Monday, November 10, 2008

Detroit Auto Makers Need More Than a Bailout

Let's assume that the powers in Washington -- the Bush team now, the Obama team soon -- deem GM too big to let fail. If so, it's also too big to be entrusted to the same people who have led it to its current, perilous state, and who are too tied to the past to create a different future.

Giving GM a blank check -- which the company and the United Auto Workers union badly want, and which Washington will be tempted to grant -- would be an enormous mistake. The company would just burn through the money and come back for more. Even more jobs would be wiped out in the end.

The current economic crisis didn't cause the meltdown in Detroit. The car companies started losing billions of dollars several years ago when the economy was healthy and car sales stood at near-record levels. They complained that they were unfairly stuck with enormous "legacy costs," but those didn't just happen. For decades, the United Auto Workers union stoutly defended gold-plated medical benefits that virtually no one else had (reflected in the $73.20 average hourly compensation for UAW workers in the graph above, data here). UAW workers and retirees had no deductibles, copays or other facts of life in these United States.

~Detroit Auto Makers Need More Than a Bailout in today's WSJ

7 Comments:

At 11/10/2008 10:47 AM, Anonymous Anonymous said...

College is over price to go to college for four years or more. Only to find out after all that money from parents in the auto industry it was a waste of time. Because of no job. If it was not for the auto industry maybe you wouldn't write such negative articles. Goto AA Dr.

 
At 11/10/2008 6:02 PM, Blogger Bruce Hall said...

Labor costs are an important issue, but not the only one:

http://hallofrecord.blogspot.com/2008/11/aid-to-us-automobile-manufacturers.html

 
At 11/10/2008 6:41 PM, Anonymous Anonymous said...

bruce hall,

Interesting link. I liked this part:

"The automobile manufacturers in the U.S. were faced with a broken economy, a credit lockdown, and a government, led by Nancy Pelosi and Harry Ried's efforts, intent on manipulating the marketplace by restricting the supply of domestic energy resources while forcing adoption of technology that either did not exist or was lacking a supporting infrastructure or was too expensive for consumers to buy... by 2015."

As I recall, Michigan, led by the unions, has voted for Democrats in the last 3 or 4 elections. I guess elections do have consequences.

 
At 11/11/2008 6:16 AM, Blogger 1 said...

Yes, Detroit auto makers need more than a bailout...

How about eliminating the federal government interference by the dumping of those inane CAFE standards for instance?

Its the essense of bruce hall's link to Aid To U.S. Automobile Manufacturers...

#3 is a beautiful thing: "a reduction of government mandates and interference in the automotive marketplace"...

 
At 11/12/2008 9:29 AM, Blogger MikeJ said...

This comment has been removed by the author.

 
At 11/12/2008 9:32 AM, Blogger MikeJ said...

The domestic auto industry as skirted disaster for years by giving out risky loans to spur demand. GMAC next to become a bank?

The future for the consumer is frugality. He will not be returning anytime soon and neither will the free flow of credit. Giving them cash is a waste, they will be back under the table in months begging for more scraps as the demand is not there.

 
At 11/13/2008 12:04 AM, Anonymous Anonymous said...

I guess the real truth is that no matter how the money is being squandered, or how the government is manipulating every aspect of the business, that car company is how we feed out family right now. It is so easy to blame the faceless masses of government, management, and unions. The reality is if (or when) all of these jobs start disappearing this country will have to face a consequence that it has avoided for years. The consequence that comes from irresponsibility and greed- poverty.

 

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