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A deep pit


A topic of note lately is the notion of “bailing out” the auto industry. The numbers vary but might be as much as 100 billon dollars. Just what does that get us?Much has been made this past week of the insensitivity of the management of the big three when they flew to Congressional Hearings in corporate jets. Management is portrayed as incompetent at best. How could they possibly have bet on the SUV as the future of their companies?There is another picture. There are legacy costs for labor contracts that provide a medical program better than most. There are retirement programs that are generous by any standard. SUVs were what the public wanted and I though that is what corporations were supposed to provide, even if some of us hated that product for ideological reasons.One can honestly ask if any management team can overcome the financial drag from those legacy costs no matter how innovative when competitors can rely on their governments to provide for the benefits covered by those costsIf we bail out the auto industries as they stand now we lock in these legacy costs. They will continue to make it difficult for the industry to compete. It will be highly likely that the current circumstance will be repeated in a relatively short time. Will we then “bail out” the industry again? Perhaps there is an alternative to dumping cash into a losing proposition. Maybe we should pick up the legacy costs of the medical and retirement programs and allow the industry to sink or swim in a more equitable competitive environment. There is, however, a matter of equity if the government commits to sustaining those programs. How about all the other industries on the wrong side of foreign competition because of costs that their competitors do not have. Should we not address their challenge?Then there are large numbers of Americans who do not enjoy medical or retirement programs anywhere near as attractive as those available to the employees of the big three. Can we commit to underwriting those costs without making similar benefits available to all?Maybe we just need to slow down a bit and think this through. Is this industry really too big to fail? Does failure really mean a disaster or will the industry survive as a leaner more competitive nucleus? Should autoworkers be protected from loss of employment when so many other Americans are experiencing it? Is this all really about payback to the auto unions by the Democratic Party – using our money?


Ronda Miller 9 years, 7 months ago

George, a lot of different things to think about these days with bail outs. I actually don't think it is a good idea for several reasons, but my main issue is one you suggest - there are other companies that also could use help, their are programs that similarly need assistance, and the majority of families are in a bind. The buck has to stop somewhere - it needs to stop now and I agree that if we assist the auto industry it will most likely have its hand out in the future.

meggers 9 years, 7 months ago

While I don't necessarily agree with you, Mr. Lippencott, you raised some points worthy of consideration. Too bad you sort of blew it with your last sentence. If we're going to play egg chases chicken and vise versa in partisan terms, I think we can give a big thank you to former president Reagan for rolling back the CAFE standards put in place by Carter. Had that not occured, the American automakers would have been forced to keep up with the rest of the world when it comes to high efficiency standards for vehicles AND our nation likely would not have become dependant on middle eastern oil. Of course, even with the reversal of the CAFE standards, the 'big three' should also have had more of a long-range vision about what the demands of the marketplace would be once the hangover from the Hummers and SUV's kicked in. I have a hard time laying all of the problems on the workers and the unions that represent them. Look at the tens of thousands of low-level government employees receive excellent benefits and regular cost of living increases. Do you also blame these workers for the poor decisions made by their superiors?I honestly don't know what the solution is for American automakers at this point. I would probably feel differently if we weren't in the midst of a recession, but I believe that allowing them to go under at this point would have some pretty serious consequences- some of which might just tip the economy completely over the abyss. I want to see what the 'big three' come up with in terms of long-range plans to change the course of their companies and if, like Chrysler back in the late 70's, it appears that they will be able to repay the money over time, I think they should get it. Not so much for the companies and workers themselves, but to avoid a further erosion of our manufacturing sector.

Flap Doodle 9 years, 7 months ago

"Is this all really about payback to the auto unions by the Democratic Party – using our money?"I'd say it's the first installment.

beastshawnee 9 years, 6 months ago

Well the comment about Democratic Party payback stings a bit, and exposes an interesting dichotomy. The democrats certainly have stood up for the unions in humananitarian terms before, and the unions in their current, (and corrupted) form with their big money connections have spent dough getting some ultra-connected politicians elected, but most democrats I know are against the bailout, just like most republicans I know, and most independants I know. In the 1980's the word was out the Capitalism was the new "God" in America. It could do no wrong, but pure capitalism has always gotten us into trouble. (It created the dust bowl, for one thing) There has to be a middle road. Regulation means oversight means protection for all the little people. And we are all little people.

Chris Ogle 9 years, 6 months ago

We could offer a $7,000 tax rebate to anyone willing to purchase a Ford, GM, or Chrysler. If we didn't have enough takers..... then we would know the answer. Without demand, no need to have the business.

oldvet 9 years, 6 months ago

My only gripe about the auto company bailouts is the lack of congressional requirements to bring the union management to the table... without significant union participation and renegotiation, the bailout may well only postpone more problems... but let GM, Ford and Chrysler fail and you will be laying off nearly 1 million people employed by these three... then the big pain will come as most of the suppliers of parts to these three also fail (e.g. Delphi, which employs about 300K people), the transportation companies fail, then the dealerships lay off all salespeople, and on down to the support systems in the cities where all of these business are located... the department stores, restaurants, entertainment, etc... it all fails when there is no money to spend. Then you will see the Great Depression on a global scale.So why didn't the Democratic-controlled Congress ask the union management to participate? There is truth in George's statement...

oldvet 9 years, 6 months ago

ariandn... the foolish will always mock what they do not know and do not understand.and the Unions represent 100% of big-3 hourly autoworkers, who average a pay/benefit package of nearly $50/hour...and the Unions represent 100% of the Jobs Bank autoworkers, who draw nearly 100% of their wages to do absolutely nothing during a layoff..yes, dear, the Unions are major contributors to the problems faced by the auto companies...

rachaelisacancer 9 years, 6 months ago

A story on NPR this morning covered consumers heading back to the auto dealerships to buy SUVs because the price of gasoline has dropped again. When gas was $4, no one wanted an SUV. Now that gas is back around $2, everyone thinks it's OK to get one. The price of gas won't go back up again. Riiiight.Bring together the incompetence of American consumers with the incompetent American auto industry and the government's incompetent "bailout" plan for economic success and seems to me, we Americans deserve the fallout of a sinking economy.

camper 9 years, 6 months ago

I think the union's day has come and gone. If you make 75 bucks an hour (even if this is adjusted to include benefits) you should be a millionare in less than a decade. And if you start at age 20, you can probably retire before you are fifty. And unions are for the middle class? Not so. Seventy-five bucks an hour puts you in the elite range of wage earners. The UAW has simply overpriced themselves. They are like a good ballplayer who has gotten lazy once the big contract is signed.

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