Posts Tagged ‘Ford’

Another Perspective on the Auto Bailout

December 17, 2008

I came across a column by economist Thomas Sowell this morning entitled “Postponing Reality,” and I’d just like to discuss part of this column with you:

We are told that the collapse of the Big Three automakers in Detroit would have repercussions across the country, causing mass layoffs among firms that supply the automobile makers with parts, and shutting down automobile dealerships from coast to coast.

You should hear the news stations here in Detroit.  The news anchors night after night of covering House and Senate votes keep making comments like, “Some Senators just don’t understand how detrimental this will be to Detroit,” or “The Southern Senators don’t understand what’s happening here in Detroit” or “Talk to your friends in other states about contacting their representatives to explain how bad this would be for Michigan.”  And you can substitute the word Senators with Republicans for a lot of the news anchors, since the media here in Detroit tends to lean left (as does all of Wayne County).

A renowned economist of the past, J.A. Schumpeter, used to refer to progress under capitalism as “creative destruction”– the replacement of businesses that have outlived their usefulness with businesses that carry technological and organizational creativity forward, raising standards of living in the process.

It’s survival of the fittest, economic style.

Indeed, this is very much like what happened a hundred years ago, when that new technological wonder, the automobile, wreaked havoc on all the forms of transportation built up around horses.

For thousands of years, horses had been the way to go, whether in buggies or royal coaches, whether pulling trolleys in the cities or plows on the farms. People had bet their futures on something with a track record of reliable success going back many centuries.

Were all these people to be left high and dry? What about all the other people who supplied the things used with horses– oats, saddles, horse shoes and buggies? Wouldn’t they all go falling like dominoes when horses were replaced by cars?

Unfortunately for all the good people who had in good faith gone into all the various lines of work revolving around horses, there was no compassionate government to step in with a bailout or a stimulus package.

They had to face reality, right then and right there, without even a postponement.

He actually brings up a really good point here.  Industries go through cycles, and to stop these cycles with the use of  government funds is only going to harm us more in the long run.  Like I’ve said before, the main reason that Michiganders support this is because it helps Michigan.  If the technology industry were to suffer detrimental losses, I’d be willing to bet that you couldn’t find 30% of Michiganders who would be in favor of spending billions of tax dollars on helping Silicon Valley in California.

Who would have thought that those who displaced them would find themselves in a similar situation a hundred years later?

Actually the automobile industry is not nearly in as bad a situation now as the horse-based industries were then. There is no replacement for the automobile anywhere on the horizon. Nor has the public decided to do without cars indefinitely.

While Detroit’s Big Three are laying off thousands of workers, Toyota is hiring thousands of workers right here in America, where a substantial share of all our Toyotas are manufactured.

 But Toyota doesn’t have union workers.  Without unions, their workers make (on average) a measly $30/hour.  Wait a minute, that’s not measly.  In fact, that’s more than the average GM worker ($29.78/hour).  The difference comes in pensions and health care.   GM has to pay out an extra $39.22/hour (that includes pensions for retirees), while Toyota has to pay out an extra $18/hour (with far less retirees).  So, the average Toyota worker (assuming he worked 40 hours/week with 4 weeks of vacation), would make $57,600.  That’s not that bad folks.  You assume that his spouse works part time (20 hours/week at $10/hour), that’s another $9,600.  That’s a yearly total of $67,200, which is DEFINITELY enough to live off of (My family of 4 lived off of about $80,000/year until my mom got a job, but she did that more out of boredom than need for more cash inflow.  And we were decently well off.  We aren’t rich, but we’re definitely nowhere close to going broke.), even though they may get a little less when it comes to health care.

Will this save Detroit or Michigan? No.

Detroit and Michigan have followed classic liberal policies of treating businesses as prey, rather than as assets. They have helped kill the goose that lays the golden eggs. So have the unions. So have managements that have gone along to get along.

EXACTLY!  I was just talking about this the other day.  Every time one of the Big 3 is in financial trouble, they go to the UAW and ask them to take a pay cut.  The UAW, being filled with greedy Americans says no.  So instead of setting a good example and taking a 50-75% pay cut, the management simply sat there and said, “You need to take a pay cut, otherwise we may go bankrupt.  The UAW continues to say, “No.  And if you don’t give in, we’ll go on strike.”  So, the company heads wind up giving in.  If I were head of any of the Big 3 right now, I’d immediately decrease my pay to $0.  Then, I’d tell the unions, “Take a pay cut, or go on strike.”  If they didn’t take a pay cut, I’d let them go on strike and hire new workers.  If a court ruled that I’m not allowed to hire new workers, I’d let the strike continue.  Eventually, the workers will have to come back to work or the company will fail.  If the company fails, it was the union’s fault for not showing up to work.  But the UAW wouldn’t let the company completely fail, because then their workers would be out of a job.  The corporate heads need to 1) lead by example, and 2) have some guts and stand up to the UAW.

Toyota, Honda and other foreign automakers are not heading for Detroit, even though there are lots of experienced automobile workers there. They are avoiding the rust belts and the policies that have made those places rust belts.

A bailout of Detroit’s Big Three would be only the latest in the postponements of reality. As for automobile dealers, they can probably sell Toyotas just as easily as they sold Chevvies. And Toyotas will require just as many tires per car, as well as other parts from automobile parts suppliers.

So, there you have it.  This was one of the best analyses I’ve seen on the auto bailout, and I couldn’t agree more.

Who’s at fault, the UAW or the corporate heads?  Both.  The UAW needs to stop being greedy and be willing to take a pay cut.  The leaders of the Big 3 need to lead by example and take MASSIVE pay cuts and start standing up to the unions.

Done Ranting,

Ranting Republican
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The UAW Put the Auto Industry in the Position that It’s in Now

November 24, 2008

Today, I saw a TV interview that has confirmed what I’ve been saying for years (see the long paragraph in the middle).  The UAW has driven the auto industry down into a disastrous spiral.  Watch theses videos.  The first is an ad put out by the Employee Freedom Action Committee (EFAC), and the second is an interview with EFAC representative Rick Berman (done by Neil Cavuto):

Alright, so those videos discuss the Employee Free Choice Act (EFCA), a bill that would get rid of the secret ballot for unions (when workers vote to either unionize or not unionize) and would force workers to pay union dues even if they don’t want to.

There are Democrats in Congress who are supporting this, but the interesting thing is, they recently voted to keep Senator Joe Lieberman (I-CT) in their caucus, by … you guessed it … a secret ballot.

Now, in that second video, you saw the insanely huge contract that the UAW has forced the Big 3 auto companies into.  Yes, I said forced.  As I’ve explained before, the UAW has bullied the Big 3 into signing those insane contracts.  Because if the auto companies don’t sign, the union will go on strike, and the company will suffer and lose money.  Unfortunately, the companies give in, because their executives don’t want their companies to fail.  If I were the auto executives, I’d say, “Go on strike,” and when the company didn’t have enough money to stay open, I’d fire those union workers.  Then see if the UAW is so stubborn.  I guarantee they wouldn’t be.

There was a time and place for unions, but, for the most part, that time and place is all gone now.

Stand up AGAINST the EFCA and stand WITH the EFAC.  Fight the union bosses.  Fight for workers RIGHTS (the RIGHT to a secret ballot, which Americans hold so dear).

End this union bullying of the Big 3.

For more information about the EFAC, check out their website, Employee Freedom.org.

Done Ranting,

Ranting Republican
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Representative Sherman to Auto Executives: Raise Your Hand if You Flew Here Commercially. No Hands Went Up

November 20, 2008

The following is a video courtesy of C-SPAN, from today’s House Financial Services Committee:

 

more about “Automotive Industry Assistance, Auto …“, posted with vodpod

Now, I’ve never been a huge fan of Representative Brad Sherman (D-CA24), but he’s absolutely right here.  If the automakers’ executives are going to fly to D.C. on a PRIVATE jet, they shouldn’t be lecturing Congress that they need more money.

Heck, I’ve been working on getting a big-name former Congressman (whose name I don’t want to give out) to come speak on my campus, and his booking agent told me, “I don’t know if Southwest Flies near you but they have great prices these days.”  If a big name Congressman can fly Southwest, then Rick Wagoner (GM), Alan Mulally (Ford), and Robert Nardelli (Chrysler) can.

Until these CEOs learn to fly Southwest or Airtran or something, they don’t deserve anything close to a bailout.  Additionally, the Union heads (and even workers) need to learn to take a pay cut.  I’ve said before that UAW workers are so overpaid, it’s just ridiculous.

Don’t bail out the auto industry, and especially don’t do it by giving into arrogance like this.

Done Ranting,

Ranting Republican
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A Michigander’s Perspective: The Goverment Should Not Bail Out the Auto Industry

November 13, 2008

As rumors fly that a $25 billion bailout of the auto industry may actually come to a vote in the Congress, I figured that I, a citizen of Metro Detroit and Michigan should weigh in.

First, the facts:

Speaker of the House Nancy Pelosi (D-CA) has called for “emergency and limited financial assistance” for General Motors, Ford, and Chrysler where legislation would be passed that would make the automakers eligible for financial support under the $700 billion bailout bill that was passed in October.

This comes after a $25-billion loan program bill specifically for automakers that was passed in September.  The problem with that program was intended to loan money to the Big 3 only to help refit plants across the country in order to assist automakers in making tougher fuel economy standards.  Now the automakers are saying that they need loans just to keep overall operations continuing.

Republicans in Congress are expected to push for the restrictions on the $25 billion to be dropped, before any other optionss are considered.  Senate Minority Leader Mitch McConnell (R-KY) has already started advocating for this plan; however, it is expected that Democrats will oppose dropping any of the restrictions on the $25 billion.

Now, what is my opinion?

Well, I have a lot to gain if the auto industry bounces back.  I have 2,500 shares of Delphi, an auto parts supplier for General Motors.  If it goes back up to $10 a share, I’ll have made a little under around $24,650 on my investment.

Plus, it’ll bring jobs back to Michigan if the automakers do bounce back.  And that’ll help the economy of my state, which is in a pretty sad condition right now.

But, I still oppose the bailout.

First, I’m tired of Michiganders saying, “I support the bailout because it’ll bring jobs back to Michigan.”  Well, my fellow Michiganders, when it’s YOUR tax dollars being spent outside of the state, would you support a bailout?

If the technology sector all of a sudden began failing, would you support a bailout of Silicon Valley companies such as Google, Adobe, Atari, Microsoft, Sony, Cisco, Hewlett-Packard, Intel, etc…?  I wouldn’t!  And as Governor Granholm is advocating for this bailout, mayors of major cities all over the nation are asking for their piece of the bailout?  And did I not predict that as we bail out more companies, more people would ask for their piece of the bailout pie?

This attitude is the same attitude as many people have with earmarks.  Ask most voters and they’ll tell you that they oppose earmarks, but then they’ll go and vote for the Representative “who brought so much money back to the district” through earmarks.  Examples of this are my representative, Carolyn Kilpatrick (D-MI13), who brags about the earmarked money she’s brought to the Detroit area, and more famously, Representative John Murtha (D-PA12) and Senator Ted Stevens (R-AK).

Second, the fact that the United Auto Worker’s Union (UAW) is backing this bailout scares me.  A LARGE PORTION OF THIS PROBLEM IS THE UAW’s FAULT!  The UAW bullied GM, Delphi, and Chrysler into giving workers benefits and wages that the companies couldn’t afford.  How?  By threatening to strike when the companies were suffering.  (I don’t remember the UAW ever threatening Ford with a strike in recent years, but I could be wrong).  Let me give the UAW a little lesson in business management: When your company is losing money, the LAST thing you want to do is cost your company more money by not showing up to work and going on strike.  If the government is going to step in and do anything about the auto industry crisis, it should be to reduce the choke-hold that the UAW has had on auto companies.  Instead of complaining about getting your benefits or wages cut, be thankful that you have JOBS.  Because when you go on strike, that means products aren’t being made, which means that less products will be sold, which means that less money comes in to the company, which means that either A) you lose your job or B) you lose wages/benefits.  Striking during a time of CRISIS only furthers the problem, and the fact that the UAW leadership (and at least 51% of the membership) refuses to acknowledge this (or are just too stupid to realize it), really angers me.  Obviously you can’t see me right now, but I’m actually getting angry just talking about the sheer stupidity of the UAW (and a lot of unions, such as the unions that struck during Northwest Airline’s financial problems and eventual bankruptcy).

And that leads me to my next point: Bankruptcy court.  We have them for a reason folks.  Let the automakers use them.  We shouldn’t be looking at bailouts at all until the companies file for Chapter 11 (and even after that, I will still be opposed to bailouts).

Lastly: I don’t think that the bailouts will work with the auto industry.  Some have cited (as they did for the bailout bill passed in October) that the government successfully bailed out Chrysler in the 1970s by guaranteeing a $1.5 billion loan.  The problem with equating the 2 situations is that in the 1970s, we weren’t establishing a pattern of bailing out company after company who came to the government looking for help.  In addition, that was a bailout of one company, not the auto industry.  Honestly, if one of the Big 3 fail, that will probably be enough to give the other 2 enough business to recover.  It’s not ideal, or anywhere CLOSE to ideal (heck, I have friends and family members who work in all 3 companies), but it’s better than this general industry bailout plan.  I think that an industry bailout will help the Big 3 for a while, but that won’t be enough for them to recover, so 1 or 2 of them may fail (I honestly think GM would be the first to go, and I don’t see Ford going under).

It’s not a good situation, but a bailout will only make it worse.  Michiganders and Detroiters need to stop being selfish and start thinking about the good of the country as a whole.

Done Ranting,

Ranting Republican
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