Blog on the Run: Reloaded

Wednesday, November 26, 2008 7:56 pm

Cut? They already did

I am not enough of an expert to know whether bailing out the Big Three automakers is, on balance, a good idea. I grok some of the arguments on both sides (doing so would preserve a boatload of jobs not only in those companies but also within their many suppliers — but would also reward decades of incredibly bad management, etc., etc.). But the argument for bankrupting them that I don’t agree with, simply because it — hello — ISN’T TRUE — is that the United Auto Workers are somehow the biggest part of the problem, or even a particularly significant part at all. Anti-union folks — for that’s what they are — say the union has to give up its lucrative contracts/benefits because they make the Big Three uncompetitive. This claim conveniently ignores the fact that they basically already did more than a year ago:

In 2007, the Big Three signed a breakthrough contract with the United Auto Workers (UAW) designed, once and for all, to eliminate the compensation gap between domestic and foreign automakers in the U.S.

The agreement sought to do so, first, by creating a private trust for financing future retiree benefits–effectively removing that burden from the companies’ books. The auto companies agreed to deposit start-up money in the fund; after that, however, it would be up to the unions to manage the money. And it was widely understood that, given the realities of investment returns and health care economics, over time retiree health benefits would likely become less generous.

In addition, management and labor agreed to change health benefits for all workers, active or retired, so that the coverage looked more like the policies most people have today, complete with co-payments and deductibles. The new UAW agreement also changed the salary structure, by creating a two-tiered wage system. Under this new arrangement, the salary scale for newly hired workers would be lower than the salary scale for existing workers.

One can debate the propriety and wisdom of these steps; two-tiered wage structures, in particular, raise various ethical concerns. But one thing is certain: It was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010–the final year of this existing contract–total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory. [Emphasis added]

We’re going to have to decide soon, and, again, I don’t know the right answer, if there is one. But can we please have a fact-based decision? Just askin’.

UPDATE: Shorter Republican Senators, in this quote of the day from dday: “If the unions would only play ball by disbanding, we could have the auto industry in the same top shape as non-union entities like the financial industry in no time!”

2ND UPDATE: Just askin’: What would the Big 3’s “health care burden” look like if, as is the case with automakers in other countries, health-care costs were borne by the government via taxes, without profit-making private insurers involved?

UPDATE THE 3RD: Still just askin’: Is there any possibility that the Senate Republicans’ opposition to the Big 3 bailout had anything to do with the fact that if the Big 3 go bankrupt, their debt becomes worthless and the people who hold the credit default swaps on that debt get rich(er)?


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