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I just watched the Congressional Democrat press conference where they unveiled their strategy for going forward with the auto industry crisis. Leader of the House, Nancy Pelosi, said it best, "Show us the plan and we'll show you the money." They're demanding accountability and a plan for long term viability of the American automotive industry before giving them any tax payer money. I think this is a really smart strategy to move forward, and I am heartened to see Congress taking their fiduciary duty to the American tax payers seriously. My personal preference would be to let the companies go bankrupt, but I don't think that's going to happen, so this is an acceptable second option for me.
In the plan the Big 3 auto companies come up with, I'd like to see serious changes to executive compensation plans. I don't understand why a board member or high level manager should get ridiculous bonuses and outlandish benefits when they are doing a bad job running the company. No more golden parachutes. No more bonuses when your company is in the toilet. No more private jet rides to Washington to beg for money. If you are doing a horrible job running your company, you can ride in coach like the rest of us.
I'd also like to see a renegotiation of the automotive industry's labor contracts. The benefits, pensions and salaries paid in Detroit are not in line with typical American compensation packages. For example, UAW's total compensation works out to $70/hour for older workers, while Toyota would pay a similar worker $40/hour in combined compensation. I don't see how American auto makers can compete if they are paying their workers such high salaries. They're totally out of line with industry standards. Not to mention typical American salaries, health benefits packages and retirement benefits plans.
What would you like to see in the Big 3 Auto companies plan?
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A chapter 11 filing. ;)
A chapter 11 filing. ;)
I agree
...But Washington (and by that I mean both Dems and the GOP) will never allow that, so I've given up hoping for it.
--Fern
You know what Fern, I'm basically with you on this, meaning that
I'm really skeptical about an auto industry bailout. When it came to the banking bailout, one could at least justify it, based on the economic impact of the banks failing, but how do draw the line next time, if we bail out this indutsry? What if the airlines tank next? Do we bail them out (again)?
Something will get done, and I'm basically on the same page as you Fern, but I really cannot get excited about this particular bailout.
"In the world you will find tribulation, but be of good cheer, for I have overcome the world."
John 16:33
ditto and amen
And why won't "they" go for it? Can you say "union"?
Chris
See Mitt Rom
See Mitt Romney's recent NYT editorial. It's ALL there.
I'm glad that the democrats are taking this line, but I'll hold off on my hosannas until I see them actually carry through with it. Bottom line, if the post-reform Big 3 don't have comparable total costs, they still won't be able to compete.
With the democrats on this issue, it's always going to be a risk that they'll accept inadequate concessions as the best they can do, and then declare that a victory. Sustainability is the issue, and sustainable is very differnt from "not as unsustainable as it used to be."
Still, it's cheering tif they are at least pushing the ball sort of in the right direction. Maybe they have taken the nation's temperature, and actually understand how many middle class folks are offended by the kind of compensation that comparatively unskilled auto workers get. It bothers you if you get paid less to do a job that took you a lot of study and practice to learn and that not many folks can do, and it bothers you if work at some other kind of similar unskilled jopb and make way less money.
And to head off quibbles with the above, folks, please note that I took care to say comparatively unskilled. I cheerfully acknowledge that it takes skill to build a modern car. My point is simply that most able-bodied folks with a high school diploma can do it.
_________
I have often said, and oftener think, that this world is a comedy for those who think, and a tragedy for those who feel. -Horace Walpole
Ditto, me too, I agree, etc, etc
I would love to make $70/hour and have the auto workers retirement plan. As it stands, I make less than half that amount and my only retirement plan is the IRA my husband and I contribute to. If my employer promised me a pension that was based on a percentage of my highest wage, I think I might die of laughter.
--Fern
What Simon said. And yeah,
What Simon said. And yeah, Romney's editorial.
The Big 3 are carrying half a century of very expensive union and management baggage, and unless they radically reform they WILL go down the tubes. Why the hell should ordinary American taxpayers subsidize the outsized pay packages of union workers making three times what they do? The value of the benefits package for UAW workers is so high that I believe it actually exceeds the cash wage--so Joe the Plumber with a $50K/yr income should pay extra so Jack the Welder can keep $170K+/yr total reward?
I think I heard today that the Big 3 CEO's have announced they will reduce their own salaries to $1/yr. After figuring in bonuses and stock options and little perks like those private jets, etc., this represents a pay cut of about 0.02%......
"Show us the plan and we'll
"Show us the plan and we'll show you the money."
There is only one problem. Who in Congress is qualified to determine whether the proposed plan will be successful?
I don't know of one savvy businessman or entrepreneur in Congress.
Well, I can name a few
Vernon Buchanan (FL) and John Campbell (CA) owned successful car dealerships before joining Congress. Steve Kagen (WI) had a chain of successful medical clinics (he is a medical doctor). Eric Campbell (VA) helped run his family's real estate development firm before heading to Congress. Those are just the ones I can think of off the top of my head. I am sure there are many more businessmen turned Congressmen.
--Fern
No, this is not good
You're right that it's better than the alternative of a free taxpayer subsidy to the UAW, but this is not "the right thing," simply because it's a lesser of two evils. What, exactly, qualifies politicians to determine what constitutes a viable plan in an auto industry they know practically nothing about? The real right thing would be: no taxpayer dollars, period. We shouldn't cheer on those who choose wrongly, simply because they might have chosen worse. The consequences will still be quite negative.
I guess I just don't have it in me to be that stubborn
I agree that it would be better for the car companies to have to reorganize their businesses without tax payer assistance. But I think there is pretty much zero chance of that happening. So are we just going to bang our heads against the wall and keep on demanding something that won't happen? Or are we going to engage in the process and try and encourage the best outcome possible? From my perspective, fiscal conservatives lost our right to stamp our foot and demand conservative financial policies when we got our you know what handed to us two elections in a row. If we continue to stamp our foot now when our bargaining power is diminished, then we'll miss out on the opportunity to sway the negotiations at all.
--Fern
So Fern
If we keep saying "no" at what point do we begin to see the Internet videos of hooded citizens of Michigan and Ohio with demands by the armed "Big 3" to either "pay up" or the citizens of Michigan and Ohio "get it". :-)
Chapter 11 allows the "soft landing" they're looking for. If they have a going enterprise, it will come through Chap 11, if not, then we were laundering welfare money through a corporate entity.
Chris
And it's called Chapter 11....
I agree that it would be better for the car companies to have to reorganize their businesses without tax payer assistance.
There's a way for them to do that. And it's called Chapter 11....
The claim that they CAN'T reorganize doesn't impress me. I live in a city that is economically based on the aircraft industry. Cessna, Boeing, Beech/Hawker, Spirit AeroSystems, Airbus, Lear, etc. If those businesses can go through the up/down cycles they do AND survive the body blow 9/11 dealt to the entire aviation industry and still come out in good shape, so can the automakers.
The Big 3 and the UAW want to keep doing things the old way. The old way is driving them under through sheer bloat and ossification, and was long before the current crunch. Propping them up now won't change that.
What I fear is that they will bring in a lip-service plan that accomplishes nothing but push the day of reckoning back another several months, and the Dems will approve it and pat themselves on the back for saving the industry....
From my perspective, fiscal conservatives lost our right to stamp our foot and demand conservative financial policies when we got our you know what handed to us two elections in a row.
As a taxpayer I have the right to stamp my foot and demand SANE fiscal policies, and no one can take that right from me.
This whole process
This whole process is beginning to feel like an intervention with the Big 3 the alcoholic in denial. My hope is that (in this scenario) Congress as the co-dependant wife doesn't give in and end up saying "If you could just cut down!"
Chris
More like an eating intervention
More like an eating intervention for an entire obese family demanding triple food rations in a time of food shortage in order to maintain their already grossly excessive collective body weight:
"Why should you get more?"
"Because we're bigger and need to eat more."
"Well, the Wongs next door manage to get by just fine on the regular ration and stay healthy too. They're not fat at all."
"Only 'cause they exercise and eat less!"
"Maybe you should exercise and eat less."
"We can't help it! We're big-boned!"
Etc.
Much better analogy
so what's congress in this scenario? The local pizzeria?
Chris
I would think more of the
I would think more of the Golden Corral Buffet.
Congress is handing out food
Congress is handing out food stamps and welfare checks. Of course.
I agree with Chapter 11.
I agree with Chapter 11. However, I also concede into the current financial climate, it may take government loans to get them through chapter 11. I would probably not be adverse to that.
A pre-packaged chapter 11 would probably be acceptable to me. I am wary of any money to the Big 3 sans chapter 11.
Great Minds, Jim. See
Great Minds, Jim. See cross-posting.... :-)
Yeah, I first heard it
Yeah, I first heard it talked about on CNBC yesterday afternoon. Sounded like the best compromise. I have been in the bankruptcy corner on this.
If there is a way to save them without a major risk to taxpayers; but one that forces them to evolve, I am for it. I do worry about the impact of a cascade failure in the US auto market on the economy. Any other time, I would say to heck with them. I still think we need to suffer some more economic pain before we can rebuild the foundation; but I do not want to drop a bomb on it. However, there has to be major changes in the way these companies are run.
I took Bankruptcy Law in Law School
I know what it is and how it works. I agree with you that it's the best option. But do you really think there is any way to get Congress to allow the Big 3 to go bankrupt? Because if you think there is a realistic chance of bankruptcy, then I will gladly stamp my foot.
But I'm not going to scream from the mountaintops when no one wants to listen. That's pointless. I'd rather engage in the process and have some say in the outcome than have the smug satisfaction of knowing that I was "right." You're right, as a tax payer, you have the right to stamp your foot all you want. But I don't want to hear from you when your foot is sore from a whole lot of pointless stamping.
--Fern
I do! Supportive foot-stomping most welcome.
But do you really think there is any way to get Congress to allow the Big 3 to go bankrupt? Because if you think there is a realistic chance of bankruptcy, then I will gladly stamp my foot.
I do! Supportive foot-stomping most welcome. A pre-pack is quite financially viable, even if Congress would rather throw our money down the toilet to please the UAW. The Big 3 already have $25 bllion in taxpayer funding earmarked for them for factory retooling. What they want now is another $25 billion with fewer strings. Which at their current "burn rates" won't last a year.
At minimum all of the Big 3 need to undergo major financial restructuring. What we will likely see instead is a much-hyped "plan" for the taxpayers to bail out Ford and fund the already-proposed GM/Chrysler merger, while also funding the VEBA shortfalls they're facing from the last UAW deal. And those VEBA shortfalls could be huge--the Big 3 are already committed to handing the UAW a $75 billion trust fund to handle retiree health care obligations.
Handing the Big 3 cash at this point is the exact same thing as handing it directly to the UAW for VEBA, because that's exactly where it will go, with no pain or concessions at all on the part of the union. I'm willing to predict that's exactly what the Big 3 ask for--that the taxpayer directly or indirectly pick up some or all of the tab for VEBA.
Can't you just smell the segue into "National Health Care" coming?
Now, I agree that not giving away the store in a lame-duck session is the right thing to do, but I have zero faith that it's anything other than punting, and when the new Congress comes into session....
well, that's part of the big question, Fern...
The problem is that Republicans weren't very fiscally conservative in the time periods leading up to the last 2 elections. While there have been some consistent voices for fiscal conservatism in the party in Congress (John Shadegg, Mike Pence), they have not been able to obtain sufficient leadership in the party. In the recent Congressional elections, there was not a bit of difference between Obama and McCain on the bailout (other than McCain at least paying lip service, briefly, to the concerns of the actual fiscal conservatives). If both candidates have the same position on an issue, the outcome of the election doesn't reflect how the public feels about that issue, because they haven't been able to make a choice of sides on that issue.
SOMEBODY needs to be the voice saying, government intervention in the economy at this scale is very, very bad. If we as a party and a conservative movement capitulate in order to have some sway over the outcome, then we'll lose even more moral stature. We'll never be able to go back and seriously pursue significant reductions of government involvement in any area, because we will have conceded the fundamental principles underlying the other side's willingness to try to control the economy.
I'm not sure whats stopping
I'm not sure whats stopping American auto makers from building more plants in Mexico if the labor costs are too high here, they've already moved some plants. Are part of the labor contracts guarantees that they'll keep jobs here or not lay off all of the workers already employed?
Now, THIS is close to
Now, THIS is close to talking good sense.
What's the catch? Oh, yeah....
Well, of course they do! The unions hate the idea. It would mean major concessions, like giving up that job banks program that pays UAW workers full pay and bennies to NOT WORK. And that would be just one part of the reforms required. Things like coming down on the ongoing underfunding of promised pension benefits and cutting pension plans loose from being mostly invested in company stock.
But the Dems may not want to go there. If you think corporate pension plans are underfunded you REALLY don't want to take a peek at state and local government pension plans.