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Monday, November 17, 2008

The UAW, the Democrats, and the Bailout

There is an ugly alliance between the Democrats and the Unions. I believe it is at the heart of the Democrat's push for a bailout to Detroit's big three. A representative of the UAW just finished up an interview with Megyn Kendall on Fox News. The rep insisted that the automakers were vital to the American economy. He said that GM's structure meant that thousands of employees, suppliers, as well as the entire state of Michigan would be crushed if the automakers were allowed to fail.

There were some stunning numbers that ran across the screen as the interview went on. First, the average hourly rate paid by General Motors per car is $71 per hour. For Toyota, that number is $41 per hour. The health care costs associated with the manufacture of automobiles is ten times as much for GM as it is for Toyota. This has everything to do with the lucrative contracts the UAW (United Auto Workers) negotiated. Furthermore, Ford currently pays 12000 people no longer working $31 per hour.

Ken Pool is making good money. On weekdays, he shows up at 7 a.m. at Ford Motor Co.'s Michigan Truck Plant in Wayne, signs in, and then starts working -- on a crossword puzzle. Pool hates the monotony, but the pay is good: more than $31 an hour, plus benefits.

"We just go in and play crossword puzzles, watch videos that someone brings in or read the newspaper," he says. "Otherwise, I've just sat."

Pool is one of more than 12,000 American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in a jobs bank set up by Detroit automakers and Delphi Corp. as part of an extraordinary job security agreement with the United Auto Workers union.

The jobs bank programs were the price the industry paid in the 1980s to win UAW support for controversial efforts to boost productivity through increased automation and more flexible manufacturing.

Here is how the UAW President characterized the bailout.

NLPC says the UAW wants additional taxpayer money to enrich health and retirement plans it controls. Indeed, UAW President Ron Gettelfinger has urged Congress to act immediately to provide a separate, additional $25 billion in loans so auto companies can meet their health care obligations to more than 780,000 retirees and dependents.

The over funded health care and retirement plans are one of the main reasons the automakers are failing. It is of course impossible for the big three to compete with foreign autos, which aren't unionized, given the current structure of their contracts. The UAW wants this bailout but they won't give at all on the health care, wages, and retirement plans of their workers. As such, the bailout will continue to fund the health care and retirement plans of their workers even though both of these are contributing directly to the hemorrhaging of the liquidity of the company.

In other words, if the big three get this bailout, but the retirement and health care plans aren't re negotiated, then the three companies will still be on a path to failure. At the same time, the members of the UAW will continue to get paid. As such, what this bailout will do is go to fund the workers of the big three.

It goes without saying that there has long been an alliance between the unions and the Democrats. Furthermore, one of the few pieces of President Obama's infomercial that I saw had then Senator Obama telling a retired autoworker that he had earned that pension and thus implicitly that a President Obama would do everything in his power to make sure that each and every worker got their earned pension and health care benefits.

This bailout as it stands now would do just that for a few years more at least. In fact, the only thing this bailout would do is guarantee that the tens of thousand of auto workers and retirees will continue for an indefinite time to receive the benefits negotiated for them by the UAW. Unfortunately, that's all it does. With the Democrats lead by President Obama pushing this bailout, it appears to be nothing more than a blatant pay back to its biggest constituency. It's being done with $25 billion of our own tax payer's money.


Authentic Connecticut Republican said...

It looks like the folks in DC are hell-bent to give the stimulus package another try seeing as the first one didn't have any real effect.

This time it's the car industry.

While the sanity of blowing cash around and running the national debt up even further is questionable; it seems inevitable - so this time let's target unemployment, create AMERICAN jobs and pump up the economy all at one time.

Consider the following:

Manufacturing costs of motor vehicles are 65% labor (i.e.: W-2 income), that's not all direct but due to suppliers. GM alone has over 1300 suppliers. (That's a lot of jobs!)

1 in 10 Americans makes all or part of their income due to the automobile industry.

Money turns over 5 times in a year.
Thus a vehicle with a manufacturing cost of 20K produces 13,500 in W-2 income which in turn becomes a total of 65K in 12 months due to the 5 turnovers.
(This isn't magic, it's simply how the economy works.)

Our domestic car makers are saddled with legacy costs, most of which will reduce dramatically in 2010 due to contract changes. They need to survive to get there.

Our own over-zealous government with a virtual alphabet soup of regulatory agencies has been no help either.
Foreign competitors have worked off-shore collectively to meet various US gov't. imposed emission and safety standards, thus dramatically reducing those R&D costs. American car companies are prohibited from that by our FTC.

Make no mistake; it’s no surprise that once again government has been a major part of the problem.

Here's the solution.

Instead of either shipping cases of cash off to car makers; or sending us all another check:

Send out a voucher for say $1,000 good on a motor vehicle for the percentage of the vehicle that's domestic. (Civic = 70% Ford Explorer=80%)

Let those not interested in a new car sell or give away their vouchers (Ebay would be loaded with them in no time flat) and those that are so inclined can use as many as they can get their hands on up to the full MSRP of the vehicle.

This would bail out the car industry without giving them a dime directly
Further it would reduce the overall age of the nation’s cars which would in turn;
increase overall fuel economy
& decrease pollution.

Strengthen the dollar!

Since vehicles with a higher domestic content would be moving better this would reduce our imports, strengthening our dollar which would in turn further reduce what we pay for anything imported gas!


Instead of simply bailing out a few big companies, this would cause such a run that it would create employment throughout the industry affecting over 1300 suppliers and their workers.
That would give the economy good swift kick right where it needs one!

Pays for itself!

Since money turns over 5 times, and the vouchers are only good for the domestic content of the vehicle, every dime would be spent in the United States creating taxable income.
What is the income tax on 65,000 anyway?
(Remember? 20K manufacturing cost = $13,500 W-2 income x 5 = $65,000)

Another Stimulus Package?

I'm sure you'll agree that this makes more sense than simply sending out checks; many of which will be used to buy new flat screen TV's usually made in Malaysia or some such place.

CKAinRedStateUSA said...

Generally, Democrats have an ugly alliance with unions. Period.

RE: Cost of manufacturing: I heard recently that the cost for American car companies is approximately $74 per hour.

For foreign car manufacturers in the U.S., it's about $43 or $46.

That's about 60 percent higher for American company's costs.

How much of that is union burden?