Posted by
Walter Grandberry on Tuesday, November 11, 2008 11:35:06 PM
On the heels of significant third quarter losses for General Motors and Ford,
the automobile industry is sharpening up its sales pitch for a massive
bailout - something on the order of $25 billion - to be charged to the
$700 billion Treasury "rescue program."
And it appears that the proposal has found a receptive ear; according to the Washington Post, House Speaker Nancy Pelosi has indicated her support for a plan to provide "emergency cash" to the Big Three automakers. In a written statement issued this afternoon, Pelosi
said that because the failure of one or more of the Detroit automakers
"would have a devastating impact on our economy, particularly on the
men and women who work in that industry, Congress and the Bush
Administration must take immediate action."
Pelosi went on to say, "[i]t
is essential for the domestic automobile manufacturing industry to
re-emerge as a global, competitive leader in fuel efficiency and in
new, path-breaking energy-efficient technologies that protect our
environment. For the automobile industry to be truly viable, it must
continue to move in this direction."
Pelosi's case of bailout
fever is indicative of the pestilence that seems to have afflicted all
of Washington as of late. If an industry can no longer compete in its
marketplace - or if a mortgagor cannot make payments to which he
previously agreed - government providing some sort of financial
security against responsibility is now seen as in order. To
be sure, House Democrats are interested in placing the same constraints
on the Big Three as have been imposed on other beneficiaries of
Treasury largess, to include "limits on
executive compensation, a ban on golden parachutes and other 'taxpayer
protections to ensure that any companies that benefit from this
assistance -- and not the taxpayers -- bear the full burden of repaying
any costs that are incurred.' "
In
the case of the auto industry, the bailout looks to be of more benefit
to the UAW than for the companies themselves, not unlike giving an
anemic dog a blood transfusion so that its ticks don't die. As the CATO Institute has pointed out, prior to GM's most recent contract with auto workers, GM's costs were outsized compared to its competitors.
Healthcare costs alone impose an average cost of $1,500 per GM
vehicle. Unlike most U.S. private-sector workers, GM's unionized
workers do not pay deductibles on their health coverage. According to
the UAW contract in force until 2007, GM’s hourly workers pay only 7
percent of their total healthcare costs, compared to 27 to 32 percent
paid by the average U.S. salaried worker. Recent "concessions" by GM's
unions will slow the hemorrhaging, but they may be too little, too late.
In contrast, most foreign-owned auto plants in the United States are
non-unionized. Their workers are not as generously compensated as GM's
workers, but they are relatively well-paid with good benefits. And
because their employers are not saddled with the uneconomic pension and
healthcare costs of a UAW contract, they can produce cars at a more
competitive price, creating more opportunity and job security for
existing workers. Michigan-based GM's toughest competition these days
is not from Japan, but from Ohio, Kentucky, Tennessee, Mississippi,
South Carolina and the other states where foreign-owned auto companies
have established production facilities.
And while the most recent UAW contract allows for reduced wages for new employees, as well as for the shifting of retiree healthcare
costs to an independent trust, this has done little to slake the
union's thirst for new cash. For without a source of ducats from
something other than auto sales, the membership of the UAW will continue to dwindle.
The simple truth is that - as the American Enterprise Institute's Kevin A. Hassett put it - "the UAW has finally acknowledged something that
big labor has always been reluctant to: past practices were driving
employers into bankruptcy." But leave it to Pelosi
and her confederates to attempt to infuse Detroit's auto makers with
cash entirely for the purpose of propping up an important Democratic
constituency. One imagines that if GM were allowed to go into
bankruptcy, it could void its contracts with the unions, and be back
selling cars profitably within months. The wrench-turners of the UAW
would hardly be so resilient.
Of course, the loan program would
accomplish another goal of the Left. For years, they have sought to
remake Detroit in their own image, as a "competitive leader in fuel efficiency and in new, path-breaking energy-efficient technologies that protect our environment." While liberals see
developing green vehicles as something not unlike putting a man on the
moon, the analogy does not stand to scrutiny, as most of the technology
used in manned space flight was already in existence or very close to being developed. If
throwing money at GM would allow it to produce a car that ran on
butterfly kisses, progressives would be hard-pressed to contain
themselves. Alas, such a vehicle is many years (and untold billions of
dollars) away.
Not that such an inconvenient fact matters to Ms. Pelosi. Her main goal is to keep the spigot open on the $48 million in campaign contributions
that unions and other interest groups contributed to Barack Obama
during the presidential race. If $48 million gets you $25 billion, it
may be one of the best investments since Hillary Clinton's cattle
futures.