Predictably, the president of the United Auto Workers union threatened a “run on the banks” last week, only hours after refusing to accept GOP lawmakers’ reasonable conditions in exchange for a $14 billion auto industry bailout. He made his comment after President Bush and the Treasury Department promised to run around the legislative process to get the money the UAW wanted.
“It’s important for the White House to exert their influence to release this money as quickly as possible. We cannot afford a run on the banks,” said UAW President Ron Gettelfinger, who might as well have been wearing a mask and pointing a pistol.
Let’s be clear, the GOP Senators didn’t dismiss a bailout. They didn’t say “No.” They merely wanted some ground rules.
Senate Republicans asked only that the UAW agree to cut workers wages to the same level paid by foreign manufacturers operating in the U.S. and that it set a deadline for doing so. That was all.
Gettelfinger refused to a set a deadline that was, in fact, his to set. His shenanigan was designed to make it look like the wage cut wasn’t the problem. Clearly, it was.
How much of a wage reduction were the GOP lawmakers requesting?
According to the Dec. 12 edition of the New York Times, most long-time union members’ “hourly pay and compensation is about $55 an hour. The figure ranges above $70 an hour when the automakers’ costs for health care for retired workers and retirement benefits is factored in.
By contrast, workers in plants run by foreign companies in the United States earn about $45 an hour, and the nonunion companies do not have the hefty burdens for future ‘legacy costs’ that are faced by the Detroit companies.”
The solution to the woes of the American auto industry is obvious: File for bankruptcy. The restructuring required for bankruptcy protection would allow the Big Three to shed the union contracts that are killing them. There is absolutely no way that the American auto industry can survive with the succubus of the UAW draining the last drop of life out of it.
Allowing the Big Three to, in essence, die—as I wrote here to the great consternation of some readers—through bankruptcy and be reborn as the unshackled, innovative juggernaut it once was, is the answer to this problem. The industry shouldn’t get a bailout.
There is another way, one that would protect the one million or so people employed by the auto industry from losing their homes and medical benefits: Expand their unemployment benefits. Yes, it would require taxpayer dollars on a large scale, but it would be money much better spent.
Some will, no doubt, warn that the ripple effect of bankruptcy will impact the suppliers—and the suppliers themselves have started agitating for a piece of the bailout, or a bailout of their own, already—but we’ve got to stop propping up an industry that in its present form is nothing more than the host for a union that refuses to accept reality, refuses to acknowledge that it has been a tremendous obstacle for the success of American manufacturing in the global market, and refuses to even take a $10 per hour pay cut to save a million jobs. Clearly, the union is looking out for the union, not for the workers, and not for our country.
Refusing the bailout and expanding unemployment benefits is not my own idea. As Nicholas von Hoffman at The Nation—the self-described “flagship of the left” no less—wrote so presciently on Nov. 18, those workers will find other jobs—they will; our economy sheds jobs all the time and then gives them back in other areas later, it’s a fact of how our system works—but the auto industry in its present form will not recover. A bailout is taxpayer money thrown away.
In a column titled “Why We Shouldn’t Save GM” von Hoffman writes, “Unemployment compensation should be expanded to ensure those losing their jobs will not lose their houses or their health insurance. Helping people on that scale will not be cheap, but helping them by propping up corporate losers is infinitely more costly: sooner or later people will find other employment, but the automobile companies will never turn a profit.
They have been steadily losing money for a generation. Their predicament has nothing to do with today's credit crunch or the stock market crash. It has to do with their being incorrigible foul-ups.
Their record for money-losing is beyond comprehension. David Yermack, professor of finance at New York University's Stern School of Business, has calculated how much capital the car companies have destroyed over the last few decades.
He writes, ‘General Motors and Ford...between them...destroyed $110 billion in capital between 1980 and 1990.... GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade--a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998. As a society, we have very little to show for this $465 billion.’
Having eaten its way through almost a half-trillion dollars, the American car industry will gulp down the $25 billion now proposed to save it faster than most of us can swallow. The Democratic leaders in Congress think they can prevent that and force a turnaround by attaching some kind of government oversight board to the financial aid. Such a board might make sure that executives do not draw down indefensibly high salaries, but any such arrangement will make it doubly certain the companies will not find their way back to prosperity.”
To read more of von Hoffman’s brilliant column, visit http://www.thenation.com/doc/20081201/howl2