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No Bailout for Car Companies

Let the unions give back

Obama is talking about a massive government bailout of $50 billion for the Big 3 carmakers – General Motors, Ford and Chrysler. The question is: Why? If these companies have failed to compete in the American market, why should the taxpayer bail them out?

Why should a hard-working carpenter in Florida making $60,000 a year pay taxes to bail out an assembly-line worker in Michigan making $125,000-a-year (average union salary) while that Michigan worker already has enjoyed a much better wage than most Americans over the last 50 years?

According to Forbes magazine, the average salary/benefit package for hourly workers at the Big 3 are: Ford, $70.51 per hour; GM, $73.26 per hour; Chrysler, $75.86 per hour. The average salary/benefit package per hour at non-union Toyota, Honda and Nissan, $48 per hour.

And who is going to the government for a bailout?

This bailout is simply a taxpayer subsidy for another Democrat activist group, this time the unions.

Imagine you wanted to start a company and you were going to pay people the prevailing wage in your region of $30 an hour. And then imagine the unions come along and say you have to pay $70 an hour. Where will that extra money come from?

If you can even stay in business, it comes right out of the pocket of the consumer. The consumer pays all wages, including artificially higher prices to account for artificially high union wages. So next time your liberal friend tells you how wonderful it is for unions to give their workers high wages, ask him if he knows where those wages come from.

Assembly-line jobs in the auto industry are practically unskilled labor. That was the theory behind Henry Ford’s assembly line – to break down the manufacture of an automobile from one-car-at-a-time production by skilled craftsmen to assembly line production by unskilled workers each doing a simple job (bolting in an engine, installing a dashboard etc.).

$70 an hour for unskilled labor? No wonder the Big 3 are going out of business. And what do the Democrats, liberal activists and media say over and over? They say: “Look at how much money the CEOs make!”

So what happens when a company is unionized?

The ‘employer’ or the ‘business owner’ actually becomes ‘the employee’ while ‘the workers’ (the union) become the employer. The union runs the company and the owner/managers become bystanders. And when the unions then run the company into the ground with exorbitant wage demands, they then blame the “greedy owner”… or George Bush.

Why can’t the auto unions give back some of the hundreds of billions of extra dollars that they have absorbed in their salaries, benefits and pension plans over the last 20 years? That is where the car companies should get their bailout. Yet most public discourse never mentions the unions. Here’s a typical example from Republican US senator Charles Grassley of Iowa: The Big 3 “should take every step possible, including cutting executive salaries and bonuses, and exhaust all alternatives before coming to the taxpayers for tens of billions of dollars in help.”

Note to Grassley: Management compensation is not the big cost of running a business. Labor cost is. There are always many more workers than managers.

General Motors is prospering all over the globe. But here the liberals in the United States have undermined the automotive industry from two sides – through government mandates on the types of cars they must build (the government runs the car companies) to fat union contracts that slowly have been killing the goose that lays the golden eggs (the unions run the car companies).

Here are some facts about The Big 3:

General Motors is not the backbone of American industry that mythology has suggested. The *Fortune magazine Global 500 list for 2008 listed GM with 266,000 employees. The same list showed Wal-Mart with 2.05 million employees. (Fortune reports, by the way, about Wal-Mart: “Long derided for the limited health-care packages offered to its employees, the company focused on expanding its options. As of January, 93.7% of Wal-Mart’s U.S. employees had some form of health care, up from 90.4% last year.”

GM, says *Fortune, is having great success overseas, being the first company to sell 1 million cars in China, and seeing sales in India rise 74%. These countries do not have all the outrageous union rules and demands that are killing GM here.

*Union work rules require that the Big 3 pay 90% of a worker’s salary when that worker is laid off;

*Organized labor in the auto industry has been given the best possible benefit and pension plans.

The Big 3 make only half of all the cars sold in the US. The other half of today’s ‘domestic’ production includes non-union companies like Toyota, Honda, Kia, Nissan, Hyundai and BMW that employ American workers at excellent *and sustainable wage rates; pay local, state and federal taxes; support other American businesses as subcontractors; give to charities etc. And these companies are making quality cars that people want, and are not seeking bailouts.

*If the Big 3 failed, these other companies – and other American workers – would pick up the slack. And by letting the Big 3 fail, GM, Ford and Chrysler would be gone, rather than becoming a permanent ward of the taxpayer. Unless the unions give in significantly on wages – which they rarely do.

*The cost of just union health-care plans for workers and retirees combined adds $1,500 to the cost of every GM, Chrysler and Ford vehicle.

*By necessity, the Big 3 have been making and selling big, expensive, fuel-inefficient SUVs in order to make the high profit to pay their exorbitant union wage rates.

*General Motors is the biggest single purchaser of Viagra in America because the unions not only have demanded full worker and retiree health coverage, but coverage for less-critical conditions like impotence. Management must share the blame for signing these give-away contracts. They too will lose their jobs if the Big 3 shut down.

*In another industry – steel – 12 firms in 2001 accounted for 75% of hot-rolled US steel production. In 2007, three companies made 80%. So efficiency and consolidation can work if it is allowed to take its natural course.

*And just an added thought about enviro demands that the auto industry build fuel-efficient cars: Those cars have been available every day since the end of World War II. They have been called Volkswagen, Corolla, Chevette, Pinto, Neon, Civic, Accent and the rest. They are small, lightweight cars. They have sold in the millions every year. But the reason that more people have not been buying them is that anyone who can afford it wants a more substantial car. So why haven’t all the liberals and environmentalist been buying many tens of millions of these econo-box cars in support of fuel efficiency?

Answer: Because the elites in the enviro movement and Democrat party want some magical 100 miles per gallon SUV, which will never happen. It is primarily the weight that determines fuel mileage. So if you really believe in fuel efficiency, go buy a tiny car. You’ll get the efficiency that you say you want.

Here’s more on the effect of unions:

Go to the town of Pittsfield, Massachusetts, today a city of 45,000 in semi-rural Berkshire County at the very western end of the state, far from Boston. In the 1950s, Pittsfield had 55,000 people and General Electric in Pittsfield employed 14,000 people from all over the county.

General Electric is gone now. Because even in the 1950s and 1960s, when every worker in America had everything they could possibly want, the unions wanted more and more. The unions were endlessly belligerent. Where there’s money, there’s a confrontational union. There were 10 major strikes against GE in Pittsfield over a period of 30 years. In the 1950s and 1960s, there were wildcat strikes and walkouts all the time. The unions “fought management every day”, said an older resident who lived through that period.

In the 1960s, there was a guy in Pittsfield at the GE Plastics division named Jack Welch. He rose to become CEO of GE. He and the other managers in Pittsfield said over and over in the 1960s and 1970s that GE would close Pittsfield rather than put up with all these union actions. Welch finally shut it down in 1988. Pittsfield is now a dying city full of boarded up storefronts and decaying neighborhoods.

Naturally most of the GE retirees in Pittsfield are Democrats. They think the Democrat union did a great thing for them, which it did. They are very comfortable in their retirements. But ensuing generations might have a different opinion, that General Electric is gone now because of the unions. Now the poor people around Pittsfield with no jobs and no hope also are looking to the Democrats – this time to give them government handouts in order to survive.

In next-door Dalton, Massachusetts is Crane & Co., a maker of fine papers, and maker of the paper for all US currency. Crane was founded in 1801 by Zenas Crane. It is non-union, and Dalton is a proper, clean, beautiful, optimistic and prosperous town with neat New England neighborhoods. Crane is thriving and nobody is worried that Crane will shut down. No outside agitators are coming in from St. Louis and Philadelphia to rouse up the workers and to threaten Crane management. No organized crime figures have orchestrated any strikes at Crane as they did at GE in Pittsfield. Crane workers are well paid and well taken care of, and they know it. They voted against unionization in 2003.

Crane will be around for hundreds more years because non-union wages set by the market are sustainable over the long-term and they actually strengthen companies and workers. Meanwhile unions may give workers wages that are artificially inflated, but in the long run, those wages are unsustainable.

Everyone knows that unions destroy jobs and wealth. Look at the most devastated cities in America today, union strongholds that were once very wealthy – Flint, Michigan (where the auto workers’ union was born) Detroit, Cleveland, Buffalo, Toledo, all the other unionized manufacturing centers in the Upper Midwest and the Northeast. Certainly some of the decay was a natural shift away from the industries that existed. But much of it was simple union greed that drove companies out or destroyed them. Autos, steel, railroads – the unions practically killed each industry single-handedly.

This is what the unions are doing today to the auto industry. We should not bail them out. Let Toyota, Nissan and Honda make our cars in their thriving, non-union factories in the South, intentionally located there in order to be far from the radicals in the labor unions.

Please visit my website at www.nikitas3.com for more.

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