Archive for November, 2008

Big Three should ask UAW for bailout

November 26, 2008

By David Farside
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Here we go again. The Big Three auto makers are begging Congress for more taxpayer money to spend before they go completely bankrupt. Before any decisions are made, both the auto industry and Congress should watch Michael Moore’s documentary “Roger and Me.” It chronicles the devastation, caused intentionally by General Motors, when they closed two auto assembly plants in his hometown of Flint, Mich.

In the 1980s, General Motors closed down two thriving assembly lines in Flint. They moved their operations to Mexico, causing layoffs of 35,000 workers. Moore wanted General Motors president Roger Smith to visit Flint, which became a virtual industrial ghost town, to see the effect the closures had on the people of Flint. Smith didn’t care about the employees or the demise of the city and refused the invitation.

Now the Big Three American automakers do care and are inviting the taxpayers to prevent their own demise. They are claiming they need our money to prevent the same thing that happened in Flint from happening in Detroit. In other words, it was acceptable for GM to put 35,000 workers out of work by choice. But it’s not acceptable to layoff workers because of circumstance. GM doesn’t know how to run a business and can’t compete with the Japanese.

The American auto manufacturers and the oil companies have been lobbying Congress for years to keep auto emission standards at a higher than recommended levels than proposed. Claiming they couldn’t compete with foreign competitors, manufacturers always moved the horizon date for compliance out 10 years more.

Currently, Detroit is far behind Japanese companies in building and manufacturing vehicles using alternative energy. The Detroit automakers had the research and technology available but instead, they chose to build gas guzzling SUVs and pickup trucks because of higher profits for them and Exxon.

During the last decade, oil-producing countries and Exxon have manipulated oil production and refining to balance gasoline prices at a sustainable and acceptable level. As long as we could afford to pay for gas, the Big Three would continue to build highly consumptive vehicles.

The Big Three auto magnets, begging to Congress for a bailout, are trying to use the governments loan to Chrysler in 1979 as an example. The problem is they are not as smart or as honorable as Iacocca, the CEO of Chrysler at the time.

At least Lee Iacocca was prepared. He approached Congress with a plan and publicly presented terms and conditions for the government loan. Last week the Big Three’s over paid CEOs arrived in Washington, D.C. on their own personal jets, had no plan, held out their hands for money and waited for their lobbying money on congressmen to be returned twentyfold. The Democrats sent them home empty-handed and wanted their plan for terms and conditions.

In 1979, Iacocca petitioned Congress for $1.5 billion. Chrysler paid off the loan in 1983. Chrysler also purchased $14 million in stock warrants and the U.S. Treasury made a $311 million profit, which is more than the taxpayers will ever see from this deal, if it is approved.

The free press, Wikipedia and one of my previous articles list some of the terms for the loan. One of the conditions listed in the congressional approval of the Chrysler bailout was the formation of a second oversight board of directors. The board consisted of the Chairman of the Federal Reserve Board, U.S. Comptroller General and the U.S. secretaries of treasury, labor and transport. Chrysler provided a staff of 20 people to monitor and work with the company, labor and the government.

Chrysler also had to put up $2 billion in matching funds to get a federal loan. State and local governments and some creditors added to the fund. Even dealers and suppliers contributed, providing another $180 million.

Iacocca and his management developed an employee stock ownership plan. Union members gave up over $450 million in concessions. Non-union and salary employees relinquished $125 million. Employees were issued shares of stock in return for making their concessions.

The Internet is full of concessions the Congress and the industry should consider. For a start, GM should get rid of assets like Hummer, Cadillac and Saab. The industry should also quit sponsoring NASCAR. I don’t ever remember Hummer winning a NASCAR race. Most importantly, current union contracts should be renegotiated.

Dealing with the unions should be the first priority. I have been a union member all of my working life. I helped organize white collar workers in central New Jersey and Los Angeles. But sometimes the demands by unions are beyond comprehension. The United Auto Workers union, in a large part, might have negotiated themselves out of a job.

The wages for the high and mighty UAW are not practical or realistic. Chrysler’s 160,000 workers receive an average of $150,000 annually in wages and benefits. GM has 140,000 employees making $151,000 a year and Ford pays $146,000 to 140,000 employees. UAW members also receive full pay when they are laid off.

In comparison, Honda, Nissan and Toyota’s 90,000 auto workers receive $96,000 annually. University professors average $93,000 a year without a union. They should consider joining the UAW.

Instead of asking for taxpayer money, the Big Three should ask Saudi Arabia, Exxon oil and the United Auto Workers for the bailout money. Or better yet, they should file for bankruptcy.