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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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It is abundantly obvious that Hassett's ONLY knowledge about the auto industry comes with driving a car. It stops there! Let me be perfectly clear. Hassett's article is a LIE. The only employees in 2007 who received $140,000 were employees who had MORE than 20 years of corporate seniority and who were willing to take the $140,000 and completely sever ALL ties to GM. That meant no pension, no health care, nothing! I am so amazed that the news media constantly promote an $80 per hour wage figure. Ridiculous! Why is it the hourly wage for UAW auto workers is always quoted to include benefits? Gee, I don't hear any other job being quoted in such like manner. It's always a double-standard. The banks and AIG can throw around millions, but don't let a UAW worker make enough to live comfortably. And I don't mean live a rich lifestyle!!! If you think the housing crisis is bad now, just what do you think would happen if the wages of the UAW workers were slashed? Tens of thousands of Americans would add to the foreclosure problems. People think these workers lolly-gag around during their shift and do nothing. Well in my plant we stand ALL the time on our feet, no sitting down whatsoever. There are NO chairs or benches to even sit on for a brief respit. In the summer the temps exceed 100 degrees day after day. The air you breathe is filled with oil and sludge that comes off the machines which are running at maximum capacity and all the time, year after year, it settles in your lungs. The floors are so slippery with the oil and sludge that you have to creep along slowly so as not to fall. You cannot climb the stairs without fear of falling and the handrails are coated with the same oil residue. The majority of Americans (including the news media) would turn up their noses at having to work in such conditions, thinking themselves too good to do so.
I'm sick and tired of hearing that the union is breaking the auto companies. In reality, GM/Ford/Chrysler pay their hourly workers within $2.00 of what Toyota/Honda pay their U.S. workers. Oh but NO, the media doesn't want that fact to get around. Sounds much better to make America think the union is out to cripple the companies. People like Hassett gets lots and lots of perks as well as a hefty wage. They just don't talk about it openly, but it exists nonetheless. We say members of congress get $150,000 yearly salary, doesn't seem like a lot, but it's all the extra perks that raises that $150,000 to over $500,000 per member of congress by the time all is said and done. Where are those stories?? Where is that truth??
In reality, a UAW hourly worker makes roughly $62,000 a year BEFORE TAXES. Heck, you've got teachers who make a LOT more than that, and they get the whole summer off and (4) weeks of vacation during the school year on top of that. If you were to figure the "actual" hours a teacher works by dividing it into their salary, you would easily see a teacher is one of the highest paid workers in all of America. They get paid time off that exceeds many corporate execs. And still we hear teachers piss and moan over not making enough. Teachers have a pension plan that rivals Congress. Pity, pity.
In truth, salaries account for LESS THAN 10% of the total cost of GM's cost. As I recall, when the figures were released two weeks ago, salaries accounted for 67% of AIG's cost. Is anybody yelling foul over that? You need a plumber to fix a leaky faucet you pay them $75 just to come out, plus parts. They in and out in less than an hour. That's okay, you suck it up and consider it necessary. But you think a $26 hourly wage for a man to earn standing 8+ hours on his legs on a cement floor is over the top. Who the heck are you to say so?
As far as I'm concerned Mr. Hassett, you have breathed more air than you are entitled to, you are the very reason there is a shortage of it for everyone else. Now, tell me, how do you like someone else making a judgment on what you are and are not entitled to? Sauce for the goose is sauce for the gander. I bet you drive a Japanese product. You spit on the graves of the 3,000 brave men and women who died 12/7/1941. Support the U.S. Troops? You haven't a clue what that means. ALL U.S. Troops deserve our support, even those who have paid the ultimate sacrifice. They deserve our homage and respect. Buying a Japanese car is no different than Germany coming to the U.S. and building a swastika factory here. Would you buy one and proudly display it for all to see just because it was made in America? Principles are cheap, they don't cost a thing. They only count when it hurts to stand by them. YOU Mr. Hassett are no gentleman and you have no honor.
Those of you who pointed out that this kind of bull belongs on FOX News Channel were right. This exact article IS on Fox's website.
http://foxforum.blogs.foxnews.com/2009/03/31/hassett_gm_obama_union/
While I do think that there are many unionized auto workers who are overpaid for what they do, blaming GM's problems on those workers is ridiculous. Executive are the ones making the big (and apparently bad) decisions, and they make the ridiculously big bucks. Plus, Mr. Hassett's comparison of the cost of an American auto worker (including benefits like health insurance) to the same worker in Japan is comparing apples to oranges: Japan has national health insurance, so the Japanese auto makers do not have to pay for their workers' health insurance. If he wants to make his point, he should at least get his details straight.
The "simple" story is that it keeps coming back to the same short-sighted management pratices at GM. They agreed to union contracts like they designed cars, with only the next quarter's stock dividends in mind. They made billions for decades and then they got caught looking on the fast balls of $4 gasoline prices, double-digit healthcare inflation, and the popping of the credit bubble that came down the middle of the plate.
The U.S. auto makers just need to learn the art of "long-term" planning.
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You have to ask yourself why workers wages are always the attention issue. Could it be a ploy to misdirect attention downward? It was said several years ago that McDonald's could pay it's counter help $37 per hour if it chose to (minus executive bonuses, perks, etc) and still make the same profits. Lets quit shooting our workers and look at the real problem.
I like Marketplace, I listen regularly and generally find the program enjoyable and informative.
However, every time someone from the American Enterprise Institute speaks on the program, I am surprised by the distortions and assertions that are not backed up by facts and examples and don't square with the facts.
This clown blames GM's problems on the workers not being willing to work for wages Japanese factory workers make.
What a crock. There was no mention of the figures, the numbers, the percent of operating expenses that wages make up for unionized workers. The wages were just said to be double what Japanese workers make.
There was no mention of how the union workers' wages compared to executive compensation in all its forms.
There was no mention of the fact that people don't want to BUY GM's PRODUCTS either. Kevin just puts all the blame on those greedy workers.
Every time someone from The American Enterprise Institute speaks on Marketplace, the show loses credibility.
As a listener and fan of Marketplace, I am insulted every time this guy, or David Frumm, or any other of these hack liars are given any air time on your otherwise high quality program.
Sincerely,
Bret Bailey
One important item lots of you are missing is that we keep these auto companies alive at "MY" expense, which I will not tolerate. I will not pay huge sums of money for an auto and then pay my taxes to subsidize keeping the company afloat. How is that even American? Say what you want about those of us who are anti-union, it is hard to refute that if a company isn't cutting it, the employees will not have jobs. It is Econ 101.
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