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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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Absolutely pathetic reporting. No context and no perspectives from union members or leaders, who have been absent from the mass media's discussion of union/automaker relationships. I listen to NPR so that I can have DIFFERENT perspectives than the ones I receive in the mainstream media, and as such, I would have expected something a little more thoughtful than this from NPR.
I would like to enlighten all of you that live outside of the auto industry and preach like you know what has been going on for the past 3+ decades.
Listen... I have lived nearly a half century in the auto industry and have seen it from all ends.
The results that you see happening in the auto industry are from several decades of fighting between the union and management. Who's to blame? BOTH! We as a country have to stop fighting about who owes us and figure out how to work together to build our futures TOGETHER.
The auto companies and unions have polarized and galvanized their respective positions for generations. The Union says the rich management owes them a better living. Management says that manual labor can't tell them how to run a company... between the fighting, they forgot about building quality cars and a making a business thrive.
Have the unions hurt the auto industry? YES! Their pay and benefits have been like landing a government job for life for generations. Has management attitude hurt the auto industry? YES! Accountants that don't know how to build cars or work with people have been running the companies like they were on Wall Street.
I have watched labor and management act like children fighting over the favorite toy until it broke ...
... Now the toy is broken and nobody can play with it.
Almost everything I wanted to say has already been done quite eloquently by Ashley Hunt of Van Nuys. It's useful to give a myopic ideologue a voice. It gives other ideologues a chance to agree and the fact-oriented public a chance to refute him factually, point by point.
It's also a warning. Many people agree with the AEI and its shills. John McCain won 48% of the vote. If the Obama admin doesn't turn the economy around, the ideas expressed in the piece and lots of much loonier ideas may carry the day in future elections. The large-scale adherence to this incoherent ideology in the American body politics is worth noting, at the least of it.
Once again the American worker is being blamed for the demise of the U.S. auto industry, when, in fact it has been short sighted policies by management that have driven GM and Chrysler to the brink. Mr. Hassett, in his anti-union diatribe of 30 March , 2009 certainly cherry-picked his facts regarding the costs associated with manufacturing a car. First, he made no mention of the ridiculous compensation packages payed out by GM to managers who lost money. This is also a problem in other sectors of the economy, but that is convieniently forgotten by Mr. Hassett and those of his ilk. Secondly, he neglects to tell your listeners that health care, the major problem in the auto companies pension arrangements, is payed for by the government of Japan for for its' auto workers. Is he suggesting we follow this path ? I doubt it. Mr. Hassett and his kind want to embrace good old Joe Sixpack when they need his vote to maintain power, but they're more than willing to throw him under the bus as soon as they're done with him.
Clearly, Mr. Hassett has his own political biases having served as economic adviser during both McCain presidential campaigns, as well as G.W.'s 2004 campaign and having been a senior economist for the Federal Reserve. Why is he supporting bankruptcy for GM and not the Wall Street companies? I must say I'm tired of the scapegoating of the labor unions when it is the GM management who are responsible for the performance of the company. Suggesting that retired workers don't deserve hard won health benefits and that workers make too much money is typical partisan politics.The entire country struggles with health care and Mr. Hassett is blaming the union for working for it's members? In 2005, health care costs totaled 15 percent of the U.S. gross domestic product. That number is expected to grow to 20 percent of GDP by 2015.
Was Hassett grinning when he compared GM workers' health care costs with those of Japanese workers. Please inform Hassett that in Japan, health care is provided by governments and costs are lower than in the US. Is he suggesting that the US needs a single payer system? Hassett is extremely disingenuous.
Labor unions are not the problem as Mr. Hassett would have us believe. They are the solution. Good wages and good benefits make for good consumers. It is a simple economic equation. The banks and corporations of America can be successful If and only If comsumers are financial capable of making purchases! Why can't the "experts" understand this. The free marketeers got rid of the steel industry and our manufacturing base and now they want us all to buy cars from China. Well all I can say is I sure hope those cars are cheap enough so I can buy one with my Wal*Mart salary and benefits.
With regard to Kevin Hassett's comments about the auto industry, let's not forget that the laissez-faire, no regulation economists from the American Enterprise Institute helped to create our current economic morass. It's a wonder they still have enough credibility to speak on your program.
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