Wednesday, November 12, 2008

Bailout for the U.S. Automakers?

An announcement was made today that Congress is presently preparing legislation to bail out the U.S. automakers. Like the bailout of the mortgage industry, the act is both senseless and needless.

Also, similar to the mortgage industry bailout, this proposed bailout is not really for the U.S. automakers, it is a bailout for the United Auto Workers union. The same union that has driven the U.S. automakers to the brink of collapse now wants their Democrat friends to throw taxpayer money at the problem so the union leadership -- or unions, in general -- will not suffer the consequences of their years of wrong-headed thinking.

Participants in unions should wake up to realize that unions only benefit two groups of people:
  1. The union executives -- those who draw a salary predicated solely on having established a monopoly on labor in some factory or industry.
  2. The below-average workers -- because above-average workers could, in the absence of the union, most likely negotiate a better wage and benefits package for themselves individually.

As we are seeing, however, in the real long-term, unions benefit no one!

  • Unions do not benefit the consumer because they cause prices to rise faster than the rate of inflation in almost every instance.
  • Unions do not benefit the worker because they ultimately make the businesses and industries they dominate to become less and less competitive, ultimately reducing the workers' wages to zero as increasing numbers fall victim to unavoidable layoffs.
  • Unions do not even benefit the union executives in the end -- although they will bleed the union workers and their captive industries for as long as possible -- because when all the workers have finally lost their jobs, then the union executives will also finally lose their jobs.

Do not take me wrong. I am not opposed to groups of workers organizing to strike or negotiate for better working conditions. However, each worker should be able to negotiate their own agreement with the employer as to wages, benefits, working conditions and work practices. They should not be coerced to pay some worthless executives to come around to aid in making the workers' employers less competitive and less successful in the marketplace.

Now, back to the bailout.

Three Steps the Government Could Take to Save the U.S. Auto Industry Without a Bail Out

  1. Reduce corporate and personal income taxes immediately to give the U.S. consumers more money in their pockets to spend on durable goods. Note: The U.S. consumer pays both the corporate income taxes and the individual income taxes. Don't let political tom-foolery trick you into believing anything different than that.
  2. Lift needless federal regulations that cost U.S. automakers millions of dollars while providing absolutely zero value-add to the consumer. The CAFE standards, for example, are absolutely without justification. U.S. automakers should be able to make cars and trucks that consumers want to buy. If the politicians and environmental groups can hoodwink enough consumers into believing they are "saving the planet" by buying a hybrid or some other fuel-efficient automobile, then the automakers will manufacture such vehicles in response to that consumer demand. We do not need the government to tell us what kind of vehicles we ought to buy.
  3. By executive order, liberate the U.S. automakers from the ridiculous union contracts to which they are presently bound. Allow the automakers to hire and fire at will and to negotiate compensation plans with each worker individually.

These three simple steps:

  • Do not require the U.S. taxpayer to be burdened with additional bail-out debt;
  • Would stimulate the economy; and
  • Will not lead to the nationalization of private industry.

This approach is safe, sane and reasonable -- all of which are reasons that the Democrat leadership and Republicans that have lost their bearings will reject them.

(c)2008 Richard D. Cushing


Timothy said...

Hear hear.

This has been driving me up the wall ever since I read about it a few days ago.

I cannot fathom how the auto industry feels it deserves a handout from the American public as a reward for being unwilling to react to consumer demand.

The price of oil has been volatile since September 11, 2001 but the auto industry chose to ignore the warning signs and floated atop fat SUV profit margins. Now that the bottom has fallen out of the SUV/truck market, they want the very consumers they chose to ignore to finance their continued myopia.

Instead of handing out $25B to the industry, why not divide it among the 1,000,000 or so employees of the big three (around $25,000 per employee) and allow them to pay off a mortgage, take a vacation or look for somewhere better to work?

I say, let them collapse. Let the market system work. We need smaller, faster companies who are willing to react and meet consumer demand. Oddly enough, Honda, Nissan, etc. seem to be ready for exactly this sort of upheaval.

This is all wishful thinking as the clout of the voting citizen will never equal the clout of auto (and union) lobbyists.

Timothy said...

Further reading on US automakers and the UAW: