Democrats try to play Auto Industry as Innocent
Automakers ready more detailed loan request
Lawmakers have said they must address new models, executive pay
From Pelosi & Reid:
“In return for their additional burden, taxpayers also deserve to see top automobile executives making significant sacrifices and major changes to their way of doing business,”
“The image that they project is very important. It’s important that they show at every level they understand how serious this is and that they’re willing to make sacrifices as well,” Debbie Stabenow D-Mich said.
Automakers need to “rhetorically indicate the willingness to take whatever additional steps are necessary to protect their companies,” said Sen. Carl Levin, D-Mich. “These are good people who are running these companies. They have a sense of fiduciary duty.
“Everything was in place, everything was on track, everything was looking very promising,” Bragman said, “and then, through no fault of their own, quite frankly, the economy went south and nobody bought anything.”
This is getting ridiculous. This isn't about image. This isn't about "rhetorical" commitments to do better. Good people or not, everything was not fine with the "Big 3" (General Motors, Ford, and Chrysler) and then through outside circumstances and no fault of their own they get screwed... Wishful thinking in the extreme, but No... I don't think so.
These companies have resisted changing the way they operate for years to make themselves more efficient and global competitors. They were big enough they could, they rested on their laurels from years past and let the passage of time catch up to them. They allowed themselves to be strangled by bad contracts with the United Auto Workers union, and now they're paying the price - and it's a price we should let them pay.
It's always a poor idea when the government gets into the business of bailing out individual companies. It's not good for the markets. It wasn't a great thing that the government bailed out the banks earlier this year, though it may have been necessary. You just don't want the government getting involved in the life or death of individual companies, it sends mixed messages to the markets which results in confusion and uncertainty.
Companies only deserve to survive if they can be profitable. In order to do that they have to have their house in order, create something of value that people want to buy, and run efficiently. If they can't do that, then their failure is no one's fault but their own. It's up to a company to run efficiently enough in good times that they can weather the storm during economic downturns - the business cycle is just that, cyclical. One thing you can be sure of is if things are down, they'll get better, if they're good, they'll get worse again. So you need to plan for that, and plan to be able to go through an economic contraction. The "Big 3" Auto makers didn't do that. They negotiated contracts with the UAW that were untenable through bad times. And the greedy Union keeps shouting "NO GIVEBACKS!" while the companies that pay their workers livelihoods go under.
Well, that's a lesson they should learn the hard way. Taxpayer money shouldn't be going to this, we'd just be throwing good money after bad, and getting nothing in return.
Let's look at some of the things that have gone on... clearly it's not that people don't want cars anymore. Demand for automobiles of varying types is still high. People need to get places, and despite higher gas prices earlier this year, they still prefer getting their in their private vehicles to using public transportation. In fact we know it's not just the industry itself collapsing, because the Foreign Auto companies that work here in the U.S. are prospering, even during this economic contraction. Consumer Reports ranked the top 10 cars produced all to be Japanese made cars. While the American car companies focused on gas guzzling SUVs, they failed to develop fuel efficient cars like many of the foreign car companies did, and when gas prices spiked, sales fell (and they have no one but themselves to blame for being insufficiently diversified). In fact, over the last 15 years, while the "Big 3" have lost more than 83,000 jobs in the Michigan area, the Auto Industry itself has CREATED over 91,000 American jobs mostly by Asian companies employing in the South - mostly because a lot of those Southern States are Right to Work states, where Unions don't have as much pull.
Which brings us to the biggest problem - the United Auto Workers Union.
The UAW is like a pair of concrete shoes on these companies while they try and swim in the global market, dragging them down, and ultimately going to drag them under where they can't survive. The "Big 3" have been paying wages close to $10-$20 an HOUR more than their foreign competitors, because the UAW has forced through non-competitive contracts that are choking them to death. In some cases there were reports of the "Big 3" paying Union members, almost 12,000 in total, their full salary and benefits for doing crossword puzzles and sitting in front of a T.V., while their foreign counterparts actually had their labor, you know, making cars. On top of it, the companies are forced to provide Health Care benefits to these Union members, and pay out large pensions to retirees. Estimates are about an extra $1,500 per "Big 3" car tacked on to the price just to be able to pay out these pensions, putting them at a competitive disadvantage to the foreign manufacturers right off the bat.
Let's look at some startling numbers:
"GM’s projected average labour costs for 2008: $69 per hour
Toyota’s projected average labour costs for 2008: $48 per hour
Toyota’s labour cost advantage: 43.8%
Average hours of labour needed to produce a Toyota automobile in 2007: 30
Average hours needed to produce a Chrysler automobile: 30
Estimated pre-tax, per-automobile profit earned by Toyota: $922
Estimated profit earned by Chrysler: -$412
Average rating, out of 100, Consumer Reports awards the Chrysler, GM and Ford products manufactured: 58
Average rating for the Toyota and Honda products manufactured: 77
What's this showing you? I know what I see. Toyota's labor (here in the U.S., these are U.S. jobs, U.S. workers, just being provided by a foreign company), able to produce at the same efficient level of production for less, and not only that, but produce higher rated vehicles. Is it any wonder why the "Big 3" have been having problems? These are systemic problems inherent in the way they are set up to do business. This isn't a "oh woe is me I'm suffering through no fault of my own." type of situation. They set themselves up poorly and allowed themselves to be choked by the UAW, and now they're suffering the consequences.
Meanwhile in Right to Work States that have successfully broken the bully power of these Unions, the Auto Industry is flourishing (Alabama, Tennessee, Kentucky, Georgia, North Carolina, South Carolina, Virginia, Texas).
Right to Work States:
So I think the message is clear. Let these Auto companies go into Chapter 11 Bankruptcy. This is a natural part of the business process. Companies that fail need to reorganize to be competitive, or they should not continue. We aren't and should not be responsible for propping up failing companies, no matter how much nostalgia they bring, or how many workers they employ. And that's what Chapter 11 is, a chance to reorganize, and set up a better business model. It's not Chapter 7, where the company just goes under and gets liquidated. This would be a chance for the "Big 3" to get significant concessions from the UAW to enable them to be able to operate in a competitive global environment. The Union might be crying that it's already given concessions, by lowering the pay of new employees, but their old employees are still getting paid at the same rates as before, and nothing has been sacrificed on their part in terms of unreasonable benefits and pensions.
Best case scenario, we let these companies fail and get forced into reorganization, and the power of the Union gets shattered and broken. Perhaps we end up seeing more Right to Work States, as they flip into the column of economic freedom. Employees should be free to join Unions, or refrain from joining Unions, without getting forced into paying Union dues as a condition of employment. Maybe we keep something like the ridiculous "Card Check" scam of a bill from passing congress in an overwhelmingly Democratic congress, and keep millions of workers from being forced into Union labor contracts that don't wish to join. As I said, that's the best case scenario.
Worst cast scenario, these companies go under, and thousands of people lose their jobs in the short term. They get forced to retrain themselves for a bit while they collect unemployment, and find new work, and companies like the foreign car competitors swoop in to pick up the lost market share and supply the nation with the cars we want for reasonable prices, and create new jobs for those out of work.
We're pretty much watching a rehashed U.S. Steel Industry collapse from back in the late 1960's & 1970's. In the Steel Industry the Unions forced their companies to overpay, the industry got choked by this unfair non-competitive wage they had to pay, and then they couldn't keep up with foreign competitors that outproduced them, and did so for less, while the little steel work that was left moved to non-union shops. It's really too bad the U.S. Automakers couldn't learn from history, and have set themselves up to repeat it, but that was their own responsibility to navigate, and their own responsibility to accept the consequences of...
And the taxpayers of this nation should not be giving them anything to bailout these poor business decisions.
Lawmakers have said they must address new models, executive pay
From Pelosi & Reid:
“In return for their additional burden, taxpayers also deserve to see top automobile executives making significant sacrifices and major changes to their way of doing business,”
“The image that they project is very important. It’s important that they show at every level they understand how serious this is and that they’re willing to make sacrifices as well,” Debbie Stabenow D-Mich said.
Automakers need to “rhetorically indicate the willingness to take whatever additional steps are necessary to protect their companies,” said Sen. Carl Levin, D-Mich. “These are good people who are running these companies. They have a sense of fiduciary duty.
“Everything was in place, everything was on track, everything was looking very promising,” Bragman said, “and then, through no fault of their own, quite frankly, the economy went south and nobody bought anything.”
This is getting ridiculous. This isn't about image. This isn't about "rhetorical" commitments to do better. Good people or not, everything was not fine with the "Big 3" (General Motors, Ford, and Chrysler) and then through outside circumstances and no fault of their own they get screwed... Wishful thinking in the extreme, but No... I don't think so.
These companies have resisted changing the way they operate for years to make themselves more efficient and global competitors. They were big enough they could, they rested on their laurels from years past and let the passage of time catch up to them. They allowed themselves to be strangled by bad contracts with the United Auto Workers union, and now they're paying the price - and it's a price we should let them pay.
It's always a poor idea when the government gets into the business of bailing out individual companies. It's not good for the markets. It wasn't a great thing that the government bailed out the banks earlier this year, though it may have been necessary. You just don't want the government getting involved in the life or death of individual companies, it sends mixed messages to the markets which results in confusion and uncertainty.
Companies only deserve to survive if they can be profitable. In order to do that they have to have their house in order, create something of value that people want to buy, and run efficiently. If they can't do that, then their failure is no one's fault but their own. It's up to a company to run efficiently enough in good times that they can weather the storm during economic downturns - the business cycle is just that, cyclical. One thing you can be sure of is if things are down, they'll get better, if they're good, they'll get worse again. So you need to plan for that, and plan to be able to go through an economic contraction. The "Big 3" Auto makers didn't do that. They negotiated contracts with the UAW that were untenable through bad times. And the greedy Union keeps shouting "NO GIVEBACKS!" while the companies that pay their workers livelihoods go under.
Well, that's a lesson they should learn the hard way. Taxpayer money shouldn't be going to this, we'd just be throwing good money after bad, and getting nothing in return.
Let's look at some of the things that have gone on... clearly it's not that people don't want cars anymore. Demand for automobiles of varying types is still high. People need to get places, and despite higher gas prices earlier this year, they still prefer getting their in their private vehicles to using public transportation. In fact we know it's not just the industry itself collapsing, because the Foreign Auto companies that work here in the U.S. are prospering, even during this economic contraction. Consumer Reports ranked the top 10 cars produced all to be Japanese made cars. While the American car companies focused on gas guzzling SUVs, they failed to develop fuel efficient cars like many of the foreign car companies did, and when gas prices spiked, sales fell (and they have no one but themselves to blame for being insufficiently diversified). In fact, over the last 15 years, while the "Big 3" have lost more than 83,000 jobs in the Michigan area, the Auto Industry itself has CREATED over 91,000 American jobs mostly by Asian companies employing in the South - mostly because a lot of those Southern States are Right to Work states, where Unions don't have as much pull.
Which brings us to the biggest problem - the United Auto Workers Union.
The UAW is like a pair of concrete shoes on these companies while they try and swim in the global market, dragging them down, and ultimately going to drag them under where they can't survive. The "Big 3" have been paying wages close to $10-$20 an HOUR more than their foreign competitors, because the UAW has forced through non-competitive contracts that are choking them to death. In some cases there were reports of the "Big 3" paying Union members, almost 12,000 in total, their full salary and benefits for doing crossword puzzles and sitting in front of a T.V., while their foreign counterparts actually had their labor, you know, making cars. On top of it, the companies are forced to provide Health Care benefits to these Union members, and pay out large pensions to retirees. Estimates are about an extra $1,500 per "Big 3" car tacked on to the price just to be able to pay out these pensions, putting them at a competitive disadvantage to the foreign manufacturers right off the bat.
Let's look at some startling numbers:
"GM’s projected average labour costs for 2008: $69 per hour
Toyota’s projected average labour costs for 2008: $48 per hour
Toyota’s labour cost advantage: 43.8%
Average hours of labour needed to produce a Toyota automobile in 2007: 30
Average hours needed to produce a Chrysler automobile: 30
Estimated pre-tax, per-automobile profit earned by Toyota: $922
Estimated profit earned by Chrysler: -$412
Average rating, out of 100, Consumer Reports awards the Chrysler, GM and Ford products manufactured: 58
Average rating for the Toyota and Honda products manufactured: 77
What's this showing you? I know what I see. Toyota's labor (here in the U.S., these are U.S. jobs, U.S. workers, just being provided by a foreign company), able to produce at the same efficient level of production for less, and not only that, but produce higher rated vehicles. Is it any wonder why the "Big 3" have been having problems? These are systemic problems inherent in the way they are set up to do business. This isn't a "oh woe is me I'm suffering through no fault of my own." type of situation. They set themselves up poorly and allowed themselves to be choked by the UAW, and now they're suffering the consequences.
Meanwhile in Right to Work States that have successfully broken the bully power of these Unions, the Auto Industry is flourishing (Alabama, Tennessee, Kentucky, Georgia, North Carolina, South Carolina, Virginia, Texas).
Right to Work States:
So I think the message is clear. Let these Auto companies go into Chapter 11 Bankruptcy. This is a natural part of the business process. Companies that fail need to reorganize to be competitive, or they should not continue. We aren't and should not be responsible for propping up failing companies, no matter how much nostalgia they bring, or how many workers they employ. And that's what Chapter 11 is, a chance to reorganize, and set up a better business model. It's not Chapter 7, where the company just goes under and gets liquidated. This would be a chance for the "Big 3" to get significant concessions from the UAW to enable them to be able to operate in a competitive global environment. The Union might be crying that it's already given concessions, by lowering the pay of new employees, but their old employees are still getting paid at the same rates as before, and nothing has been sacrificed on their part in terms of unreasonable benefits and pensions.
Best case scenario, we let these companies fail and get forced into reorganization, and the power of the Union gets shattered and broken. Perhaps we end up seeing more Right to Work States, as they flip into the column of economic freedom. Employees should be free to join Unions, or refrain from joining Unions, without getting forced into paying Union dues as a condition of employment. Maybe we keep something like the ridiculous "Card Check" scam of a bill from passing congress in an overwhelmingly Democratic congress, and keep millions of workers from being forced into Union labor contracts that don't wish to join. As I said, that's the best case scenario.
Worst cast scenario, these companies go under, and thousands of people lose their jobs in the short term. They get forced to retrain themselves for a bit while they collect unemployment, and find new work, and companies like the foreign car competitors swoop in to pick up the lost market share and supply the nation with the cars we want for reasonable prices, and create new jobs for those out of work.
We're pretty much watching a rehashed U.S. Steel Industry collapse from back in the late 1960's & 1970's. In the Steel Industry the Unions forced their companies to overpay, the industry got choked by this unfair non-competitive wage they had to pay, and then they couldn't keep up with foreign competitors that outproduced them, and did so for less, while the little steel work that was left moved to non-union shops. It's really too bad the U.S. Automakers couldn't learn from history, and have set themselves up to repeat it, but that was their own responsibility to navigate, and their own responsibility to accept the consequences of...
And the taxpayers of this nation should not be giving them anything to bailout these poor business decisions.
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