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Friday, December 12, 2008
Auto bailout bound to be a train wreck
The Atlanta Journal-Constitution
When it came down to the final U.S. Senate vote Thursday night, the essence of truth was revealed.
While the United Auto Workers have pledged to grant concessions to help save their jobs and the companies they helped destroy, they balked at taking wage cuts next year that would bring the Detroit industry’s wages in line with those of Japanese carmakers. General Motors, facing bankruptcy, reports hourly labor costs of $69, including benefits, while Toyota’s are about $48. Of that, the average hourly UAW worker earns $29.78, in line with Toyota’s roughly $30. Benefits for active and 432,000 retirees and spouses account for the labor-cost gap.
The UAW refused, however, to make the concessions by a specific date next year. Its contract doesn’t expire until 2011.
With the union unwilling to budge, the $14 billion emergency bailout failed. UAW President Ron Gettelfinger blamed — though I would say credited — the defeat of the bailout on Southern senators who are, to his mind, anti-union and anti-Detroit. “They thought perhaps they could have a twofer here maybe,” said Gettelfinger on Friday: “Pierce the heart of organized labor while representing the foreign brands.”
But no worry that the bailout bill failed. The Bush administration will divert money from the $700 billion financial industry bailout fund, which has about $15 billion remaining, until Congress reconvenes “and acts to address the long-term viability of the industry,” said U.S. Treasury spokesman Brookly McLaughlin.
The temporary loan to come should be straight up, without the “car czar” or any other element of the House-passed bailout legislation.
The fact is that Democrats will control Congress next year and any UAW pledge to make concessions is subject to revision, as are the sums of the bailout, the authority of the car czar, or the terms of the merger between politicians using public money and the industry.
Inevitably, the politicians who launched the subprime mortgage disaster by encouraging lower lending standards will dictate the failure of the Detroit auto industry as a free-market competitor to what Gettelfinger derisively calls “the foreign brands.”
The left has long despised the U.S. auto industry because it made cars and trucks that sold, including Hummers and SUVs, instead of the tiny, fuel-sipping car-ettes that it wanted to push on America. The political party where leftists congregate now has full power to write laws and spend public money in ways that will dictate to Detroit not only what vehicles it should build, but what conditions should apply, in terms of other countries’ environmental, wage and labor rules, to the imported parts used to build them. When the cars that politicians prefer don’t sell, they’ll be able to offer tax credits, thus forcing taxpayers to subsidize at the point of purchase the cars they were just forced to subsidize in building.
Politicians will be able to dictate, too, the wages to be paid to union workers here, and they will furthermore be able to use government to drive up the costs of cars made by Detroit’s competitors.
The better alternative is bankruptcy, a clean bankruptcy that forces the industry and its union to confront realistically its uncompetitive operating costs. The Bush White House thinks “a precipitous collapse of this industry would have severe impact on the economy and it would be irresponsible to further weaken and destabilize our economy.”
With bankruptcy, the industry would restructure quickly and regain competitiveness, smaller and with fewer brands.
Except with massive sums of public money, Washington can’t keep private companies in business. Once their executives and unions are no longer desperately in fear of the free market, they’ll be content to turn decision-making over to car czars or any other agents of the poltical ruling class in return for public money. Their mind-set will be: We’ll build or accede to anything politicians are willing to pay for. And if they don’t, the bankruptcy that awaits them now will occur.
The “foreign brands” the UAW finds objectionable are cars and trucks built by non-unionized American workers in the South.
If, however, American buyers are getting vehicles they want that are built in American factories, it ultimately matters little what the ownership structure is.
I’d much prefer Japanese ownership of factories that build cars to compete in a free market rather than have U.S.-owned car companies run from Washington. Once a car czar, always a car czar
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