Detroit Auto Makers Need More Than a Bailout
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