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Auto union drove GM to trouble
Kevin Hassett, director of economic policy studies at the American Enterprise Institute
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TEXT OF COMMENTARY
Tess Vigeland: As we discussed earlier, the Obama administration forced General Motors CEO Rick Wagoner to resign this weekend as part of the government's effort to save the ailing automaker. The firing-by-any-other-name was positioned as being in the best interests of GM's future. But with or without Wagoner, GM's future remains in question. Commentator Kevin Hassett says there may be more politics than economics at work here.
KEVIN HASSETT: President Obama has a huge political debt to the unions and that's why he's avoiding the obvious solution to the auto crisis.
Historically, failing American companies like GM have entered bankruptcy. In bankruptcy, they either liquidate or, if the firm is worth saving, reorganize.
Bankruptcy reorganizations are painful for stakeholders. Hard-nosed judges give workers, managers and debtors severe haircuts in order to reshape a firm into a new organism that can thrive again. But bankruptcy can work. Most everyone has flown on an airline that has emerged from a successful bankruptcy.
This economic crisis is unique in history in that troubled firms have sought protection from politicians, rather than bankruptcy courts. Why? Because if you're politically connected, you can expect a much better deal from politicians than you would ever get from a worldly and experienced bankruptcy judge.
GM is in deep trouble mostly because the United Auto Workers have festooned the company with rigid work rules and extravagant costs. The 2007 collective-bargaining agreement, for example, required the automaker to pay up to $140,000 in severance to a worker whose position was eliminated. And that is nothing compared to the enormous health-care costs these companies are laden with. The average cost of employing a worker at the Big Three, including benefits, was nearly twice that of Japanese automakers. No wonder the automakers are hemorrhaging cash.
A bankruptcy judge would bring some reason to labor costs and create a GM that could emerge stronger. But the unions have a better idea. They plan to use taxpayer money to fund their juicy compensation. And they know they can count on Obama and the Democrats to help them. All told, organized labor contributed over $74 million in the 2008 campaign cycle, 92 percent of that went to Democrats.
History will tell a simple story about GM: Union bosses successfully negotiated sweetheart packages that destroyed GM's competitiveness. If Obama was serious about creating an enterprise that can thrive in the future, he would have demanded that the union bosses resign along with Wagoner. Instead, it's payback time.
VIGELAND: Kevin Hassett is the director of economic studies at the American Enterprise Institute in Washington, D.C.
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Im a proud auto worker with fifteen years of service.It blows my mind how people talk about something they know absolutly nothing about, Including this idiot. Does this guy even know what we have given up over the past five years. Gm has taken every pay raise from us including last week when they took our cost of living from us. I have not recieved a raise in years but everything in the world cost more and more every day. My bills have doubled but i still make the same wage I did five years ago. What more could we possibly do for this company. The government wants us to make $15.00 an hour if they get their way. If they want half the wage then they will get half the work which will cost them twice as much. I have a neighbor who makes well over $100,000 a year working for the government and he is dumb as a box of rocks. I think the government pays way to much for their work force who is off more then they are there. We need pay reform in our government not our auto industry. Just look at the cars when you drive around. Most of the asain cars built in the usa are down south where things are way cheaper and people believe we must make what they make. Why not make them pay their employees what we make. We were here first and now they set the standards for everyone else. Japan is taking over the auto industy now and there is nothing we can do about it. The big three may survive but the american people will ultimatly loose intrest in american cars so it really doesnt matter what we do for our company. Thanks Obama and all the congress members for blaming the workers for your mess. I didnt want your loan to begin with because I believe the government is not resposible for our troubles. Ford was right in not excepting that money and they may be the only one standing when its all over with. Then again nobody asked me my opinion.
Maybe we all should look into how much money Kevin Hassett get per year and what are his perks. If people are to save for their retirement in 401k's, it will be a cold day in hell when they will have enough to retire on. Everyone I know has lost everything they have in their 401k's and some do not have any time to start over. This is not like the old days where almost everyone lived and farmed or owned plantations. The prices today on everyting is out of sight, in order to live you have to earn at least $60,000 a year. Every time you turn around every school district wants more tax money, utilities are going up, food prices are out the window and forget being able to have enough money to send your kids to college. The stupid part of this is you have people up in Congress who are earning a whopping amount of money and the President who think the auto workers earn too much money. WELL I SUGGEST THAT EACH ANY EVERY ONE OF THEM LIVE ON $60,000 A YEAR FOR 5 YEARS AND HAVE NO ACCESS TO THEIR TONS OF MONEY AND SEE HOW WELL THEY DO.
Global freetrade benefits the business class, by sourcing cheaper sources of labor, resources, taxation etc. to sell to more customers. This is the American model for globalization. The downside is it forces American workers to compete with foreign workers. There are 200 million unemployed Chinese whom wish to work in a factory. There are roughly the same number of total American workers. The shear numbers are mind boggling. Pandora box has been opened. There is no way back to the standard of living Americans once knew.
Asian's have a saying for hard times: 'Better learn to eat grass" Its not so funny when you realize its true in many cases. As for the business class, which also runs the American government, I think even they maybe run over by the Chinese business machine.
With regard to teachers, the majority of them became teachers for the fact in reality, it is less work. Teachers teach the same subject(s) year after year. They don't have to expend much effort to stay on top of a subject they know like the back of their hand. They spend far less than 8 hours at school and during the few hours they are there, they get a free time plus lunch. Teacher unions are considered one of the strongest and most formidible in the U.S. They "say" they chose teaching because they care about kids. Yeah, right. Is that why they go on strike after the school year begins? Teachers have a unbelievable retirement pension. At least in Ohio, they also have the Public Employees Retirement System in addition to any pension provided by the local school district. Teachers in my community live in some of the most affluent areas. Can't do that on a low- paying job. Teachers in my community are also provided free gratis with a laptop computer and printer TO HAVE AT HOME. Time after time teachers have the kids in the classroom swap papers to grade them. I used to have to frequently call my kids teachers to point out the fact an answer was marked wrong when it was actually correct. Where's the oversight? Teachers frequently use the pre-written tests that are provided in the back of the teacher's manual that the teacher chooses to use in their classroom.
In addition, once a teacher gets tenure you can't get them out of the school system even after they've committed a felony. Teaching used to be considered a hallowed position and well respected. That was when teachers used to conduct themselves above reproach. Not so anymore. Every time you turn on the TV it's a teacher sleeping with a student or molestation, etc. I have personally found the most unruly kids in a neighborhood belong to a teacher. It's a case of "do as I say, not as I do." Teachers have double-standards. They give preference to the kids of other teachers in their classroom. When teachers are the coaches for after-school activities they choose the kids of other teachers first and have no hesitation telling you what they've done and why. It's a real pity communities no longer hold teachers to the level of accountability they used to years ago. Teachers used to have to conduct themselves so as not to draw any kind of public scorn or attention. That's no longer the case. Teachers "choose" to become teachers knowing full well they are going to spend hours each day with kids. Teachers want pity for freely deciding what vocation they want? Give me a break! As I previously stated, teachers have every weekend off, get (4) weeks of vacation "during the school year" in addition to having the summer off. There are times when overtime is mandatory in the auto industry (usually it's during the summer when everyone is having picnics, going here and there, enjoying being outside), autoworkers are "required" to work (2) weekends in a row before they can "request" the third weekend off. Not so with teachers. Teachers get every single federal holiday off too, which FAR exceeds what any autoworker gets. In addition, at least in Ohio, teachers ALSO get (5) paid snow days. They don't have to go to work when the superintendent closes school and they get paid for it. The autoworker has to get out in that snowstorm and get to work regardless. On top of all the other perks, teachers get "sick days" and "personal days" in addition to all their other days off through the year.
I don't begrudge any person trying to earn a "decent" living, but I draw the line when my property taxes are constantly raised hundreds of dollars every year simply to cover the ongoing perks given to teachers and school systems. Buying a house is NOT like buying a car. You choose a house based on a long-term investment, not so with cars. My property taxes (and so too my house paymnt) has risen $2,600 ALL due to the school system. Well WHO do you think is going to sustain the school system's thirst for money if the auto industry and its workers go under?
A person who believes that unions created the problems in the auto industry are still living in a fairy tale world. Many management decisions have contributed much more to the US auto business. Decision about product models, manufacturing locations, product quality, product input sources, board salaries and bonuses, union awards, etc., are all management decisions. I do not and never have been a union member or worker. I just think people who think unions did this to the economy need their heads candled.
Funny, when the Communists still exists, the right wing pointed to the "overpaid" workers as proof that letting GM make massive profits, and trickling them down, was good for society, and thus capitalism was good for society.
Now, suddenly what GM agreed to, is bad. YET, if it wasn't for those paychecks...how possibly could there be a middle class that could afford houses, AND cars, AND college? Those paychecks didn't disappear into savings accounts, now did they?
GM's problem is easy to understand--they overproduced a product, perhaps both due to efficiency and to employ all the babyboomers. Why do I say they overproduced?
Well, go back a few years. When there were too many vehicles on the lots, because used cars could do the same work for a lower price, suddenly the advertising campaign and financial experts told consumers that leasing a car made sense. Can you imagine these same people telling us that renting makes more sense than buying a house and paying upkeep and taxes?
but that's what was told. Of course, these leased cars came back to sit on dealer lots again. So, a new advertisning campaign came out, telling us these weren't used, abused rental cars, but "pre-loved" cars.
If you ran a business, producing more product than customers, that required millions in advertising to create a demand, and the cost of your product was so high, many had to borrow money they didn't have....how long do you predict that company would last?
I'm a union guy and I don't blame anyone for taking advantage of all that your company is willing to give you in return for your work. That being said, I take exception to Patty Miller from OH and her comments about teachers and our pay packages.
I'm a 32 year old high school teacher making less than $40,000 a year. According to Patty that makes me among the highest paid workers in America. Oh, yeah I get summers off. Did I miss the part where we are no longer required to participate in continuing education...over the summer? Are we no longer expected to take home tests and papers to grade on a daily basis...on our own time? Are we no longer required to create lesson plans for what amounts to 5-6 hour long presentations every day. If you really want to compare "Actual Hours" that we work I have no problem with that. Before we start comparing working conditions, try being responsible for 40, 15-18 year olds. I don't think I need to mention that we spent thousands of dollars to get the Masters level degrees that most of us have earned. I'm sure that Patty has her Masters in something that grants her at least $20,000 a year more than me.
I have no problem with the UAW, but it does say something when you feel the need to attack ANOTHER UNION in order to defend yours.
I think there are valid points made by the author of this article and the comments on the forum. Do people skew the dollar numbers from the payroll/benefits to fit their arguments? Of course. You show me numbers from the UAW and I'll show you numbers from the Auto industry criticizing the unions... Not impressed. The issue I see here is that the UAW is handicapping the companies in the way that the companies cannot be nimble enough to change their plans to meet their needs and survive. What company or job these days gives you a pension? None, its not a financially reasonable thing to do, this is a vestige from the 40's and 50's that should be done away with. Every worker should be responsible for their own retirement with 401K or other savings. This is how 99% of the people entering the workforce will do it from now on and there is no place for pensions. Also the UAW secures sweetheart health plans for their workers, again no one else does this for their employees. Welcome to PIP health plans, enjoy it.
Unions were born out of a very real need in the early industrial revolution, back then workers were made to work like slaves like hours for a pittance. Unions came by and gave the average man a voice and power to assure fairness and equality in the labor-owner relationship. These days such bruteness is not required, no corporation will go to such extremes to squeeze their workers beyond what is expected, federal law protects you there. At this stage you can say that unions have too much leverage when dealing with their corporate counterparts and are too near sighted to see that the landscape around them has changed. So let them strong arm the US auto industry into oblivion, then hopefully it can come back and function like any other responsible corporate entity not having to be mommy and daddy to all their employees for life!
Once again, we blame the victim. American workers are not culpable for business failure. They're the very folks who show up, day in and day out, to do their jobs. They have kids to feed, bills to pay and lives to live. If they happen to belong to a union, they have a voice in matters involving how they are to be treated in the workplace. They do NOT get to make the executive decisions that may ultimately lead to the demise of the company for which they work so hard. Many of us do not have union representation. A few years ago, I worked for a healthcare organization that "busted" the union by deciding to give disgruntled (and vocal) nursing staff a large raise. Those of us in the ancillary departments were not given one penny. Instead, management told us that if we so much as signed a union intent card, we'd be canned. Hassett's rant brought back that memory. Please do not bring him back. I could see the spittle fly from here.
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