Things didn’t go so well on November 20 when the CEOs of the Big
Three automakers came to Congress, tin cups in hand, to make a
pitch for another $25 billion.
The first $25 billion loan for the cash-strapped automakers was
signed into law last year, for retooling. This time around, the
top execs wanted no strings attached, just the money.
On top of offering no plan to the lawmakers for fixing their
industry, the CEOs had the distinct disadvantage of asking for
money at a time when the public is becoming increasingly
skeptical about the government’s escalating multi-trillion dollar
handouts.
The total national debt, the accumulation of all the annual
federal deficits over the nation’s entire history, stood at $5.7
trillion on the day that George W. Bush took office. We’re almost
double that now, adding nearly as much red ink in eight years as
the nation accumulated in the previous two centuries.
And that’s not counting the currently snowballing trillions in
corporate bailouts, already at over $7 trillion. Just this new $7
trillion in loans and guarantees comes to $23,000 for every man,
woman and child in America.
Also uncounted in the aforementioned debt numbers are the
trillions the federal government has collected and owes in the
Social Security and Medicare “trust funds.” The government
doesn’t have a dime of that money. It’s all been spent for things
like our new $500 million 1-mile tunnel under the Allegheny River
here in Pittsburgh that will connect downtown to the city’s two
new ballparks and duplicate the various bridges in town that
already do exactly the same job.
Unfortunately, the whole thing collapses if China doesn’t keep
lending us the money, so our job this Christmas, more than ever,
is to load up our carts at Wal-Mart with those Chinese blinking
reindeer.
Offered a second chance at the new $25 billion, the U.S.
automakers, going downhill for decades without a strategy for
beating Toyota, were given two weeks by Nancy Pelosi and her
colleagues to submit their ideas to the business geniuses in
Congress on how they’ll use — and pay back — the new handout.
Then the politicians in Congress who’ve been so brilliant at
planning and budgeting over the years have allocated a week to
themselves to fully evaluate the turnaround plan and render their
official judgment.
No matter how good the testimony and color charts presented in
Congress this week, the CEOs can’t change the fact that U.S.
automakers, in order to buy labor peace over the years, have dug
themselves into a hole where it’s nearly impossible for them to
compete with their better-managed foreign rivals, even when those
foreign firms are producing their BMWs and Hondas in U.S. plants
with highly-paid American workers.
A RECENT STUDY by Mark J. Perry, professor of economics and
finance at the University of Michigan, shows that the hourly
compensation cost, including benefits, for the Big Three
automakers in Detroit for 2007-2008 is $73.20 per hour, compared
to $48.00 at Toyota.
New two-tier labor agreements between the UAW and Detroit’s car
companies have dropped the starting wage for new workers to $14
an hour. Unfortunately, there aren’t enough new hires to fix the
companies’ non-competitive wage structures.
In goods producing industries overall in the United States,
reports Perry, the average hourly compensation cost, including
benefits, is $31.59. For management and professional employees in
the U.S., the average hourly cost, with benefits, is $47.57. For
all workers, the average hourly wage/benefit cost is $28.48 per
hour.
Asks Perry: “Should U.S. taxpayers really be providing billions
of dollars to bailout companies (GM, Ford and Chrysler) that
compensate their workers 52.5 percent more than the market
(Toyota wages and benefits), 54 percent more than management and
professional workers, 132 percent more than the average
manufacturing wage, and 157 percent more than the average
compensation of all American workers?”
Perry’s solution: “Maybe the country would be better off in the
long run if we let the Big Three fail, and in the process break
the UAW labor monopoly, and then let Toyota, Honda and Volkswagen
take over the U.S. auto industry and restore realistic,
competitive, market wages to the industry.”
Separate from the current economic downturn, the American
automobile companies have been destroying themselves from within
for decades. General Motors currently employs half as many
salaried and hourly workers as in 2002. The UAW has lost over
200,000 members since 2001, with its total membership now at its
lowest level since 1941.
The Big Three’s solution to downsizing and its never-ending job
losses? For the past 24 years, all three U.S. automakers had tens
of thousands of “workers” sitting in job banks, watching TV,
playing cards and collecting 90 percent of their pay. Asks
University of Maryland business professor Peter Morici, “Why
should a waitress in Indiana have her tax money sent to Detroit
to subsidize that?”
