two of the UAW leaders are ripping off the companies for thousands of hours of overtime. You can check it out here.

Given that the Democrats owe so much to the unions, I'm sure that they'll never make that demand. I'm also sure that they won't allow the bankruptcy that so needs to happen. Quite simply, if they do, the UAW will lose a large chunk of the Working Man's Golden Parachute that is their deal with the Big 3.

So, while it probably won't happen yet this year, this bailout will probably happen, and it won't happen with concessions from the UAW. Which means that the companies will not be able achieve a competitive hourly cost, which will doom this bailout to eventual failure.

Working man's golden parachute

The management of the Big 3 Automakers will be in Washington today with their hands out looking for their bailout. I hear calls for the CEOs to take a hit in all of this and I can't agree more. The people who were driving the boat when it sank don't deserve bonuses, etc., but the government can't be blindly handing out money to everyone who has decided that they're too big to fail. Especially in this case, because it appears that one of the major root problems behind this is not going to be addressed. Namely, the Working Man's Golden Parachute that is the UAW contract.

Ron Gettelfinger says that the UAW membership will not make any more concessions in this try for a bailout. Yet, according to Ford's annual report it has paid at an average $70.51 an hour in wages, pension, and health care costs for hourly workers last year. General Motors' annual reports show that its labor costs average reaches $73.26 an hour while Chrysler Group reaches an average labor cost of $73.86. Contrast that with the $43 per hour that Honda, Toyota and Nissan are reportedly paying and you see what I mean.

Don't get me wrong, there are a number of things in this to list as causes. Mismanagement by the company execs, sure. So, they should be giving up the giant salaries, big bonuses and golden parachutes. Certainly, the fact that the Big 3 have continued to make huge, gas-guzzling cars despite the constantly rising fuel prices. I understand that there are market forces to be considered here. I understand the need to make the SUV's that the people want to buy, but much of this fuel situation was visible on the horizon. They should have at least been planning, so I think some direction for them as to more fuel-efficient cars is in order if they're going to use my money.

The problem is that even if the Big 3 implement lower salaries for CEO's and start making more fuel efficient cars, the root problem that their labor cost is nearly twice that of their competitors, they're still not going to be competitive and we'll just be throwing our money down a hole.