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More Trouble in Detroit

UPDATE:

White House is considering orderly bankruptcy of auto firms.


Just last week during the Senate's attempt to craft a domestic auto bailout (a negotiation that that UAW President Ron Gettelfinger didn't bother to attend), taxpayers witnessed the real UAW at work in the open. Asked to shoulder some part of a federal tax payer financed bailout, the UAW essentially said "we'll let ya' know later on that" and then placed its bet on a Bush Administration promise of help with a healthy side bet on an Obama/Pelosi/Reid trifecta.

Well, to mangle the metaphors, the price of poker is going up.

Chrysler is idling all assembly lines until late January and Ford has just announced that it is adding yet another week to its seasonal shut down. An expected swift solution from the TARP legislation has yet to materialize (one wonders if Frank and Paulson are butting heads again?).

In a quickly unfolding story with many political angles there is a surprising lack of disquiet in the legacy media, as if they have silently folded another hand. The high stakes poker between auto manufacturers and organized labor can barely find front page coverage today. Perhaps the sermonizing on behalf of organized labor has finally met
cold economic reality
as manufacturers further expand operations south of the border and foreign owned manufacturers show no reluctance to make necessary cuts.


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Comments (20)

The UAW, like the Big 3, is... (Below threshold)
GarandFan:

The UAW, like the Big 3, isn't going to learn until they get smashed in the balls. Once their workers are collecting unemployment, and the union isn't getting any dues money....then the union bosses will begin to wake up.

I sure am injoying my popco... (Below threshold)
1903A3:

I sure am injoying my popcorn watching this show.does it have an intermission,I gotta go to the bathroom.:)

There is a large c... (Below threshold)
dr lava:

There is a large car plant in my town and I am related to and friendly with a lot of UAW members. These guys make between 50 and 60 K a year have health insurance and a pension when they retire.

There is something wrong with this?

From the Wall Street Journa... (Below threshold)
Bob:

From the Wall Street Journal regarding GM layoffs: "Under the union contract, laid-off hourly workers receive pay from GM to supplement unemployment insurance that brings their income to 72 percent of their gross pay."

I'm not sure the Chrysler contract is quite as generous, but taking only a 28% pay cut for not working at all may look good to some of the UAW members. Of course, the pay will last only as long as employer is able to keep its doors open, which may not be that much longer - at least without massive infusions of our grandchildren's wealth.

1. Again a new poster doesn... (Below threshold)
Grady:

1. Again a new poster doesn't get the facts right. The UAW has agreed to make concessions for the current bailout and has agreed to changes in the contract for 2010 which brings the pay scale for new employees down.
http://online.wsj.com/article/SB122832097499675993.html

2. There is but one aim for the republicans in the auto crisis and that is a political one - to bust the UAW. They don't give a rats ass about the people affected by a failure of these companies. And by people I mean the millions other than the UAW because, of course, unions are democratic supporters. Instead of trying to bust supporters of dems maybe the republican part ought to think about attracting people into its ranks other than extremists from the right and old, white, men and women.

There is a large car ... (Below threshold)

There is a large car plant in my town and I am related to and friendly with a lot of UAW members. These guys make between 50 and 60 K a year have health insurance and a pension when they retire.

There is something wrong with this?

That's a good point. There's nothing wrong with that scenario as long as no federal taxpayer funds are used to subsidize operations.

_______________________________________________

Grady: What does race and gender have to do with the post topic? Nothing.

Also,

The UAW has agreed to make concessions for the current bailout and has agreed to changes in the contract for 2010 which brings the pay scale for new employees down.

You conveniently ignore the problem of negative operating cash flow that must be financed between now and 2010 (or whenever the new contract is settled). Tax payers should not have to pay for that. Calling it a bridge loan (as they are) is ridiculous. It's nothing more than asking taxpayers to gamble on a successful turnaround. Same old song.


Hugh SThe point I'... (Below threshold)
Grady:

Hugh S

The point I'm making is that the republican senators are making a political decision not one based on what's best for the country. I hope they keep on making stupid political decisions for the next 2 years.

There are numerous Big 3 bl... (Below threshold)
Van:

There are numerous Big 3 blue collar workers around the neighborhood from where I live. I really don't know what the problem is with people who are always on their case(s). These guys just make a living, buy a car once in awhile. Why are people always busting on them?
Their is a Yasaki factory down the street and they make the same wages. What's the problem?
http://www.detnews.com/apps/pbcs.dll/article?AID=/20081213/AUTO01/812130355

Posters and message board r... (Below threshold)
Van:

Posters and message board readers are being mis-lead on the unemployment and sub-pay a worker gets when laid off. The state pays the un-employment and the "sub" fund makes up the difference in a workers weekly pay minus approx. 15% and then taxes. The sub-pay, if you will comes from contributions from the workers hourly wage and goes to this "rainy day fund" - the subfund!

Again a new poste... (Below threshold)
hcddbz:
Again a new poster doesn't get the facts right. The UAW has agreed to make concessions for the current bailout and has agreed to changes in the contract for 2010 which brings the pay scale for new employees down.

If they want taxpayer money make the changes now. Why wait until 2010?

There are numerous Big 3 blue collar workers around the neighborhood from where I live. I really don't know what the problem is with people who are always on their case(s). These guys just make a living, buy a car once in awhile. Why are people always busting on them? Their is a Yasaki factory down the street and they make the same wages. What's the problem?


. I do not really care. If the company is profitable then who cares what line workers or executives are paid. However when they want taxpayer money and the company is not sustainable then it becomes an issue.

If the companies want to survive, then everyone must make changes from top guy to the person who sweeps the floor. They have to have flexibility in order to respond to changing market conditions. It also means that some benefits are going to have to be reduced or cut. Not to mention all the regulation and taxes they are under. I would love to see the companies and unions work together to become profitable. The government can help by reducing federal, state, and local corporate taxes. They can also lower the income tax rates for all workers so they have more money to take home. We could also work on domestic drilling to keep gas prices low and real alternative energy programs like nuclear power.

NO bailouts, The government should stay out of private industry. Let companies and banks fail or succeed on their own. Let government stick to doing things in the government (taxes and regulations)

If Detroit goes bank... (Below threshold)
Larry:


If Detroit goes bankrupt, it is going to cost the Taxpayers tens of billions of dollars, period. This is in the form of payroll taxes not paid, unemployment benefits, and the huge cost of dumping all the retired auto workers on to the Medicare rolls.

There is a domino effect as well, which means that suppliers, retailers and a host of others will also see unemployment, bankruptcy and associated negative things happen.

Those who call for no bailout on ideological grounds are being incredibly myopic.

Please read ">Ed Wallace and a bit of common sense.

We got where we are through stupid government regulation and stupid government deregulation and a lack of market oversight. Yea, it was mostly the Dems. It was also the Republicans and a failure to scream bloody hell.

Now we need smart regulation and smart, selective, public interference in the marketplace. This means bailing out Detroit directly for far less than the ultimate cost of doing nothing and allowing bankruptcy.

So which is it, bailout with a chance of payback or no bailout and watching even more money from the taxpayers exit down the hole?

Sorry, it looked ok ... (Below threshold)
Larry:


Sorry, it looked ok in the preview.

Here is Wallace's article:

http://www.star-telegram.com/ed_wallace/story/1064040.html

hcddbz -I agree - ... (Below threshold)
JLawson:

hcddbz -

I agree - as long as the company is profitable, why would they need a bailout? When it's not - well, that's what we're addressing, isn't it?

Larry - We've seen government handouts on damn near everything - but have you forgotten that WE are the ones who will eventually have to pay the bill? At this point, I've seen estimates of our obligations and guarantees running between $4 to 7 TRILLION. So why should we balk at a paltry $25 bil?

Because if we pay them now - then we'll pay them again. And again. And again. Why would they change the way they do things - it's PROFITABLE to be inefficient!

Grady - "The point I'm ... (Below threshold)
Marc:

Grady - "The point I'm making is that the republican senators are making a political decision not one based on what's best for the country. I hope they keep on making stupid political decisions for the next 2 years."

And you know this how? Just the facts Grady, give us the facts that prove your point.

Unless or course you want to paint yourself as being just as partisan as those on the right.

Funny isn't it? (not really) For the last 7 plus years all we've heard from the left, left-turds, far left, progressives, and obamabots is how terrible Bush has been economically by running up the Fed deficit.

Now, they are all on the deficit spending band-wagon.

From the LA Times:... (Below threshold)
max:

From the LA Times:

Sen. George V. Voinovich (R-Ohio), a strong auto industry supporter, acknowledged that some of his colleagues simply did not want to help the UAW.

"We have many senators from right-to-work states, and I quite frankly think they have no use for labor," he said. "Labor usually supports very heavily Democrats and I think that some of the lack of enthusiasm for this [bailout] was that some of them didn't want to do anything for the United Auto Workers."

http://www.latimes.com/classified/automotive/news/la-fi-gopunions13-2008dec13,0,4830309.story

Much as I hate to admit it,... (Below threshold)
max:

Much as I hate to admit it, Larry is absolutely correct. If we had a healthy economy, I'd say let 'em go bankrupt, but given the current economic climate, it makes more sense to prop them up for a year or so and then let the chips fall.

JLawsonWell, heck.... (Below threshold)
Larry:

JLawson

Well, heck. I am not in favor with much of the bailouts. I was for a limited version because in my mind, the government caused the problem and thus should be responsible for helping to fix it. On the other hand, much of the problem was caused by the very ones we bailed out.

Now for the automobile bunch, they are blameless in their situation. By any definition, the government has been a large part of why they are positioned as they are at this point. With CAFE standards and a horde of rules plus a long history of UAW contracts that in some administrations became a take it or take it deal, our car makers have been hanstrung.

Keep in mind that over the years, every time the auto companies built small cars, they lost money.

I am not ideologically based on this deal. We made money on the Chrysler bailout, so why not now? Frankly, ideology is why we are in this fix, from Congress Libs pushing the home loan irrespective of qualifications to the lack of oversight by the geniuses running our SEC and other regulatory agencies. And that applies to not only the current Bush administration, but also to Clinton's.

Thank you for your opinion.

I agree - as long... (Below threshold)
hcddbz:
I agree - as long as the company is profitable, why would they need a bailout? When it's not - well, that's what we're addressing, isn't it?

JLawson,
Are we addressing profitability? These companies have to adjust to become profitable and neither management or workers really want to take the step necessary to do it. . I agree with you we keep rewarding failure that all we are going to get.

Those who call for no bailout on ideological grounds are being incredibly myopic.

I am calling for it on economic terms, the long term view of company that is not willing to change is that it will fail. Putting money in now does not fix the problem it just delays it. In fact the bailout now may cause worse issues in the long run.

Years ago John Z. DeLorean-... (Below threshold)
Wynne:

Years ago John Z. DeLorean-no paragon, to be sure, but one who knew well the GM management culture-observed that the corporation was incapable of changing from within. Chapter 11 is the only option for the company's long-term survival.
During WWII a relatively lean model of management (the legacy of Alfred Sloan) gave way to an increasingly bureaucratic style. The result of the wartime command economy.
Under the disastrous leadership of Roger Smith, design, production and marketing gave way to investment strategies. GM's chief product shifted from automobiles to careers. Under Smith's reorganization program, a marginally functional management bureaucracy collapsed and re-formed into another in which lines of authority and responsibility became hopelessly blurred. Predictably, by that time, the remedy was to add more bureaucracy.

The Mississipi Plant for th... (Below threshold)
jpm100:

The Mississipi Plant for the new Prius is delayed. The New Prius, itself, is not delayed. Its almost as if those US plants aren't fundamentally necessary. Huh. Weird.

Maybe they don't want to invest more at the moment. link

Senator Shelby has been kinda of quiet from about the time of that article. I wouldn't be happy with a senator who overplayed it and jeopardized my investment. They are probably being very cautious about future investment and probably very cautious about future investment in a state with a senator not friendly with the industry, whether that was his intention or not.




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