Saturday, November 15, 2008
UAW: No concessions
The United Auto Workers apparently feel that they have the votes necessary to get the taxpayers to bail out the Detroit Three without offering up any concessions of their own. Apparently they did not heed President-elect Obama's weekly YouTube address, which warned all Americans that only shared "sacrifice" would get us out of the current mess. If this is an early measure of Obama's ability to inspire the important constituencies within the Democratic Party, then we are in for less change then we hope.
17 Comments:
By 
JPMcT, at
Sat Nov 15, 07:03:00 PM:
The UAW is expecting their money's worth...and they will no doubt get it.
What REALLY needs to happen is for the Big Three to go bankrupt and reorganize, hopefully losing the enormous STONE around their necks called the UAW.
That, of course, will never happen. The UAW is a microcosm of the "NEW new deal". The Democratic party will always be there to shore up the unions, regardless of how preposterous their demands.
By Purple Avenger, at
Sat Nov 15, 07:06:00 PM:
Their concessions will be pink slips when Detroit comes back to the well a second time and is refused.
The UAW leadership is just as brain dead the the big 3's.
By Ray, at
Sat Nov 15, 07:14:00 PM:
Second time? This is something like the Nth time, where N is a really big number.
For as long as I've been alive, America has been bailing out failing auto companies. And I'm teaching college classes of my own.
By 
, at
Sat Nov 15, 08:09:00 PM:
It really doesn't matter. The big three are doomed, and soon, no matter how much help the Treasury give them. It's OK though, since we have a second, healthy, auto industry in this country. Somehow the "bailouts" started off as a way to unfreeze the credit markets, via guarantees of interbank lending and an envisioned national "bad bank" of toxic assets and morphed before the first dollar was spent into bailouts of individual companies, via equity investments. When the history of the end on American capitalism is written fifty years from now I predict Hank Paulson will be regarded as the man who drove the U.S. economy into the dustbin of history.
By , at
Sat Nov 15, 08:18:00 PM:
And just how is this going to make me more inclined to purchase an American automobile? I would suggest a boycott to prevent the bailout, but that implies that not buying one of their cars is a sacrifice.
a. moral
By D.E. Cloutier, at
Sat Nov 15, 09:23:00 PM:
Ray: "This is something like the Nth time."
Please provide more details, College Teacher.
Here's one example: "On September 7, 1979, Chysler petitioned the United States government for US$1.5 billion in loan guarantees to avoid bankruptcy."
Tell us about the other times.
To help you out, here is some historical info about U.S. bailouts:
http://www.propublica.org/special/government-bailouts
By , at
Sat Nov 15, 10:22:00 PM:
Yeah, its definitely the unions. UAW, the teachers' unions. That's why the economy is a mess. There is much less evidence of corruption or bad faith amongst the misunderstood company men (executives, boards of directors, administrators). I'm sure the workers were told to build Smart Cars five years ago and they just kept on with the SUV's.
By TigerHawk, at
Sat Nov 15, 10:41:00 PM:
For my part, space commando, I do not think that the unions are the biggest problem for the Detroit Three. See my longer post on the subject. However, I do think it is interesting that they are already trying to jam Barack Obama.
By North Dallas Thirty, at
Sat Nov 15, 10:57:00 PM:
Yeah, its definitely the unions. UAW, the teachers' unions. That's why the economy is a mess.
Let's see; UAW members are paid an average of $30 per hour more to build less reliable cars of inferior quality that no one wants than nonunionized workers are paid to build more reliable cars of exceptional quality that people are still buying.
In California, innumerable thousands of high school seniors are having trouble passing an exit exam that tests at the sophomore level for reading and at the eighth-grade level for mathematics, but teachers' unions insist that their methodology is correct and that they should not be required to adhere to teaching standards.
Meanwhile, in Los Angeles, the rampant corruption, waste, and outright criminal behavior of the SEIU is utterly staggering. But it's not a surprise; after all, we have government unions in Arizona arguing that workers who lie on their timecards and leave their jobs early should still be paid even though they're not working.
By Bob W., at
Sat Nov 15, 11:53:00 PM:
The Detroit bailout just prolongs the inevitable. Investing in these companies with taxpayers' money at this point is subsidizing failure. Let them attempt to restructure when they enter bankruptcy, or succumb to market forces.
By , at
Sun Nov 16, 12:25:00 AM:
The federal money will be well managed! A rehabilitated Kwami Kilpatrick, former misunderstood, lovestruck mayor of Detroit and son of Congresswoman Sheets-Kilpatrick, Chair of the non-integrated Congressional Black Caucus will lead the evil car manufacturers, with the blessed help of the Obama and the UAW, back to the light.
By , at
Sun Nov 16, 12:03:00 PM:
UAW members are paid an average of $30 per hour more ... than nonunionized workers are paid
I know its the internet, but that just sounds made-up.
Wages for an assembly worker will increase to $28.85 after four years, rather than the $28.12 level under the current contract. Certain “noncore” positions will be split into a two-tiered system, under which new hires will earn $14 to $14.61 an hour.
Non-unionized autoworkers are paying to build cars?
And TH, I hear you. The lobbying is always a cause for concern.
By , at
Sun Nov 16, 12:11:00 PM:
Contrast the operation of Honda in Marysville, Ohio and a host of GM and Ford factories in the same state. The Marysville factory is by and large managed and run by Americans (there are Japanese there, but not more than a few hundred at any one time).
Work rules, wages levels (total compensation of $60-72/hour, depending whose numbers you use), rules on the way the shop floor is run, skilled tradesmen kept on staff to make minor repairs (at $90-110K a year, before overtime), productivity LIMITS on line workers (shift limits on how many parts you make to guarantee more jobs. go figger).
There is indeed an new agreement between the Big Three and UAW on a new, lower tier entry level wage (as mentioned above), but this has not happened YET. Some older workers will be bought out and retire, some will leave and come back at the lower wage (reminiscent of what has happened in the steel industry the last ten years). But the Big Three will still be burdened with a lot of people working under the old wage rules.
All part of the charm of the UAW collective bargaining agreement with the Big Three.
Yeah, it's not the union.
I've owned a host of cars over the years: BMW, Audi, Ford, Chevy, Honda, etc. I don't think that all American cars are "crap", and I've had my share of gripes about foreign cars (the Audi in particular), but the driver in any purchase is VALUE.
GM and Ford are doing ok in Europe, but struggling in North America. I wonder why that is?
-David
By davod, at
Sun Nov 16, 12:26:00 PM:
LCB, who posted an excellent appreciation of the situation at Ace of Spades kindly gave permission for me to post it elsewhere:
9 I don't normally chime in, but I have a very strong economics background. Let me be clear: Paulson sucks ass. Is this a complicated situation? Sure. Can complicated situations be fixed in simple ways? You bet. Our crisis essentially exists on paper. Are there non-paper components? Yeah, but the crisis exists on paper. Let's fix what we can fix easily and then deal with the rest.
Fix mark-to-market and the situation improves DRAMATICALLY. The mark-to-market rules defy common sense. Since when the hell do we retroactively apply new valuation rules? We don't, because then shit like this happens. Require all new securities to be valued on mark-to-market, allow old ones to be grandfathered in. Mark-to-market is forcing companies to take huge writedowns and put up lots of collateral in a market where they need liquidity. Okay, but why is that bad?
It is bad because it forces them to release quarterly reports that say, "Yikes we lost a lot of money this quarter." Berkshire Hathway (Warren Buffet's company) made money last quarter, infact they made a BOATLOAD of money. However, one investment that MADE 4 billion required 6 billion in collatoral because of mark-to-market. This killed their quarterly results. The difference between investment companies, banks, and insurance companies posting okay returns versus bad losses is one bad rule. Let's consider that again: one of their strongest assets is requiring 6 billion in colateral b/c of a bad rule.
Paulson has only made things worse. Banks should have been recapitalized from the get-go. Lehmen should never have been allowed to fail. The government has no business getting into these toxic assets (which are toxic in part b/c of mark-to-market). Intervene and force renegotiations of some mortgages, allow all mortgage payments nationwide to be tax deductible across the board for 10 years, don't force banks to make bad loans, and slowly start inching up the minimum required payment on CCs, and so on.
There are a lot more effective ways to deal with this mess, but it all starts with mark-to-market. And Paulson is a f'ing moron. His erratic actions have made this much worse.
11 When you're on a roll you're on a roll, so here goes part 2:
General Motors bailout. Let's ignore everything wrong with GM, and pretend that we live in magic pixie land, and act like bailing GM out will fix all of GM's problems.
Okay, so GM gets a bailout. TONS of jobs are saved in America. If GM goes under a million+ people lose their jobs overnight. These folks make things for GM. Widgets. Pipes. Steering wheels. Whatever goes into a car so I can drive to the store and buy beer.
But what happens 5 years from now? Even if GM's fundamentals are fixed (using pixie dust on their business plan and union commitments), what happens 5 years from now? In 5-10 years we will see transitions to plug-in hybrid vehicles. It's not unreasonable that we may even see fully functional electric cars getting 200+ miles per charge and selling at normal cost (look up Tesla Motors for more).
These jobs are ALREADY lost. The cars of tomorrow have no moving parts other than the wheels. If you make engine lugnuts you are already out of a job, you just won't find out for 5-10 years, because the days of the internal combustion engine are numbered. If you make super high tech batteries and electric components that aren't yet in vehicles, then you have a job.
And if I'm wrong about car technology changes (which I'm not) car sales dropped 45% in October alone. So you bail out GM and use the magic pixie dust. Who the f is going to buy the cars GM makes?
In other news, GM's bonds are trading for 25 cents on the dollar, with an 8ish % interest rate. That means the bonds are paying 32% per year. Who likes government guaranteed money? I'll be reinvesting my coupon payments into foreign car companies in non-dollar currency.
Posted by: LCB on Ace of Spades at November 15, 2008 01:28 PM (lpLHM)
By JPMcT, at
Sun Nov 16, 03:13:00 PM:
What the above post implies, correctly, is that "the fundamentals of the economy are sound".
Too bad davod wasn't on McCain's advisory group.
By , at
Sun Nov 16, 03:33:00 PM:
"it all starts with mark-to-market"
let me guess, mark to market was part of Sarbanes-Oxley?
By Bob W., at
Sun Nov 16, 09:06:00 PM:
Executives at Chrysler plan to go ahead with $30 million in executive compensation, too, even in the wake of the bailout; apparently everyone is taking their government cheese while they can! Pathetic. I would rather see the government extend unemployment compensation than invest in these failed companies.
