Sunday, November 16, 2008

Auto Maker Bailout: Unions Must Reform First

Congress plans on debating carving another $25 Billion out of the financial bailout pie to feed into American auto makers. The Democrats refuse to expedite the release of $25 Billion already approved and allocated tot he auto makers and they refuse to change the purpose of those monies. Democrats are resisting alleviating the restrictions because the restrictions are currently tied to environmental groups a key constituency of the Democratic Party.

The Democratic Party would rather play politics with the bailout then do what is right in policy. The economy is a mess and the auto industry is about to go bankrupt. Yet rather than produce a bill that is good for America the Democrats would rather play politics for their constituents. It goes further than just the $25 Billion already allocated and restricted to development of future technology. In Pelosi's plan there are no calls for the United Auto Workers (UAW) to renegotiate or reform their ways.

The UAW President Ron Gettlefinger says "the problem is not the union's contract with the auto companies. " Gettlefinger goes on to say "The focus has to be on the economy as a whole as opposed to a UAW contract,". These statement show the union is unwilling to concede much in reforms or even to renegotiate. I agree we should be looking at the economy as a whole and the union contract is one of the root causes of Detroit's problems. In the contract Union employees are paid to do absolutely nothing. The union hails this as protecting unions and making their jobs safer than ever. This program costs between $1.4 and $2.0 billion every year. This is ridiculous and this money would be better spent on education programs designed for competing in other growing markets. The unions have priced themselves out of the competition. Paying someone $25 dollars an hour to place 8 bolts in a door frame is outrageous. The auto industry can not remain competitive with these increasing labor rates. The union must reform and renegotiate.

Many of the union workers are unskilled labor. This unskilled labor continues receiving higher and higher wages but the responsibility does not increase accordingly. Unions do not want to reform and renegotiate yet they are waiting for a handout from the rest of the taxpayers. The Unions want guaranteed employment for life even if the company or industry goes bankrupt. The Democrats are more than willing to provide for their constituencies (environment and union's) at the expense of other taxpayers.

Republicans must not concede on the bailout. President Bush must not concede these points. Without true reform of the entire industry including the UAW the industry will fail anyway. Any bailout without restructuring the entire industry to include management and labor would only prolong the inevitable. The auto industry is doomed without a short term fix and a long term solution.

The long term solution is for the auto industry to transform. The industry must place money into Research and Development. However, in order to make profits that would enable this development the industry must reform in the short term. This includes limiting corporate CEO pay, compensation packages and excessive internal spending. Additionally, union labor costs must be reduced, layoffs must occur for excess labor, and programs eliminated that pay workers full pay and compensation for doing nothing. Only a total reform of the industry will make any bailout successful. Thirty years ago the government bailout Chrysler now again the auto industry is at the government trough looking for more handouts.

Americans should be persuaded that it is a good idea to bailout private industry. In this case I believe the public will not be persuaded without a new business plan. The new industry business plan should move the industry into the global environment. The auto industry must become competitive with global competitors. This means reforming union labor contracts first. There should be no bailout without UAW contract revisions first.

29 comments:

media boy said...

In the case of the auto-makers' bailout, it's a relief to have a national issue that is so straightforward: American cars tend to break down and fall apart therefore people are not buying them. If GM and Ford don't want to go out of business, they should start making decent cars. To bail them out would be to reward their terrible manufacturing standards.

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