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The Faces of the Auto Bailout

I have read with the interest the articles on the auto bailout here at Wizbang and on the various news sites. Should they or shouldn't they? Who's trying to save face and who is trying to save .... well, a different part of their anatomy?

Meanwhile, nearly 500 local auto workers are out of a job two weeks from Christmas.

I understand why people want a bailout and why others oppose it. It is crystal clear how many politicians, members of the media and other assorted players are invested in more in what they can get out of this than what can be done for the auto industry and its workers. It makes a great theorectical discussion of policy and program

But, what happens to the people who are simultaneously being ill-served by both their company and their unions?

I will confess to being envious of the salaries local auto workers have pulled down in the past. Not only have the workers benefitted, but local retail establishments and the school districts have as well. I've seen the blessings that a Honda and/or GM plant can provide to local education.

Well, Honda is fine (so far), but the schools that depended on GM are scared. Those of us still with jobs never pulled down the salaries that the automakers provided. Kids still need to be educated, however, and, if the auto companies go under, we will be all that those kids have to count on.

I was not happy with this bailout proposal - particularly given the bill passed earlier this summer for auto makers benefit - but, I had hoped that a deal could have been reached that involved all players giving up something so that the industry itself could survive.

Sadly, the leadership that could put such a deal together don't exist in Congress.

By: Rose Hughes


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Comments (10)

Will the union bosses still... (Below threshold)
GarandFan:

Will the union bosses still have jobs when all their members are in the unemployment line?

I also have reservations ab... (Below threshold)
Allen:

I also have reservations about the bail out for the big 3. But there are some questions that have never been asked, such as: Don't they want to equalize the wages of Automaker CEO's with their Japanese counterparts?
Didn't think so.

And as to the health care the UAW has, why did Toyota built its new plant in Canada, where they will never be on the hook for health care. And they explicitly stated that as their reason for choosing Canada over the US.
But socialized healthcare is bad for business, right?

I am also upset about the UAW wages, but I'm outraged that autoworkers can potentially make as much as $60,000 in the course of a year, but the Wall Street guys at ING getting $4,000,000 bonuses financed by the taxpayers who paid that money!

Also Where are your demands for an across-the-board pay cut for every employee of the Big Three, from the CEO all the way down to the autoworkers? Why do only the autoworkers have to get a pay cut when times are bad? Why are VPs at Ford and GM still pulling down $300,000 a year? Maybe they should make as much as the union guys do.

The auto industry in this country effects more than just the big three. As you mentioned, schools, cities, etc. Which will be cheaper for the taxpayer, the bailout, or the fall out when millions of people will go on food stamps, welfare, unemployment, flood the hospitals and unable to pay them.

It's time to get over the hatred people have of unions, as they are not the major problem.

It is completely insane for... (Below threshold)
blueguitarbob:

It is completely insane for the US Congress (or Executive branch, for that matter) to be dealing with the problems of individual companies. Especially when bankruptcy law exists, which was created by Congress and signed by Presidents _specifically_ to deal with these sorts of problems.

Bankruptcy law has been on the books since 1898, and most recently revised in 1979. Here are companies that have successfully reorganized under chapter 11 of the bankruptcy code:

Delta Air Lines
United Air Lines
Northwest Airlines (merged with Delta, after successfully emerging from chapter 11 reorganization)
US Airways
America West Airlines (recently merged with US Airways, well after successfully emerging from chapter 11 reorganization)

Notice a trend? That's almost all of the major US airlines, except American Airlines. Did people stop buying tickets from these companies while they were in chapter 11 reorganization? It may have given consumers pause, but largely no. How many of you flew on these airlines while they were in chapter 11? I know I did. The industry continued, and most of the jobs were preserved, because consumers needed the product.

The only major air carrier that did not emerge from bankruptcy was ATA, and that was from their _second_ chapter 11 reorganization. They survived their first one.

GM and the UAW have been arguing that a chapter 11 reorganization would mean liquidation and dismemberment of the company and disaster for the workers. Hogwash. If consumers still need the product, the company will continue and most of the workers will retain their jobs. That's the most we can hope for at this point, unless you want to delude yourself in fantasies.

The only thing that chapter 11 would mean _for certain_ is the loss of control by GM and UAW executives. That's the reason they want this special "bailout": to save their own skins, not to benefit the blue collar line workers.

Bankruptcy law has existed for over 100 years, and is extremely well-known, familiar legal and financial territory. Consumers have experience dealing with companies in chapter 11 restructuring, and it has a history of success. Nothing "special" needs to be done by either Congress or the President to solve the problems in the US auto industry, or any industry. They just need to have the restraint to rely on the solutions already in place.

Just read a fine article in... (Below threshold)
jmc:

Just read a fine article in Business week about this, about whata GM bankruptcy would mean.

First off GM's pension plan if government backed. Currently the plan is underfunded by 30 Billion dollars or so. Meaning if The automakers go under you the tax payer will be left with a 30 Billion dollar bill from GM alone. Not to mention the other two car companies. So that in itself is reason to do the bailout.

On top of that the job loss, would be anywhere from 1-4 milion depending on whose figures you buy.

Also for Chapter 11 to work GM would have to get financing in the biggest chapter 11 case of all time, in a time when credit market's remain frozen. Probably won't happen so GM goes under and all those jobs are most definelttly lost and again we the tax payer are now on the hook for the pension plans and unemployment plans and Welfare plans once that runs out.

A recent survey by CNN concluded that 80% of consumers would not buy from a bankrupt car company. So the idea of it emrging stronger like the airlines is false.

see: http://money.cnn.com/2008/11/13/news/companies/gm_bankruptcy/index.htm?postversion=2008111305

for mention of the survey.

Basically with or without a bailout we are going to pay for this and beleive it or not it is cheaper to give the companies LOANS because that is what they are asking for, not free cash.

If we let them go under we pay and we don't get the money back!


I wrote GM's pension plan i... (Below threshold)
jmc:

I wrote GM's pension plan if gov. backed.

that should read IS Gov. backed

Whenever a company fails ma... (Below threshold)
hcddbz:

Whenever a company fails many people are affected. That does not mean that bailouts should occur.

The fact is that many people are affected when companies fail. Bear Sterns and Lehman Brothers have other people besides CEO, CIO and other top level executives and traders. They have thousands of middle class people workers. Their tax receipts also support schools in the area. Also there are have been many charities that are worried, they will not meet goals, because donations from the those companies have gone away or been sharply reduced.
However companies are in the business of making a profit. If they do not operate at profit then the business is unsustainable. If it is unsustainable there is no long term viability. Which means we will be in the same spot in few months or years. They business needs some re-organization so that they can produce cars at a profit. This means every aspect of the company needs to be evaluated from executive pay to factory workers. They need to remove excess and redo retirement benefits. They have business units like GMAC that are costing the huge amounts of monies. GM sells as much cars as Toyota but they lose money on every sale.
Just like Banks and Investment Banks that took unacceptable risk should fail so that the more risk adverse banks should prosper.

I have family members and ... (Below threshold)
jdgjtr:

I have family members and friends that work for Tier One suppliers for a Japanese automaker. If Detroit gets a bailout, then they may lose their jobs. It is not fair to many Americans who work for Nissan, Honda, Toyota, etc to have their tax dollars taken and given to the competition. It would be better to sell the Big Three to the successful automakers. That way cars and trucks would still be made in America by people who know how to make a profit.

One week before Christmas, ... (Below threshold)
Dodo David:

One week before Christmas, I will lose my job via a layoff, and I'm not associated with the automotive industry. So, why should people associated with the automotive industry be treated better than me by the federal government?

I have family memb... (Below threshold)
jpm100:
I have family members and friends that work for Tier One suppliers for a Japanese automaker. If Detroit gets a bailout, then they may lose their jobs. It is not fair to many Americans who work for Nissan, Honda, Toyota, etc to have their tax dollars taken and given to the competition. It would be better to sell the Big Three to the successful automakers. That way cars and trucks would still be made in America by people who know how to make a profit.
Nothing could be further from the truth for two reasons.

Your transplant depends on some of the same suppliers as the US industry. Especially those that are to meet US specific regulations. If the US companies go down, so do many of the same suppliers the transplants use.

And as for the flow of tax money. Virtually all the years of the US auto industry, the tax flow has been out of states like Michigan and into the states that host the transplants. This bailout doesn't even scratch that.

Thanks to all for the comme... (Below threshold)
Rose Hughes:

Thanks to all for the comments. I think that they reflect the all-over-the-board concerns that most Americans have about all the bailouts - not just the ones involving the auto workers.

A few specifics:

Also Where are your demands for an across-the-board pay cut for every employee of the Big Three, from the CEO all the way down to the autoworkers? Why do only the autoworkers have to get a pay cut when times are bad? Why are VPs at Ford and GM still pulling down $300,000 a year? Maybe they should make as much as the union guys do.

Well, if you got the impression that I was saying only the automakers should get a pay cut, then I wrote the piece badly. I think EVERY player in the piece needs to give up something. That's why I specifically stated that the workers are being ill-served by their company AND their union. It's the leadership that I find most flawed and who should not only make concessions, but also some lose their jobs outright.

Second, I don't know of an automakers who works for GM who has only the potential to make $60,000. (I am not as familiar the other members of the Big Three.) That may be true of the workers in plants supplying GM, but full-time autoworkers have the potential for much more and, in the past, have often done much better than $60,000 per year.

First off GM's pension plan if government backed. Currently the plan is underfunded by 30 Billion dollars or so. Meaning if The automakers go under you the tax payer will be left with a 30 Billion dollar bill from GM alone. Not to mention the other two car companies. So that in itself is reason to do the bailout.

Not sure exactly what you are referring to with this one. Many pensions are "government backed", but only to a percentage. GM may be promising 30 billion, but, if the standard federal program that backs pensions is invoked, it doesn't mean the government will be on the hook for 30 Billion.




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