Big Three Auto bailout

NYT: Bailout to Nowhere

As I've noted, my family is heavily into GM's retirement system.

But yet another bailout loan wont solve the perenial problem which all three face: Too many on the retirement books, putting the domestics at a disadvantage against the imports and foreign based builders.

The problem originated MOSTLY from GM using benefits to attract white collar and skilled trades workers post-WWII. Then the unions got into it and now the Big Three hemorrhage non-productive capital.

It would have been nice if someone had used their heads in the seventies and separated pension/health from each corporation, somehow.... now the only solution is quasi-socialist.

EVERY new car sold, foreign or domestic, could have a 10% surcharge levied at the time the title is registered to a new buyer. The state would take 5% of that for handling fees.
For used cars a sliding scale, starting at 5% for a last years model; out to 5 years old.

Then all benefits for ALL automakers with US employees would be covered and the same.

Yeah... there's problems with who would administer it, but it would at least put the domestics on an even playing field.

As usual, though, the 'elected oafs' complain about the wrong thing.. last years news.. and berate the automakers for not seeing 'Green".

well they have. All have closed large vehicle assy plants and have green cars in the pipeline to match anything the Japanese have.

 

And we look to the Old World, and see glimpses of our future. Seems almost inevitable.

Question, is it necessarily "bad" (certainly does not seem evil) to become a bit more socialist, or as petty says, "quasi-socialist"? Is that like "kind of pregnant"??

As long as you have a government that collects taxes and in turn pays for things, are you ever truly free from socialism? Aren't we just arguing degrees when it comes down to it?

 

It's the skyrocketing healthcare costs. Read this from CNNMoney

all those retirees are getting coronary procedures and hip/knee replacements - these things are not cheap and often not readily available in other countries.

Mandatory healthcare for all is coming in 2009.

 

Socialism is fundamentally a flawed form of governing. No nation, in the history of this world, has ever taxed it's way to prosperity. Socialism, at it's core, thwarts innovation, dampens expression, creates a nation of dependence & entitlement (this is the fundamental flaw that is killing our auto industry which is the unions are small socialist structures in our manufacturing industry), and throttles the oxygen of entrepreneurialism. The Old World is not to be admired in this respect. Government is not the solution it is the problem. I am afraid we will be moving more in this direction and it's only achievement will be continued dependence on Uncle Sam to save our assess from ourselves. yikes.

 

I thought other industries would come to Uncle Sam with their hand out. Why not the auto industry? Who's next, the tobacco industry? The tech industry companies that go face down in the mud? Any other entepreneur that fell on his posterior? Why not? Where does it end? How much will my taxes go up once everyone gets theirs? Geez.

 

Follow the politics. Were this the oil industry, the leadership wouldn't give a hang and in point of fact would probably implement policies to hasten and ensure the companies' failure.

But the Big 3 are as tight with the UAW as the Old Firm are to each other. They may look like adversaries to many, but like Celtic and Rangers they will always protect each other because their interests are one in the same.

The Democrats are determined to protect and enhance the strength of Labor. You're not going to do that if the Big 3 declare bankruptcy and shed the jobs that are the backbone of Big Labor.

Personally, I think this would be a bad mistake. These companies have a poor business model and need to restructure in a normal way a failed business would reconstitute itself under our economic system. If you give them a place at the trough, then you are merely allowing them to proceed as if there wasn't a thing wrong with their approach in the market.

The Democrats will make certain this gets passed after 01/20/09. They'll try to get Bush 43 to sign it so they can palm the blame off on him should the scheme fail. But if they go down that road, they'll have to keep throwing money at it in a fashion that would make the money spent on Amtrak look like change I spent buying a pack of baseball cards as a kid back in '78. It will end up dwarfing the money spent bailing out the financial industry. We'll be revisiting this around the end of the fiscal year every year as surely as we look at the budgets of Defense, Treasury, and State.

Our economy is a mix of capitalism and socialism. That mix will change as necessity demands (FDR in the 30s & Reagan in the 80s). But a good socialist wouldn't sit there and throw good money after a bad business model without demanding several reforms from the companies being funded. I'm not seeing that with this proposed bailout. What I am seeing are the usual suspects handing out the pork with no questions asked as if these were little more than the typical earmark tacked on to a Defense budget bill.

When we bailed out Chrysler in the 1980s, our folks in Washington made certain Iacocca was going to put the money to good use. When we bailed out Mexico in the 1990s, our Government received assurances from Mexico that reforms would be implemented to prevent a repeat performance. The problem I've had with all of these bailouts is that no one in a position of leadership has done a thing to attach strings to the largesse being granted to these private businesses.

 

Well stated HDL!

 

I know you are not trying to simplify this into a national healthcare issue Don. Are you? I read somewhere that the 'fully burdened' per hour cost of a US autoworker is somewhere around $75/hour where are closest competitors in the world are at $48. This not just some issue with healthcare, this is a Union strangle hold on our labor force and management issues at the companies themselves. No doubt healthcare is a piece of the pie, but no mongering going on here. I and others see this as moving farther to the left and becoming more socialist. This IS a far worse scenario for the US over the long haul than anything that is going on right now.

Nice post HDL!

 

Which definition of socialized medicine are we talking about?

 

I think we are talking about a govt backed pension/healthcare plan.

The NYT makes apologies for the retiree program here.

They place the retirement burden at $15/hour for the full wage burden.
That would be about $180 per car produced.

I think that's low and there are hidden costs elsewhere but it's still significant.

Especially added to the fact there are too many dealers per line and the lag in perceived quality for US v foreign owned makes.

I can say this... if anyone thinks Chap 11 is the way to go, they are idiots. It is NOT the same as steel or airlines. No matter how far you stick your head in the sand. That's assuming someone's already pounded sand up your backside portal.

Here's the problem with that, AGAIN:

For the companies to survive they actually have to sell their products. No one is going to buy a car with a warranty that may or may not be valid.

Even if the government would, for some reason, guarantee the warrantees it wont work.

Their product quality IS now high enough. They have lines that match what both the public and green weinies want. Their prices are competitive.

But without a warranty....

 

"Car Czar".........

Sounds snappy. Better than "Drug Czar" anywho, and I imagine it will be more successful.

 

I dont know what to think about this one. On one hand you have to worry about just how bad the economy will get if the big 3 go under. It's not just the auto workers; so many other contractors, suppliers, and service businesses will fill the impact. Despite what the article Petty posted said, somebody is and has been buying their cars over the years so there is a market. Then there is the healthcare costs mentioned above - a big part of the diff. between the cost is probably due to the number of retired workers but I dont know how that works out per hour if you compare American workers for Detroit vs American workers for Japanese models. Nevertheless, I believe the cost of healthcare is the single largest expense per car for the big 3.

But then you have to wonder if a bailout will allow the big 3 to benefit from a bad economy when they've been screwing up and close to the edge for a long time. Wasnt Chrysler bailed out once before? Didnt they all lobby against stricter CAFE standards for years so that they could keep making their now unwanted gas guzzlers. Plenty of major companies, like GE, have been open shops for decades and people are still delighted to work at their plants; not to mention the fact that GE is very competitive globally. If we do bailout the big 3, they damn well better become open shops.

Oh and please dont presume from my comments above that I'm for socialized medicine. I'm completely against that and I dont think Obama will do that. I do think that he and Congress will pass a single payer mandatory-healthcare-for-all bill. This will also be a mess but our current system is a mess now so I will probably welcome it, even though it could likely mean my job in a few years. We spend way too much on our healthcare due to the cost of drugs, the number of tests/examines that our litigation weary doctors and hospitals order, and something that I would catagorize as being medically spoiled and irresponsible.

 

Think so? If the 'car czar' is watching over things, then you'll buy a Chebby?

Maybe just to reduce your taxes...

I say again... all us carmakers compete favorably with the foreign owned brands as far as reliability. Unfortunately QUALITY is subjective. That's why people still buy new Audis and Nissans... long as they dont have to own them when they are 10 years old.

Mo... good points. What some people dont understand is that the initial foofraw over how great HMOs were will just be replayed in a guvmint run HCS.. single payer or not.

If people hate arbitrary treatment decisions by HMO drones, what makes them think that will change under GHC?

 

I say blow them up! Work a deal with the largest 5 Japanese car-makers to buy them at a discount, they receive the assets, such as the factories and employees, then as part of the deal they re-establish relationships with the suppliers who supply Detroit now with new contracts with these companies. Let the Unions fight their way back in by being reasonable or lose these strongholds forever. The Japanese have proven they can make cars in America at a competitive price and at a high quality level.

This will never happen and would be a little complicated but it would change things forever. It would force our workers to compete, rather than entitle. Then in the ruins of the now US Auto industry we might see new companies emerge with better ideas, better business models and hopefully a more globally integrated and competitive industry.

 

Screw'm... they can go into bankruptcy like everybody else. The UAW is abomination, by the way, and is half the reason (if not more) the American auto industry is about to collapse.

Obama, from what I've read, is going to arange a 'special' bankruptcy deal for them... which will be better than a bailout and hopefully jump start a reformation in the American auto industry. Hope that's what happens anyway.

 

Well, the Senate Republicans killed that version.

A pretty good 'Reason' piece on it:

Well, IIRC, there ARE now three wage tiers in the Auto labor pool and only those guys with more than 20 years in making those ridiculous high wages.

As I said in the first post, though, the key is to somehow relieve the 3 of the retiree burden.

But it is too political as it now stands. I bet if Congress rushed through a TURNDOWN of 'CardCheck' the Republicans would give in.

And that is just wrong. Card Check is WRONG on its own merits.

 

Sure, why not? After the financial bailout, the safe vote (especially for rep candidates) was against any other bailouts. Add to that the fact that this bill was bankruptcy light with the only primary difference between a bankruptcy judge and the car czar being the latter's inability to touch the union contracts, and you have a non-starter for rep candidates not based in MI. It's not like rep's were losing votes by pissing off the UAW; you have to have something in order to lose it. More important though, kowtowing to the UAW would have cost them votes from their constituents.