My esteemed Keloland colleague, Cory Heidelberger has a post worth reading on the Detroit bailout blues. Cory notices that George W. Bush and Dennis Kucinich (it rhymes with spinach!) are in agreement: the big three are too big to let fail. Cory says this:
Two ironies here: one, that George W. Bush is agreeing with Dennis Kucinich, and two, that I, a diehard Kucinich supporter, am not sure either man is right.
It is charming that Cory is so loyal to the only Presidential candidate I know of who claims to have seen a flying saucer. But I am pretty sure that linking Kucinich to Bush on this issue doesn't strengthen the case for the bailout. But then Cory is skeptical of the bailout, as am I.
The only coherent argument for the bailout is that the collapse of the big three, at this moment, threatens to turn a recession into a depression. Thems no small potatoes, as a guy I used to work for once said.
But everyone seems to understand that fifty or sixty or two hundred billion dollars pumped into the automakers now will only allow them to survive to ask for much the same before another Christmas rolls around. It would make just as much sense for the Federal Government to liquidate the Big Three and pay the salaries of all their workers until the economy is officially out of recession.
There are only two reasonable options. One is to let the Big Three work it out on their own. This seems to be Cory's inclination, and I am with him. It might hurt more now, but it would be better for everyone in the long run. The other is to keep the automakers afloat in return for real changes that wean the off the Federal tit and maybe get our money back. There are two major reasons why American automakers are in trouble. One is the burden of union wage contracts. Lawrence Kudlow has this:
Average compensation for the Detroit little three is $72.31. Toyota's average wage is $47.60, Honda's is $42.05, and Nissan's is $41.97, for an average of $44.20.
At those wages, the Big Three cannot compete with the transplants or imports unless they are at least one and a half times as productive. In fact, they are less productive than their competitors. Mickey Kaus notes that the real problem is union work rules that make domestic carmakers much less flexible than their rivals. Kaus produces this juicy quote:
Under the Wagner Act, management manages. What the union does is complain, and negotiate for a rule limiting management's right to do what the union doesn't like. A worker protests that his job should be classified as "drilling special and heavy" instead of "drilling general." The parties butt heads, a decision is reached, and a new rule is deposited like another layer of sediment. At some GM plants, distinct job categories evolved for each spot on the assembly line (e.g., "headlining installer"). In Japanese auto plants, where they spend their time building cars instead of creating job categories, there is only one nonsupervisory job classification: "production."
The "transplants", which means foreign companies building cars in the U.S., can rapidly retool their lines to produces new cars as demand changes. The Big Three can't do anything except at a snail's pace and after rancorous negotiations. Billions of government bailout money isn't going to change that, unless it comes with strings attached.
Tennessee Republican Senator Bob Corker has been trying to negotiate a deal that would put the domestic auto industry on the road to health. The unions and their allies in Congress have so managed to defeat Corker. Their strategy seems to be to get the stop-gap money for now, and get more from the incoming Democratic Congress. That is a recipe for ruin.
Recent Comments