The big three US automakers have already received a $25 billion "bailout" low interest loan from the taxpayers and now they are frantically asking for another $50 billion from us taxpayers. General Motors has announced that without this additional bailout, they will run out of cash by January.
It is estimated that if the three automakers went out of business, it would result in a $200 billion hit to the US economy. In addition, we are told that 2 million American jobs would be lost from the auto companies themselves, and from peripheral businesses (parts suppliers, etc.). I believe those estimates are overstated and the companies are playing a game of "chicken" with the government to get more bailout money.
If I were President, I would tell the CEO's of the auto companies to pack their briefcases, go back to Detroit and solve these problems by themselves; or go bankrupt. If all three US auto companies went out of business it would be a dramatic event in the history of this country, but out of the ashes of their destruction would come a better, stronger auto industry that would be competitive with the rest of the world. Detroit's problems are all of their own making primarily as a result of ridiculous union agreements and lack of long term research on new technologies.
In the past auto companies agreed to employee pension and lifetime health care agreements that even a junior accountant should have known they could never pay for. With the low cost of gasoline, they continued to produce large gas guzzling cars and trucks based on old technology. Then when the price of oil went through the roof their market disappeared.
But the worst agreement the automakers were talked into by the United Auto Workers was the "Jobs Bank Program". To put it simply, this was a worker security guarantee program agreed to in the mid 1980's.This was a plan to guarantee pay and benefits to union members whose jobs fell victim to technological progress, plant closings, or restructuring. So as the rest of the world became more productive through automation and the digital revolution, the US automakers were stuck with these Jobs Bank agreements. As a result, by 2005 there were 12000 auto workers being paid "not to work". And as Jeremiah Wright would say: "Now the chickens have come home to roost".
I recently read a story about one auto worker. He shows up at 7 am every morning at a Ford Motor Company manufacturing plant and signs in. Then his "work day" starts - he works on crossword puzzles, and watches videos. He says it is monotonous, but his pay is $31/hour plus benefits, for no work. And when he reaches retirement age for this "no work" position he will retire with a very generous pension plus health benefits for life. He is one of the 12000 in the Jobs Bank as of 2005; so is it any wonder the automakers are in trouble?
Automakers are trying to renegotiate this Jobs Bank agreement but the damage is done. And if the big three go bankrupt many of those employee pension and lifetime health benefits will be gone. Or maybe the government will give these auto workers a "bailout" too.
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5 comments:
I read about stupid shit like this and I can't believe that we have not heard about such idiocy until now. I am now part owner in the Big Three, as are all the rest of us, so it's time to be accountable to the taxpayers who now have an interest in your company. Yes, shut 'em down. Permanently. These union highway-robbery programs will never go away unless they are bulldozed along with the rest of the company. Unbelievable.
Your Mom and Dad would be turning over in their graves if they could read your blog. You may have forgotten that they received retirement from GM for years and were covered until the end of their lives by the GM health benefits. The only difference is that he retired after working hard for the company for many years. The union leaders who negotiated these contracts have killed these companies.
None of this would have affected my parents because when dad retired (1975), General Motors was well managed. In those days I was myself a company CEO and we had to "fund" our employee pension accounts each year. What this means is the company had to put the money aside and they could not touch it, even if they went out of business.
The past 20 years companies were not required to do that and poor managers used the money for other purposes, believing "things would get better and the money would be there". Look at Enron - all those people lost their pension accounts, which were supposed to be "funded" every year.
Part of this bailout is an 8.5 billion payment GM owes to the United Auto Workers to fund their pensions.
Lee Iacocca's latest book is titled "Where have all the managers gone?" I think that pretty much says it all.
Mismanagement in companies across the country is a serious issue. I see it in my company on a daily basis. Nobody will make the tough decisions, and everyone has the mentality that things will get better soon, even as the company is crumbling all around them. Huge companies and big government can survive in spite of themselves just because of their size and momentum. But these problems at the Big 3 are enormous, and I agree that they should be left to die.
They should all file Chapter 11, reorganize and cut costs to the point where they are making a nice operating profit. All union benefits need to be eliminated. And in a perfect world, they would hire Ben Stein as the new CEO, with Joe the plumber as senior VP.
The problem in management is the same as the problem in politics: everyone is simply trying to keep things going till they move on -- pass the buck on to the next guy to take the fall. Keep the populace happy for now, when you need to get reelected. When the shit hits the fan down the road, you'll already be gone. Well my friends, the shit is hitting the fan, and the whole room is going to be painted dark brown very soon.
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