Sunday, November 30, 2008

Who do we bailout?

This was originally going to be a reply to Adam’s post titled The sky is falling and Congress doesn’t see it., but it grew way too big.  Before the election he was on board with the socialism buzz word and I asked him if he really thought people were going to just stop working and mooch off the system.  I asked if we had the moral responsibility to protect people.  No one likes seeing people live for free while others struggle.

Adam says the United Auto Workers of America must be to blame for ongoing talks of auto industry bailouts.  That everyone just wants them to go bankrupt, “reduce cost” by lowering wages and wipe the slate clean. Obviously the union is fighting it - that’s what unions do.  Remember that no unionized company/industry was created that way. 

You can’t speak so callously of union workers refusing to give up their wages for the good of the company!  These workers are the ones who go into work every day and on weekends.  They don’t get to chose the cars they make, SUV or hybrid, etc.. But they will be the ones to bear the failures of their management.  They will be the ones not able to pay their mortgages, loans, and living on unemployment and welfare.  The very people Adam himself said we have a responsibility to help.

Take a lesson from the airline industry.  In September of 2001 all of a sudden people stopped flying.  Airlines had to pay salary without any income.  Pretty similar situation to today.  All the legacies went into bankruptcy except American.  Thanks to our lovely bankruptcy laws, airlines were able to throw pilot contracts into the garbage.  American pilots gave up 1.6 billion in salary, benefits, and pensions…so same thing, put 2000 of their own pilots on the street.  Pilots are skilled workers just like the UAW, and it wasn’t the pilots that made people stop flying.  But the pilots and the other “lower class” employees took the brunt.

Several years later the airlines are just starting to turn around again, and how has American given back to those employees who gave up their future, their kids futures (everyone loves the little emotional burst you get by mentioning kids), those who gave up their livelihood so management could keep trying?  By giving $21 million in bonuses to top level executives!  By giving the CEO a $6,600,000 bonus on top of his $581,000 salary for a total of $7,181,000 not including stock.  Other airlines are all the same.  Pilot salaries are down 66% since 1978 while these executives hand out pat on the backs to themselves.  So forgive me for not having any sympathy. 

What will happen if we bailout the auto industry?  I want to say let them fail but bankruptcy will just do to them what it did to the airlines.  The executives responsible will just lower the pay of the workers to cut costs and then it’s business as usual again.  What we need is some way to hold those accountable…accountable. 

Again a look at history proves this isn’t the first time we’ve bailed out Chrysler anyways.  In 1979 we bailed them out for $1.5 billion dollars.  There were many strings attached just as there should be many strings attached now.  But the point is, they paid it back! 

“Under the leadership of Lee Iacocca, Chrysler doubled its corporate average miles-per-gallon (CAFE). In 1978, Chrysler introduced the first domestically produced front-wheel drive small cars: the Dodge Omni and Plymouth Horizon.  In 1983, Chrysler paid off the loans that had been guaranteed by US taxpayers. The Treasury was also $350 million richer. “

I’m not an economist or even that good at money stuff, but I do know that this stuff is all connected.  Demand is down because people cant afford to buy things because we’re all scared we are losing our homes.  Probably wouldn’t be half as bad without the media telling us how we should feel, but we are officially in a recession, so demand is down.  Prices will fall until everything evens out, and then values will grow again.  It stands to reason that the government can make interest off the bailouts just as it did with Chrysler.

American cars suck.  They all look the same.  I just recently bought a German car, after shopping around.  American cars, don’t care which brand, are all big, gas guzzling, square-looking bricks.  Gas prices have been rising for years and they failed to deliver higher mpg vehicles.  It’s management’s fault, not the union.  So I say bailout the auto workers, not management.  Give the money to the company, but not to the executives.

By “Spreading the wealth”, Obama didn’t mean stealing your money from your bank and giving it to poor people.  He meant rebuilding the middle class.  Let the CEOs live with their failures, kick them out and let those who actually work get the pay!  Congress should be scared shitless!  They should get what’s coming to them!

Posted by eclipse on 11/30 at 03:05 PM
Just Visiting

Adam

 

Your new comment form is way too nosey!

Thanks for the link, but if you’re going to paraphrase me, at least get the meaning right, if not the content.

I didn’t say the UAW is “to blame” for the talks. The CEOs approached congress directly, I just said it was the UAW that is lobbying the hardest for the bailout money. I don’t necessarily think that is inappropriate, but when salaries for employees who don’t have work to do and benefits for employees that out-class many white-collar workers, I think the UAW should be willing to adjust its contracts for the good of the company. Tax-payers do not have a responsibility to maintain the wages and benefits for an entire industry. Like in my post, limited minimums are what society might be liable for.

The airlines recovered and the execs paid themselves… if the industry thought that was out of line, they had every right to strike. I would expect no less of the auto industry. I have no problem with workers fighting for better pay, but they don’t have the right to do so in a way which bankrupts the company they work for (and then go ask for free money to keep it going). Management needs fixing across the board I agree, but the CEOs aren’t the only idiots starring in this show.

Posted on Sunday, November 30, 2008  at  10:19 PM
{screen_name}'s avatar

eclipse

 

lol I have to admit, I never really messed with the comment form.  At least it didn’t require anything but a name! 

Maybe I misunderstood what you meant then.  Yeah both CEOs and the UAW want the bailout, everyone wants to keep their jobs of course.  But who should be the ones rewarded?  Since at least 2006, the UAW have been giving concessions.  I asked Rick, whose mom works on wranglers for chrysler:
[9:41] Rombus: The fact is, UAW HAS made cuts, trust me, i know how bad they have cut benefits

The UAW is pretty much only saying the same thing I am: which is stop rewarding those who have failed everybody.  UAW Wants Limits On Automakers’ Executive Salaries In Return For Government Loans sounds like a good compromise to me.

And I am sooo so happy you brought up the right to strike in your last paragraph, because I get to link to my (least) favorite law, the Railway Labor Act, when in 1936 was applied to the airline industry (although a travesty to both railways and airways), where congress removed the right to strike from railway workers in interstate commerce, because it was too vital to the economy to keep the trains running. 

So we’re too vital to the state of the economy, but also we aren’t able be reimbursed for this value.  The airline execs know we can’t strike, so they give all the money to themselves. 

Where I find the most fault with what you say is that it’s the unions bankrupting the company.  The problem with “white collar” execs is that they see labor as nothing but an expense.  “Boy we’d be making so much money if it weren’t for these damn employees!”  The unions don’t bankrupt the company, they are the ones who keep it going.  If the unions didn’t exist they would all be making minimum wage while exec salaries would be even higher, and still they would blame it on the employees.

Take a look at un-unionized airline pilots:
-Make on average ~$6 less per hour
-Worked maximum amount of hours every month
-Company can call them in on days off and force them to work (what family?)
-Paid significantly less during training (or not at all big surprise )

And those business models fail just as often as the unionized airlines, proving it was never the employee’s fault.  Improper money management and lack of management foresight does these companies in.  It’s not the workers who cause your business to fail!  It’s your business that causes your business to fail!  Don’t sell at a loss and make it up in volume!  Don’t play the Enron!  And for gods sake stop placing the blame everywhere else.

Posted on Monday, December 01, 2008  at  11:32 AM
Just Visiting

Adam

 

I had a very nice response typed out… but for some reason it didn’t submit… :( So now you get bullet points:

- The UAW did in fact refuse to reduce wages/benefits in the last 6 months
- The auto’s don’t have the money to continue to pay the wages
- The combination of the above IS bankrupting the companies
- Declaring an industry as vital is crap and any industry should have the right to strike when treated unfairly
- All of the companies getting bailouts (including those like AIG and Citi) need to be reorganized and get effective management, but if they can’t afford to pay their wages it doesn’t matter

Posted on Monday, December 01, 2008  at  02:17 PM
{screen_name}'s avatar

eclipse

 

I like bullets better anyways

-Execs also refused to stop flying their private jets.  As you said, GM CEO refused to take a paycut.
-Bailout = $ to pay wages while they reorganize.

If CEOs weren’t able to just wash their hands of it through bankruptcy, and workers’ rights were preserved I would be for that.

Posted on Monday, December 01, 2008  at  03:39 PM
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