Saturday, November 08, 2008

Auto Industry Bail-Out?

Our government has already committed $25 billion to the automakers to help them re-tool for the next generation of automobiles. Now, these same companies are coming back to Washington, this time asking for cash to keep them from going under in 2009. I say, "Wait a minute, here! Get your house in order first."

For all too long Detroit has been making inferior cars while paying its employees overly generous wages, benefits, and pensions. (Why should an assembly line worker with a high school diploma make as much or more than a teacher with a masters degree?) Recently some changes have been made in increasing auto workers contributions to their medical plan, but that should be just the start of a major adjustment in auto industry compensation. Until the companies and the UAW can agree on that, I would reject any bailout. We don't need a "bailed-out" auto industry that is still incapable of competing with foreign competition on price.

I don't hate the guys who design and build cars in Detroit. It's just that they haven't made the adjustment to competing in a world economy. Their cost structure has to be competitive in order for them to survive over the long term. If, to incent change, Washington has to threaten the companies and their pension plans by letting them go the brink of collapse, so be it. If we have a simple bail-out, the next one won't be far behind.

The fact is, if U.S. auto companies are competitive, there will be plenty of jobs there. They just won't be quite as cushy as they've been for the past 50 years.

4 comments:

ThomasLB said...

If the auto workers are making a lot of money, it's because the auto industry is a profitable business. If that money didn't go into their pockets it would go to the shareholders- and they deserve it even less.

But I'm not sure that the workers have really made all that much money since Reagan took over and busted all the unions. Detroit isn't exactly a string of mansions with Bentleys in the driveways.

Dave said...

I'm thinking there are no heros in this story. We need to rethink working. The "owners" and the "workers" aren't evil, they just don't think they have a reason to work together. They do, and they need to realize it.

1138 said...

You've got your finger pointed in the wrong place.
The workers don't set the policies of these Corporations, management does and management has failed badly.
The wages of the workers are not the issues, nor the pensions (the pensions were decided by management).
Education does not decide what you are worth, the value of your work does.
Management has been way over payed for under performance for way too long.
New management is needed before money is handed out.

Ron Davison said...

This line of industries to bail out is starting to look really long. If all the industries too big to fail are bailed out by everyone else, isn't it just a matter of time before all the small companies are bailing out the big ones? How does that work? I think it is time for something sustainable.