The Right Way to Bail Out the Auto Industry
Let Detroit get its money — but only after Democrats, the Big Three, and the UAW admit their failures.
Admissions by Big Three management
We acknowledge and admit that:
- For over 25 years, in the face of a growing competitive threat from more efficient foreign-owned companies with manufacturing plants in the U.S., we failed to implement a lower, more efficient cost structure in our negotiations with the United Auto Workers union, and failed to effectively manage our salaried workforces.
- We have often failed to adequately respond to vehicle market conditions and consumer desires.
- We have poorly utilized our research and development dollars.
- We have failed as stewards of our shareholders’ money and trust.
- The funds to be disbursed by the U.S. Treasury represent a bailout.
Admissions by UAW President Ron Gettelfinger on behalf of the United Auto Workers
We acknowledge and admit that:
- Our militant abuse of our virtual monopoly position in the 1960s and 1970s led the Big Three to enter into contracts that brought about their serious financial difficulties in the late 1970s and early 1980s.
- For decades, we have run our union for the benefit of our more senior members at the expense of less senior members, including but not limited to two-tier wage structures and, more recently, permanently lower pay for new members.
- We have negotiated and enforced antiquated work rules and ruinous “jobs banks” that have caused the Big Three to be much less efficient than other vehicle producers in the U.S. We unconditionally agree to eliminate the jobs banks and all work rules that are not directly relevant to members’ on-the-job safety or health within six months after the first bailout funds are disbursed.
Joint admissions by Big Three management and the UAW/Gettelfinger
We acknowledge and admit that:
- Instead of permanently fixing the domestic auto industry’s structural problems in the early 1980s, we prevailed upon then-President Ronald Reagan to establish “voluntary” vehicle import quotas. These quotas led foreign makers to build manufacturing and supporting parts plants in the U.S.
- Our continued existence is not a prerequisite for a healthy U.S. economy.
Additional requirements
The parties hereby agree that the bailout disbursements, not to exceed a combined $22 billion, will be the only bailout disbursements made.
Any subsequent statement made by any party to this agreement that contradicts the admissions contained herein will cause funds previously disbursed to become immediately repayable to the U.S. Treasury without recourse.
* * *
These admissions are a small but necessary price that Pelosi, Obama, and Reid must be made to pay to keep their most favored union alive. Similarly, Big Three CEOs must accept their share of the admissions medicine to stay afloat. Finally, the UAW must admit its responsibility for pushing its employers to the brink.
If the parties involved want the bailout badly enough, they will end the posturing and reality avoidance, and make these required admissions. If not, bankruptcy for GM, Chrysler, and perhaps even Ford is the only option that makes sense.
So sign on the dotted line, folks, and you can have your precious bailout money — this one time.
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Tom Blumer owns a training and development company based in Mason, Ohio, outside of Cincinnati. He presents personal finance-related workshops and speeches at companies, and runs BizzyBlog.com.
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10 Comments
1. IndyEnigma:Would make an excellent spectacle & perhaps make Conservatives feel good to see the mighty grovel but all of that will have absolutely NO bearing on success or failure of the Detroit 3! Humiliating these executives, the ruling trio & the union toad Gettelfinger would be fun, no doubt. Giving them money on the basis of a meaningless document is just another episode of the same political play that you criticise, sounds good tho!
Dec 18, 2008 - 4:32 am 2. Brian:There should be a bridge loan with major concessions from the Detroit 3 and the UAW.
1) This is primarily an economic crises hitting the auto industry. Honda is set to lose over a billion dollars in 2008. Toyota and Honda both had sales decline of over 30% last month. Coupled that with the significant sales declines in Japan and it will not be long before Toyota and Honda are requesting a bailout from their government. I bet before June 2009.
2) If the Detroit 3 go down, the economic depression to hit Michigan will be very long lasting. Decades long.
3) I would not be surprised if Toyota rescues GM. The Japanese manufacturers have stated that if any of the Detroit 3 fail, it would be detrimental to their business.
Dec 18, 2008 - 6:21 am 3. David Thomson:“If the Detroit 3 go down, the economic depression to hit Michigan will be very long lasting. Decades long.”
Nothing could be further from the truth. Michigan merely needs to drop its tax rates and become more business friendly. The problem will take care of itself in a few years. And the same holds true for Ohio and the other economically troubled blue states. They are paying the price for electing Democrats and “moderate” Republicans.
Dec 18, 2008 - 7:15 am 4. Maggie:I wish elected leaders would articulate the issues as clearly as this. As for me, the bailout has highlighted the UAW role in politics – so I will not be buying another UAW product.
Dec 18, 2008 - 7:15 am 5. beloml:Maggie,
I think there are millions of people with the same thinking. I certainly will do my best to never give another cent to anyone affiliated with the UAW.
Dec 18, 2008 - 10:02 am 6. saleboter:They can bail out anyone they want. I ahve favored Chevies for over 30 years. Looks like I have bought my last one.
Dec 18, 2008 - 11:45 am 7. Chuckt:Union leadership has been corrupt for decades and the Big 3 (mis)management (with the possible exception of Ford in the early 80s) have ignored W. Edwards Deming’s teachings of building quality vehicles for just as long, all to their detriment. I say let the market play out, the Big 3 can file a structured bankruptcy, so they can renegotiate union contracts from a superior (oxymoronic, I know) bargaining position, see if they can start building better cars and let the chips fall where they may. Toyota, Nissan, & Honda all build quality vehicles that last a long time, are reasonably sized, reasonably economical and hold their value. If the UAW wants to keep their jobs, they must make significant concessions, beginning with the “jobs bank.” If they refuse, then I have zero empathy for them.
Sears was the undisputed retail ruler for decades until a young upstart named Sam Walton came along with a better way, and bumped them off the top spot. The Big 3 could, should and had better learn a few lessons from Sears’ experience and change with the market, or be eliminated. If they fail to do so, then I say bye-bye and good riddance.
Dec 18, 2008 - 2:49 pm 8. DanO:Good comments…especially by David on the “decades long” depression in Michigan…no way…while of course I don’t think even the author believes any of the responsible parties will ever sign on to this document…it IS a factual economic analysis.
(Full disclosure: I live in Michigan, was once a (non-voluntary) member of the UAW while putting myself through school building cars, in the early 70’s…and eventually an MA in Economics from NYU, the most Austrian Economics oriented program I could find).
The economics were clear then, even to an undergrad who had read the right books (outside of class)…it was only a matter of time until today’s situation…but only someone truly interested in (or capable of) long-term thinking, (thus leaving out both union leaders and auto execs) would know that the deals made then were ticking time-bombs that were economically similar to our wonderful Social Security system…
Anecdotal evidence: even then, in the 70’s, temporary layoffs were decided by union seniority…with the more senior workers WANTING to be laid off…why? SUB: Supplementary Unemployment Benefits. You’d get unemployement on the taxpayer’s dime, and the union would make up the difference so you’d get 95% of your take home pay. Layoff? Paid vacation is more like it…maybe today’s “jobs bank” is the same thing…
In any case: I hope for bankruptcy. Allowing for adjustments and true renegotiations, in justice, retirees first…and not a few billion of Fed money put into the sinkhole…until they run out of money again…and come back to the trough time and again…
Does anyone else out there remember when the US had a real steel industry? Is their a difference in the diagnosis, or prognosis?
DanO
Dec 18, 2008 - 3:40 pm 9. G Alston:That’s too complicated. Ford and GM make models that sell well overseas. GM has a car in the UK that gets 55 mpg. Both companies are profitable overseas. Congressional rules re CAFE and diesel and such prevent them from importing them. Simple solution? Rescind these rules.
Dec 23, 2008 - 2:21 am 10. Ronnie Schreiber:“Big 3 (mis)management (with the possible exception of Ford in the early 80s) have ignored W. Edwards Deming’s teachings of building quality vehicles for just as long, all to their detriment”
That’s absolutely not true. More people living in the past as far as Detroit is concerned. Every automobile manufacturer and supplier in Detroit and in the global automotive industry uses statistical quality control. Deming is no longer a prophet ignored in his own land. I know that because I worked for a tier 1 vendor that used statistical QC and had to supply that data to the automakers, both domestic and transplant.
Also, regarding Michigan, it’s a better run state than most. The people of California owe as much money as GM does, maybe more, and California has twice the foreclosure rate as Michigan. Most states have much bigger budget shortfalls than Michigan, which has had a balanced budget since 1963. California will be insolvent before GM and certainly before the state of Michigan.
Dec 25, 2008 - 12:10 am