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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.

1 comment:

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?