Saving Citigroup while the auto industry suffocates. Class warfare at its worst.
I'm no fan of the auto industry. After all, the industry - especially the big three American auto manufacturers - have utterly failed to adapt to changing times, producing gas-guzzling, carbon-spewing urban assault vehicles that fly in the face of everything we know about the way the world is changing. They've opposed higher mileage standards, pretended global warming doesn't exist, and pushed against alternative transportation policies.
That said, it's time for Congress to step in and do what's necessary to save the American auto industry.
There are lots of problems with the auto industry. Their long-term problems are of their own making - and will either be solved or not, and they'll either fail or not, over the long term. But in the short term, the auto industry's troubles are not of their own making. Right now, they're being sucked into the giant economic black hole of the Wall Street credit crisis.
For most Americans, there are three big-ticket items that require substantial credit in order to purchase -- a home, a car, and a college education. And in a world where banks simply aren't lending money -- either to consumers or to major corporations -- the auto industry is liable to die on the vine.
After all, they produce cars that cost thousands of dollars to build. And consumers buy them, almost always, on a five-year loan. The materials and labor have to be purchased in today's dollars, but the manufacturers get paid back over time. The money has to come from somewhere - and if the banks aren't lending, they can't produce cars.
And if they can't produce cars, millions of jobs will disappear - and fast. There's only so much cash to burn before paychecks start bouncing. I just got word from an old friend that her sister was laid off from GM last week. For many of us, this is a theoretical issue, a policy question to be debated on blogs and talk radio. But make no mistake: millions of families across this country are watching to see if America will step in before the holidays and provide a temporary bridge loan -- a short-term bridge to a long-term future.
Frankly, I find it somewhat insulting to see that Citigroup - another big-time financial institution that played fast and loose gambling with their depositors' money - gets a $45 billion investment organized in just one pizza-fueled all-nighter; while Congress spends weeks debating whether a real industry, with real blue-collar working-class jobs at stake, "deserves" to be rescued with a $25 billion loan. And yeah, that's a critical element: We're talking about a loan to the auto industry, while the financial services industry gets gifts of cash - which, in some cases, are turned around into dividends... a direct transfer of wealth from future taxpayers to present-day investors.
There's some serious class warfare going on here; and as usual, it's a war of the rich on the working class. Sure, every member of Congress knows a bank president, a stock broker, a hedge fund manager - and very few know the engineers, technicians, mechanics, and sales people that populate the auto industry.
The financial services industry created this hurricane sweeping through the credit market; and as a result, the auto industry is facing an economic disaster akin to their very own Katrina.
It's the auto industry, and lots of other small manufacturers, that built the middle class in this country. Make no mistake: When you hear wealthy Wall Street executives and right-wing talking heads complaining about "excessive" labor costs, understand that what they're doing is stoking class resentment. They're trying to tell $10/hr, $15/hr, and $20/hr workers that those lowly bolt-turners who build cars don't "deserve" $30/hr, $40/hr, $50/hr. And that's gross. Why shouldn't a 20-year veteran automotive technician be making a solid middle-class wage and supporting his (or her) family? Is the goal really to drive DOWN wages for auto workers? Why aren't we talking about ways to drive UP the wages of everyone else?
As I said, the auto industry has lots of problems. But none of them are going to be fixed by putting a million or two million people out of work. The auto industry needs to reform itself - and start producing more fuel-efficient vehicles, focus on reducing emissions, and modernize their fleets. But that's not going to happen if they're gone by spring break. And that's a very real possibility.
Postscript: OK, one more thought. I couldn't say it any better than this blogger from Detroit:
Some of the people saying let them fail about Detroit's automakers are very the same people who had no problem with the $700 billion bailout of the very "industries" responsible for the sudden evaporation of so many billions of dollars in equity and credit. I would like to show them the state of this city and ask them to think about how much worse it (and hundreds of other cities reliant on the auto industry) will get if any of these three employers were suddenly unable to pay their employees or suppliers. This isn't Manhattan. We're not talking about Goldman Sachs associates suddenly not being able to pay the mortgages on their $350,000 parking spaces in Tribeca for the Ferraris they bought with their 2006 bonuses. We are talking about the lifeblood of a region that has already suffered so deeply, and I can't believe how many people are speaking so flippantly about allowing this great American industry to die. ...If we're going to spend $700 billion to bail out those greedy firms who successfully used chicanery for years to manufacture an economy built of lies, shouldn't we also spend $25 billion to save one of the few remaining industries that actually design, engineer, and manufacture something real and necessary in this country?
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November 25, 2008 |
Kari Chisholm | Comments (78 so far)
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Posted by: Dan Petegorsky | Nov 25, 2008 5:37:21 AM
Kari - I've felt exactly the same thing myself the last couple of days. Rachel Maddow really grilled Eric Schmidt on this last night - essentially asking if there was any place in the evolving recovery plans for either the middle class or for manufacturing. Not to mention the various posts re. the CITI bailout helping underwrite crap like their shelling out $400 million for naming rights. to the new Mets stadium.
Kevin Phillips does a great jobs documenting the displacement of manufacturing by financial services as the favored sector of the US Economy in Bad Money.
Posted by: sharon | Nov 25, 2008 6:00:56 AM
Well said, Kari. I know this might not be a popular post, I think you are so brave to put this out there. I still believe in an America where skilled labor makes a living wage, and has a seat at a bargaining table. Maybe that is a throwback, but I think the future is what we make it. And I do encourage people to check out the Chevy Malibu at your nearest showroom. That car is perfect Americana at its finest.
Posted by: Jesse Cornett | Nov 25, 2008 6:38:38 AM
Here’s a wacky notion: If Congress is going to consider such an auto industry bailout, which I won’t disagree is needed, they should consider a voucher program. That’s right, send a voucher to every taxpayer instead of a direct bailout.
This will help the auto industry. This will help car salesmen. This will help the local economies all over the county. This will help the American consumer. We could buy or sell our vouchers, and industrious car buyers could compile as many of them as needed to get the car of their choosing.
Sure, there would be tweaks to work out. For instance the government would have to regulate car prices for the duration of time that the voucher is valid. But , heck why not?
Posted by: Leslie Carlson | Nov 25, 2008 7:09:13 AM
Kari, well said. I've also wondered how we could bail out banks who employ white-collar workers while leaving the blue-collar jobs to wither away at the automakers.
I'm interested in saving the automakers, with this caveat: that we help them retool to make the cars of the future. And that means both manufacturing efficient, innovative, new technology as well as helping consumers more if they purchase more efficient vehicles. I'm not sure exactly how to do this, but I'm encouraged to hear Bill Ford indicate his willingness to do just that.
Posted by: FormerUAW | Nov 25, 2008 7:28:31 AM
The only similarity is overpaid management.
The main difference is that Citibank does not employ unskilled labor that makes around $70k a year with great benefits, that are difficult to fire [see if the UAW would allow 50,000 people to lost their jobs for the good of the company!] and in an enviornment where seniority means more than performance. If we had national healthcare that would help with costs but still the non-union shops like Honda and Nissan are still able to make a cheaper and arguably better product. Unions are only a part of the problem, but a Big Part.
Blue Collar is great, but the majority of these jobs are not that specialized and when we employed summer help they were generally picks up what to do within a month.
Posted by: sharon | Nov 25, 2008 7:36:30 AM
FormerUAW- What are you talking about? Do you have any idea how many have been laid off? More than 100,000 in Michigan alone. What skills do you think it takes to be a "financial advisor" for Citibank? And the autoworker making 70k is largely a myth. Starting salary now in a union factory is 15.00/hr in the last contract- in which the union made HUGE concessions.
Posted by: Dan Petegorsky | Nov 25, 2008 7:49:54 AM
While much of the discussion - here and nationally - is focusing on the details of the auto industry bailout, I'm finding myself much more distressed over the lack of transparency and debate over the necessary restructuring of the financial industry, whose depredations have caused vastly more harm than the auto industry, yet whose minions seem no less diminished in their power and influence.
This is sadly reminiscent of the early Clinton Administration, whose kowtowing to the bond markets in crafting economic policy left Clinton himself saying they'd essentially turned into Eisenhower Republicans and James Carville famously quipping, "I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter, but now I want to come back as the bond market. You can intimidate everybody."
This isn't in any way to belittle the scale of the crisis, but rather to underscore what increasingly feels like seat-of-the-pants crisis management with no coherent framing/explanation of what the underlying problems are and how the solutions are addressing those. It shifts from one day to the next - much like the Administration's ever shifting rationales for going to war in Iraq (only to be followed by the ever shifting framing of the reasons for staying and the strategies for "winning.")
Posted by: Joe Market | Nov 25, 2008 8:05:53 AM
"They're trying to tell $10/hr, $15/hr, and $20/hr workers that those lowly bolt-turners who build cars don't "deserve" $30/hr, $40/hr, $50/hr. And that's gross. Why shouldn't a 20-year veteran automotive technician be making a solid middle-class wage and supporting his (or her) family?"
If you're going to pay the lowly bolt turner $40/hr, and your competition only pays $20/hr - you're going to have to make up the difference in some way. Which ultimately leads to a car that has less overall value than the competitors. The labor unions might be good for a few in the short run, but over the long term - as we can see - it's not sustainable.
Posted by: Zarathustra | Nov 25, 2008 8:06:33 AM
Before "the wartime president", before 9/11, before Cheney met with energy execs, Bush began his first term calling himself "the CEO President". I still say it was his most authentic moment and we should take the statement very literally. The Iraq-style "have to keep on keeping on" stems from the fact that his style of managing the crisis largely mirrors the management style at Citigroup that caused their probs, I do believe.
Posted by: Urban Planning Overlord | Nov 25, 2008 8:08:59 AM
Two points:
1. There are lots of automobile manufacturing jobs in the U.S. that will remain even if one or more of the Big Three go under. They just happen to be working for foreign car companies. Sure, they're not making as much as the UAW unionized workers, but they're making living wages.
2. The Obama administration needs to craft a health care plan that completely removes employers from the health care business. It will mean higher general taxes for us all, but removing the burden of providing health care coverage from employers, big and small, will take a growing millstone off of their backs that reduces their ability to hire new employees.
Posted by: Urban Planning Overlord | Nov 25, 2008 8:10:56 AM
Regarding my second point - if the Big Three are relieved of providing health care insurance to their current and past employees it will be the equivalent of a multi-billion dollar bailout.
Posted by: Garrett | Nov 25, 2008 8:16:26 AM
Drive down health care costs and we'll fix a lot of problems right there. Detroit needs to start putting out fuel efficient cars...like yesterday.
This is also an important issue to our national defense. Those manufacturing jobs are skilled workers who will build our war machines if for some reason we get in another shooting war. I'd rather build our own tanks than rely on Mexico to provide them.
Posted by: Kari Chisholm | Nov 25, 2008 8:19:55 AM
the lowly bolt turner
Sorry if I wasn't clear, but I was trying to point out that they're talking about these folks using epithets like "bolt turner". There are no more bolt turners in the auto industry.
The menial labor jobs have all been replaced by automation. What's left are highly-trained and specialized technicians and engineers.
And yes, there are non-union workers employed by foreign car companies making something less. Fine. So what? Are we seriously arguing that it'd be a good thing for American to drive wages down rather than up?
And yes, UPO, a major reason we do universal health care - and do it by ending the employment-based system - is to save American manufacturing.
Posted by: sharon | Nov 25, 2008 8:29:58 AM
If the big three and their suppliers go under, it is unclear if the foreign car makers will be able to continue to manufacture cars here at all, no matter what they pay their workers. For example, Delphi would likely liquidate if GM goes bankrupt. They are the only US supplier of the cockpit module for the Mercedes plant in Alabama. Also, the foreign cars have a huge build up of supply right now, too. This is a global crisis.
Posted by: FormerUAW | Nov 25, 2008 8:33:03 AM
"The menial labor jobs have all been replaced by automation. What's left are highly-trained and specialized technicians and engineers. "
Source Kari?
Not my experience. Just because you have to monior a computer on the line does not make you a skilled technician. And last time I checked engineers are not blue collar workers. Some that are: Part pickers/stockers, Forklift and Pallet Mover Drivers, Shipping and Receiving, plant janitors, interdepot truck drivers all draw union salaries and benefits.
Posted by: Greg D. | Nov 25, 2008 8:36:21 AM
Remember the news stories a few years back about some cracker town in Texas that passed a law requiring everyone to own a gun? The only way the feds can save Detroit would be to pass a law that requires everyone to purchase a Chevy Suburban (or Ford or Dodge equivalent).
The UAW members and retirees deserve a fair deal and that may require short term aid to the manufacturing companies. However, the Big 3 have buried themselves with bad management decisions going back 30 or more years, and I don't think any form of government intervention (other than the mandatory Chevy Suburban law suggested above) can save them from drastic reorganization. They sell products that are generally inferior to their foreign competitors. They have legacy costs that are obscene. And they have a bizarre system of dealerships which results in too many dealers trying to cut the throats of their competition while at the same time squeezing every last dime out of the consumer.
Chapter 11 - or perhaps some equivalent new legislation adopted specially for the automobile industry - will allow the manufacturers to eliminate about half their local dealership network without complying with expensive state "automobile franchise mandatory buyback" laws, and will allow the manufacturers to offload their legacy costs to the Pension Benefit Guaranty Corporation and/or the federal government.
UAW current contracts - which are considerably less lucrative than the old days - are not the problem and should not need significant restructuring.
Posted by: Jenson | Nov 25, 2008 8:39:55 AM
$700 billion bailout? That's chump change. You should see how much the Federal Reserve as already doled out. They've already pumped about $1 trillion in loans, many of which will go bad leaving the American taxpayer on the hook for that bill that's coming.
This constant news story of what Paulson is doing is a waste of time. Bernanke and the Federal Reserve beat him to the chase. We are already soaked in debt. Sure, what's a little more debt to help the auto industry? I don't drive, but I saw prices were $2.19 for unleaded. That's cheap enough for people to forget about going green and start driving their SUV's full board again.
Strive for maximum destruction. Carry on . . .
Posted by: Scott J | Nov 25, 2008 8:58:21 AM
Kari,
It has been leaked (whether true or not is a separate discussion) that Obama favors a pre-packaged Chapter 11 filing for GM. This is smart and is real change.
GM could come through this without laying off the union workers and would be a more nimble player, better able to compete with Honda and Toyota. Honda and Toyota manufacture a tremendous quantity of cars here on US soil and do so profitably. They are the model to copy.
What's wrong with a pre-packaged Chapter 11 filing. The only major losers are the stockholders.
Posted by: Steven Maurer | Nov 25, 2008 9:01:41 AM
Bail out bad management? How about buy their companies and fire them instead?
It would save us all money. Seriously.
The auto executives flew in their private jets to DC to beg for a 25 billion dollar bailout. This dwarfs the amount of money the companies are worth. Ford, for instance, has a market capitalization of a mere 4.3 billion.
What these companies need, in other words, is a complete purge of their ossified and self-dealing management. Any money we put into them should begin at buying control of these corporations to do exactly that.
Oh, and by the way, that whole "UAW is overpriced" bullshit comes from the 1970s. Today, unions are lean.
Posted by: Jenson | Nov 25, 2008 9:06:06 AM
Here's another way to look at it. Our public debt stands at $10.6 trillion at the moment. The average interest rate is 4%. China owns about 7.5% of the debt.
So we will send the Chinese a check for about $32 billion this year to cover the interest portion of the US Treasuries they hold. Yet, we are hesitant to take $25 billion of taxpayer money to help the auto industry here.
Maybe we should ask China to bail us out.
Posted by: Kari Chisholm | Nov 25, 2008 9:14:34 AM
What these companies need, in other words, is a complete purge of their ossified and self-dealing management.
Sure. If that's one of the conditions, I'm OK with that.
And as I said, their long-term problems require long-term solutions - and the automakers need to take a serious look at their business models.
But their short-term problem is NOT of their own making. It's the fault of the Wall Street casino gamblers.
Give 'em a short-term bridge loan - say 12-24 months - so they can leap across the chasm that's opened up beneath their feet.
Posted by: John Calhoun | Nov 25, 2008 9:15:57 AM
It is clear that action needs to be taken to help the middle class and reduce unemployment that is hitting this country. So far the actions of the administration have been entirely focused on the credit markets. While critical and necessary these actions are not sufficient to keep us out of a huge economic disaster. Paulson has been obstinately avoiding solving the mortgage problems at the heart of the mess and this needs immediate attention. He has also refused to force the banks to lend out the money that they were given. Frankly if people with jobs could get mortgages and car loans and businesses could get cash to run their businesses more people would buy cars and some of the auto problems would resolve themselves. Paulson is still waiting for the free market to solve the problem when it is clear that this will not happen in the short run. The loans to the banks without requirements to open up the credit spigot is incredibly frustrating.
The question of the auto companies is part of the problem of how we stop the bleeding and get the country back to work. Obama has proposed a major work program which is the classic solution and will clearly help but does nothing for the auto industry.
The real problem with giving money to the auto industry now is that they are really already bankrupt and their currrent structure is such that they will just chew up the funds and then ask for more. That is why Congress told them to go back and put together a plan that will show how they will use the money to get back to solvency. Congress is acting like the banker they have become as the lender of last resort. However, they still believe, as do I, that they should be lending money to the auto companies, not just subsidising them.
The question is not should we provide funds to the auto companies. The question is what conditions should we require so that this is not just a black hole with no hope of ever getting the tax payers funds back; which we did with Chrysler. The fact that Paulson has not demanded enough from the banks is no excuse for adding addtional loans without doing it properly.
Posted by: Mike Austin | Nov 25, 2008 9:26:19 AM
I'm willing to bet that a major reason why Citigroup was bailed out is that Saudi Arabia holds a large, if not controlling, stake in it.
Posted by: Mike Austin | Nov 25, 2008 9:26:55 AM
I'm willing to bet that a major reason why Citigroup was bailed out is that Saudi Arabia holds a large, if not controlling, stake in it.
Posted by: Mike Austin | Nov 25, 2008 9:27:01 AM
I'm willing to bet that a major reason why Citigroup was bailed out is that Saudi Arabia holds a large, if not controlling, stake in it.
Posted by: John Calhoun | Nov 25, 2008 9:29:58 AM
That large Saudi stake is about 5%. Not a factor. You don't have to look for nefarious reasons for bailing out Citi. It is the classic, too big to fail.
Posted by: Eric Parker | Nov 25, 2008 9:35:59 AM
What would be better is to have congress do what they did during WWII - take over the industry alltogether and tell them what they are going to produce. Instead of tanks and such like they did during WWII, they now can force the industry to produce the hybrid cars and the like that we really need.
Forcing the issue like this on the auto makers is the only item the big 3 understand.
Posted by: Joe Market | Nov 25, 2008 9:47:37 AM
As defined by the current United Auto Worker contract negotiated with the "Big Five" (GM, Ford, Chrysler, and top parts makers Delphi and Visteon), an auto "production worker" is a job description that covers anything from mowing grass to cleaning the toilets. In the real world, these jobs would be outsourced to $8 an hour, no-benefit wage earners, but on Planet Big Five, these jobs get the same wages as any auto line-worker: an average $26 an hour ($60,000 a year) plus benefits that bring the company's total cost per worker to a staggering $65 an hour.
But at least the grass cutters are working for their pay. The UAW contract also guarantees that 12,000 autoworkers get full wage for doing nothing. On the heels of Miller's straight-talk, the Detroit News reported that "12,000 American autoworkers, instead of bending sheet metal, spend their days counting the hours in a jobs bank." These aren't jobs. And they certainly aren't being "lost" to China.
"We just go in (to Ford's Michigan Truck Plant) and play crossword puzzles, watch videos that someone brings in or read the newspaper," The News quoted one UAW worker as saying. "Otherwise, I've just sat."
The coming months will be painful for many American autoworkers. Accustomed to a certain lifestyle, they will see their wages cut in half, jeopardizing second homes, college tuitions, and car payments. One blue-collar Delphi worker interviewed by the Detroit News makes $103,000 a year operating a forklift and fears the consequences if his pay is drastically reduced. But many Americans will ask how a forklift operator felt entitled to a six-figure income in the first place (according to Bureau of Labor Statistics, the average forklift operator wage in the U.S. is $26,000).
Posted by: Bill Bodden | Nov 25, 2008 10:03:16 AM
There's some serious class warfare going on here; and as usual, it's a war of the rich on the working class. Sure, every member of Congress knows a bank president, a stock broker, a hedge fund manager - and very few know the engineers, technicians, mechanics, and sales people that populate the auto industry.
"... every member of Congress..." Does that refer to all Democratic members, Republican members, or both?
Posted by: Jack Roberts | Nov 25, 2008 10:04:26 AM
There's class warfare going on here alright, Kari, but you're the one playing that card.
I support a bailout for the automobile industry, too, but so far no one seems to have figured out quite how to do it. As Obama said at his press conference yesterday, the CEOs of the Big Three didn't do themselves any favors by coming to Washington without a real plan to extricate themselves.
The Wall Street bailouts, including Citigroup, are galling but unavoidable. We learned from the Great Depression that we simply can't afford a meltdown in the financial markets.
The main difference between thema nd the auto industry is that these banks aren't in trouble because they can't compete. Once their financial situation is stabilized, there is no reason to believe they will simply sink back into insolvency.
With the American auto industry, there is a real fear that any bailout will simply postpone their bankruptcy unless they have a viable business plan that allows them to compete.
That's what both political parties in Washington are looking for. I'm not just talking about labor costs; they have already made significant moves in that direction. They need to look at both the quality of their cars and the current market (including, but not limited to, gas mileage).
I hope they will come up with something--and soon. But omparing their plight to that of Citigroup, and playing the "class warfare card," is not helpful.
Posted by: Becky | Nov 25, 2008 10:10:29 AM
Kari
What a great post and what good comments after - mostly. Former UAW...it is good that you are a "former" if you don't respect your co-workers and the work they do any more than it appears.
I think everyone above the factory floor in the big three should be fired immediately. Bring is some fresh new ideas in the corporate towers and design some cars that are on the cutting edge instead of the same ole same ole. Then let the factory floor folks build them.
I am a buy Union and buy American kinda girl - but it is nearly impossible anymore. I stil drive an american car but will have to let it go soon in favor of someting that gets better milage. It has well over 200 K on it and I have had no big problems with it.
I think bailing out the industry (Ford and GM) must be done but only with very short and very strong strings (ropes) attached. Chrystler I am not so sure of - we did that once and they did not seem to learn their lessons.
For the big three to fly in private corporate jets to beg for my taxes is insulting and beacuse of that I think all their personal assistants should be canned as well. Starting with who ever called the airport and told them to get the plane ready...stupid, stupid, stupid.
We also need to go to the Wallstreet boys who bankrupt their companies and say --- "Remember the money you took with you, well we want it back. Now!" attche their bank accounts and all their property till they give us our money back.
Treat them like we would a common robber, make them pay their victims. I'd like to see a little community service in their furture - maybe cleaning up the highways and serving the homeless would humble them just a little. Heaven knows they could all use some humbeling.
Posted by: George Seldes | Nov 25, 2008 10:11:49 AM
Save the workers. Don't save the industry.
What America needs is a crash program to rebuild our rail transit systems, both city-level and cross-country, which the auto industry consciously and intentionally destroyed.
Those workers would be just as happy to build something America desperately needs as something that America most definitely does not need, which is more cars and trucks.
Posted by: Dan Gicker | Nov 25, 2008 10:23:30 AM
I agree with Jack, congress and Obama are asking for automakers to come up with a decent plan for the funds. The fact that they aren't asking banks to do the same doesn't mean they should give automakers a blank check. Automakers have done some pretty crappy things like oppose CAFE increases and killing the electric car (GM-EV1). Congress is right in asking for prudence. The fact that they aren't being prudent with banks doesn't mean prudence with automakers is a bad idea.
Posted by: Kari Chisholm | Nov 25, 2008 10:24:38 AM
There's class warfare going on here alright, Kari, but you're the one playing that card.
Sure. Guilty.
There's been a class war going on for decades in this country, but it's been the rich pounding on the working class for years. And every time a Democrat or a union pops up to object - ever so slightly, and sometimes timidly - the wealthy and their apologists scream "CLASS WARFARE!" as if that wasn't what they were doing all along.
Posted by: LT | Nov 25, 2008 10:28:20 AM
"That's what both political parties in Washington are looking for. I'm not just talking about labor costs; they have already made significant moves in that direction. They need to look at both the quality of their cars and the current market (including, but not limited to, gas mileage)."
Thank you, Jack.
Some of your fellow Republicans have not yet figured out that it wasn't unions which decided to pay Big 3 executives more than 15 times what the head of Toyota makes.
Rail is not a total answer, esp. to those in rural areas or for jobs like outside sales.
As Wes Clark wrote in a recent op-ed (New York Times, I think) there is a need for the auto industry for more than just personal automobiles. Do we want foreigners making Humvees and those MRAP anti-IED vehicles for the military?
Those demanding "pain" for labor and dealerships but not for executives (like that character who left as a Dow Jones executive and was talking about his book on Meet the Press) seem to forget that part of the Chrysler bailout was Iacocca being a dollar a year man and nominating Doug Fraser, head of UAW, for the Chrysler board. What business model is Toyota using? Why does VW have so few problems with credit?
THOSE are the questions that need to be asked, not just who should suffer "pain" so that the auto industry survives.
Posted by: Kevin | Nov 25, 2008 10:32:22 AM
I don't drive, but I saw prices were $2.19 for unleaded. That's cheap enough for people to forget about going green and start driving their SUV's full board again.Strive for maximum destruction. Carry on . . .
In a round-about way this comment goes directly to the point in Kari's post about class warfare.
Riding public transportation is in many ways a less viable option for blue collar workers. Mostly because many of them live quite a ways away from their job. For example, I drive almost 40 miles one way to get to my job. Now, I could work closer... for a LOT less money. As it is I earn less than $40k per year.
The other part of it is that those blue collar or lesser skilled office types who do commit to the green ethic of not driving a vehicle have no choice but to add to the urbanization of America because that's the only place where they can viably live that lifestyle. My oldest daughter and her boyfriend are among this group. Even so it has it's limits. I frequently get phone calls asking if I'll come give her or both of them a ride home from the grocery store because they've got too much to realistically take on the bus. And of course the alternative to that is much more frequent trips to the store which is less efficient/cost effective, and they earn less than I do!
Posted by: rural resident | Nov 25, 2008 10:37:41 AM
The auto firms should -- and will -- receive federal aid. It will come with strings, but it will come soon. Moving toward national health care, and lifting the burden of the legacy medical care costs off the backs of this industry will help immensely. That's why Obama should use this opportunity to push for national health care as part of his overall stimulus strategy.
Claiming that auto workers make "$75 an hour" by attributing the pension and health care costs of retirees is dishonest and spiteful. The retirees have completed their service to their employers under contracts in effect at the time they worked. They traded current for future compensation at the time, which many conservative probably considered foolish. There is no justification for cutting their benefits now. Pay levels for UAW workers, including all elements of compensation, averages somewhere around $40-$45 an hour for current employees. That's higher than average manufacturing industry pay, but it helps stabilize the middle class. We should be trying to find ways to bring others UP to this level, not bring auto workers' pay down.
I'm amused by the pundit class making an issue of auto workers' pay, but not saying anything about the 25-year-old hotshots on Wall Street making $500,000 a year in pay and bonuses for punching computer keys that move money back and forth. I'm still waiting for the first talking head to advocate for drastic reductions in pay for everyone from the mail room attendants to the CEOs in the financial community. There are plenty of people out there who can (and would!) do these jobs for a lot less than the gag-inducing compensation too many of these folks get.
All that said, it's interesting to see the indignation of so many BO folks about the effects of auto industry declines. First, Portland-area Dems have been working for years to make cars persona (automotia?) non grata in the state by creating artificial shortages of road capacity and promoting higher costs for everything from car titles to gas.
I guess it's also easier to be outraged about an industry in another part of the country. Many of the same people wringing their hands over those middle class jobs in the rust belt (and their worry is well placed), cheered as middle class jobs and families were demolished by politically-caused decimation in the timber and fishing industries right here in the Northwest. Didn't see much outrage from Portland Metro and Willamette Valley folks when that happened.
Posted by: Dan Petegorsky | Nov 25, 2008 10:43:59 AM
Jack said, The main difference between them and the auto industry is that these banks aren't in trouble because they can't compete.
Can I press you on that a bit, Jack? I realize that we're talking about a wide range of institutions under the now almost quaint term "banks" here, but:
Isn't it the case that not only the now failed investment banks but even the likes of Washington Mutual were only able to "compete" in the credit markets of the past decades by peddling products (NINJA loans, etc.) that were insane? Or, more to the point, it's not that the "banks" could or couldn't "compete," but that the entire credit market was an insane construction - one in which the only way to compete was to lure both credit buyers and investors into an ever deepening cesspool of leverage and risk.
Posted by: Jack Roberts | Nov 25, 2008 11:17:23 AM
Dan, I would agree that there were systemic problems in the financial markets. Without relieving these companies and their executives of culpability, I think we can agree that there was also culpability in the public sector in a lack of oversight, not to mention some ill-considered deregulation and mistaken regulation.
One of the best examinations of this, by the way, comes from former-Clinton economic adviser Joseph Stiglitz in his book The Roaring Nineties. Among other things, Stiglitz makes clear that there was a bipartisan culpability.
That doesn't mean, however, that the financial institutions can't survive now if they are bailed out. The problems with the financial industry generally are not like the problems that seem unique to the U.S. auto industry.
Posted by: Dan Petegorsky | Nov 25, 2008 11:27:40 AM
Jack - I absolutely agree on the bipartisan culpability, which is why many have raised eyebrows if not howls that some of the key culprits are winding up with plum jobs in the Obama Administration.
On survival of the auto industry versus the financial service companies: the investment banks will certainly have an easier time reorganizing.
Posted by: Gregor | Nov 25, 2008 11:41:17 AM
Am I my brother's keeper? The unions took that question seriously and have achieved amazing salaries for people throughout the auto industry. What I hear mostly here are people wanting to bash the unions for a job well done. Legacy costs were prevalent throughout industry until about 10-20 years ago when those funds were raided and depleted in non-organized companies. Only organized labor has managed to retain these benefits and people want it taken away and to perpetuate those crimes. This is the folly of imbeciles.
IMHO, if the economy was in great shape, people would still be turning away from the SUVs because of the sudden and drastic change in oil prices. When the cost of a tank of gas more then doubled, that was when people were no longer interested in their SUVs. That was when prices in every market rose. That was when the summer vacations evaporated. That was when the pain of the home-losts spread to those more fortunate.
Our present financial crisis is related to oil more then anything else. We simply cannot quickly recover from the blow the oi companies inflicted. The recent lowering of prices was the result of the decrease in demand. It feels good to watch the oil companies rush to drop the price when demand slowed. Frankly, I look forward to their collapse as a green economy emerges and they are left wondering what to do with all the infrastructure we don't need anymore and all that oil. I can dream anyway. We took a step toward independence when we stopped driving so much and it hurt them. That was a pleasant moment.
Posted by: blilzzak | Nov 25, 2008 12:09:31 PM
I don't see why the auto companies can't file for bankruptcy. Plenty of big companies (including United airlines, Delta airlines, Texaco, and PG&E) have filed for bankruptcy and survived. If the auto companies file for bankruptcy the assembly lines will keep moving. Bankruptcy is a reorganization, not a shut-down.
Posted by: Ned | Nov 25, 2008 12:17:18 PM
The unions took that question seriously and have achieved amazing salaries for people throughout the auto industry.
Yeah, and that's part of the problem. In a competitive environment, if you're paying people 'amazing salaries' you better have an amazing product to back it up. With out that, all you will be doing is begging taxpayers for bailouts - because it's not a business model that lasts.
Posted by: joel dan walls | Nov 25, 2008 12:46:07 PM
I think we need a few more politics-of-resentment posts. "Those damn UAW members have better health coverage than I do, so obviously we need to tear them down to my level, and while we're at it, we can give top management some more goodies and throw shit at feminists, gays, Jews in Hollywood, and whoever else Rush and Sean hate today."
Posted by: Kurt Chapman | Nov 25, 2008 12:58:02 PM
there are a whole lot of people guessing at what domestic UAW auto workers do and what they make. I have two brother-in-laws recently retired from Ford in Louisville, KY and a nephew who works the swing shift there. Ford and the UAW have a long history of animis, but over the past 15 years in Kentucky have really been working together. UAW workers with 5 or more years seniority pull down about $60/yr before shift differential and OT. Newer hires are on a lower or two-tiered pay plan which was narrowed in the last round of contract negotiations. There are PLENTY of jobs in domestic auto manafuacturing plants that still work impact wrenches, rivit guns and small hand tools. Each plant has a whole army of material handlers who get parts from various spots to the line in a timely and efficient manner.
The problem with the Big 3 is entirely of their own doing. To blame it on the UAW, or call it blue collar warfare is just simplistic. Management has made some astoundingly poor decisions over the past 25 years. They have also fought reasonable CAFE standards increases since 1988. concessions won during negotiations have gone into purchasing other companies like Hertz, Volvo, Rover, etc rather than a wholescale upgrade of older facilites. That is not to clear the UAW however. There are still stranded legacy costs for retiree healthcare and pensions that are underfunded and many UAW diehards who refuse to bargain away such interesting perks as 2 years of sub pay in the event of a lay-off.
I too wonder why we can socialize the risk of AIG and Citigroup 9among others) yet kick the Big 3 to the curb.
Posted by: Eric Parker | Nov 25, 2008 1:17:13 PM
"The problem with the Big 3 is entirely of their own doing."
Which is why we need the new administration to can the execs, take the industry over, and tell them what to make and how to make it. They have shown they can't be trusted any longer to continue by themselves. They have blown their chances and they will have to be led by the hand of the adult (the new administration)like a child would be led when the child is in need of suprevisory guidance.
Posted by: Dan Petegorsky | Nov 25, 2008 1:35:54 PM
And while folks are demonizing the autoworkers, ponder this: workers at the mortgage factories that were right in the middle of the credit collapse were pulling in more per month that your UAW worker was in a year.
This American Life had a fabulous program a while back called The Giant Pool of Money, which is one of the best explanations I've encountered of just how this all worked.
One of the folks they interviewed was essentially an assembly line worker at one of these factories - making between $75-100,000 a month. Listen to the show or read the transcript - and then see how you feel about those awful overpaid autoworkers.
Posted by: Jenni Simonis | Nov 25, 2008 1:44:50 PM
Before my parents moved to Texas, they lived in Michigan. Both were born there and for the most part raised there (my grandfather was in the Navy, so my dad moved around some). My older sister was born there.
However, in the late 70s, jobs in the auto industry started disappearing. As those jobs dried up, so did everything else around them - the restaurants, grocery stores, department stores, etc. Entire towns just about disappeared off the map.
It came down to the point where my father had to start looking outside the state for work, as there was nothing to be found anywhere in Michigan. He found three leads - one in Boston, one in Australia, and one in Texas. They moved to Texas - where my mother's mom and step-father had already moved for work. Not too long after that, they had me.
My parents can tell all kinds of stories about watching the towns around them become ghost towns because of some auto industry jobs leaving. Can you imagine what it will be like in cities all over this nation if the big three close entirely? Can you imagine what the economy in Michigan will be like?
I think Congress does indeed need to give them the loans. If we can bail out the financial industry, who then goes out and parties on our money, why can't we give the auto industry a loan?
Of course I'd want something in that agreement that says...
- the funds cannot be used to create jobs overseas - it has to be used in the United States.
- they should immediately (as in yesterday) begin the work to update the plants so they can build more efficient vehicles, including technologies like hybrids, electric cars, etc.
Posted by: Bill Bodden | Nov 25, 2008 1:47:38 PM
"The problem with the Big 3 is entirely of their own doing."
This is nothing new. David Halberstam described problems with the American auto industry in his 1986 book The Reckoning. In this book, Halberstam told of how W. Edwards Deming tried to persuade the Big Three to change their management systems to the one he proposed that came to be known as Total Quality Management. The Big Three turned Deming down. He went to Japan where his ideas were readily accepted and the rest is history.
Misinformation about autoworkers' hourly compensation resurfaces on Hardball
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Posted by: Mark Schwebke | Nov 25, 2008 4:06:00 AM
Kari, Couldn't have said it better myself.