Sunday, December 14, 2008

Wake Up UAW! The End is Near!!!

The R.C. Blog has been highlighting the bailouts since the fall and has specifically gone after the unions (leadership, not members...) for the fall of the Big Three. The R.C. Blog continues to support restructuring or bankruptcy for the three U.S. automakers, not a temporary bailout. Unless the union contracts are restructured, the automakers will eventually fail anyway; why waste taxpayer money on a band-aid.

Major and immediate UAW restructuring is needed in order for the Big Three to get back on track to ultimately become a global player in the auto industry. The chart on the left tells the story...

Great editorial from Saturday's Investor's Business Daily:

The proposed $15 billion bailout of the Big Three failed in the Senate for one major reason: Some lawmakers stood up to the unions. But their stand may be moot, since automakers may get the money anyway.

For a full week, GOP lawmakers bore the brunt of the bitter battle waged over an aid package for GM and Chrysler. Though the idea is wildly unpopular among voters, some Washington politicians were desperate to pass it — particularly the Democrats, who are beholden to the Auto Workers and other unions for tens of millions in campaign donations.

In addition to major restructuring by the automakers, GOP senators insisted on givebacks by the United Auto Workers. The UAW responded with a resolute "No." But the bailout foes won, killing the $15 billion in aid.

And they were right to do so.

As the chart shows, gold-plated union contracts are a big reason for U.S. automakers' woes (though managerial incompetence at the Big Three also played a role). The average Big Three worker made $73.26 an hour in 2006; the average worker at a foreign transplant, $44.20. Bailout foes wanted the gap to be shrunk by the end of next year.

A chart making the rounds on the Internet tells it all: Last year, Toyota made 9.37 million vehicles. GM, virtually the same number. Yet, Toyota made a profit of $38.7 billion on its global operations, or $1,874 per car, while GM lost $38.7 billion, or $4,055 a car, almost entirely due to its operations in the U.S.

Even so, the UAW vowed to make no big changes unto 2011, when their current deal expires. That basically would lock in the Big Three's lack of competitiveness for at least three more years, requiring billions and billions more in bailouts or bankruptcy.

Immediately after the bill failed Thursday night, Senate Majority Leader Harry Reid said he "dreads" seeing what the stock market would do on Friday. "It's not going to be a pleasant sight," he warned. For the record, the NASDAQ rose 2.2%, while the S&P 500 increased 0.7%. He needn't have worried.

As for the UAW, they rolled the dice, betting they could lose in the Senate and still get bailed out. It looks like their gamble paid off.

On Friday, the White House said it might use money from the $700 billion Troubled Asset Relief Program — reversing its earlier stance. Why? "A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time," White House spokeswoman Dana Perino said Friday.

We're sympathetic, but this is the wrong path to take — especially after the president's own party successfully made its case in Congress, and won.

We don't want to see workers suffer or the auto industry disappear. But the fact is, under bankruptcy reorganization, they won't. The workers will still exist, as will their skills. Unprofitable plants that can't be turned around will close. A bankruptcy judge will sell unprofitable assets to those who can use them productively.

They won't need a "car czar," or congressional oversight, or political micromanagement. And out of this process, a slimmer, more competitive and, yes, even profitable Big Three can emerge if we let it — one that will be able to compete with foreign companies on our own soil.

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