Auto Bailout

[Olivia Wilde Homo]

I still think we should exhume and hang Ronald Reagan's corpse.

The Dow will probably drop 500 or 600 points.

[Van Cruncheon]

i have a small sum on a drop of 500

[Fresh Prince]

self-interest *smh*

Bring on communism.

[demi]

So after the auto industry goes belly up, what will be left that Americans make? Hamburgers? Is that about it?

LOST

[TVC15]

So after the auto industry goes belly up, what will be left that Americans make? Hamburgers? Is that about it?

Adipose tissue.

[ferrarimanf355]

I'm not even going to bother looking at the stock market tomorrow. You all should follow my lead, and go to the local sports bar and get plastered instead...

[Phoenix Dark]

sigh @ today

Bush is gonna use some of the bank bailout money to bailout the auto industry. Good for him

[TVC15]

sigh @ today

Bush is gonna use some of the bank bailout money to bailout the auto industry. Good for him

I can live with that.  Nowadays, banks are kinda the last people I'd trust with the money, anyhow.

[Van Cruncheon]

http://www.cbsnews.com/stories/2008/11/24/opinion/main4630103.shtml

If you've been following the auto industry's crisis, then you've probably read or heard a lot about overpaid American autoworkers--in particular, the fact that the average hourly employee of the Big Three makes $70 per hour.

That's an awful lot of money. Seventy dollars an hour in wages works out to almost $150,000 a year in gross income, if you assume a forty-hour work week. Is it any wonder the Big Three are in trouble? And with auto workers making so much, why should taxpayers--many of whom make far less--finance a plan to bail them out?

Well, here's one reason: The figure is wildly misleading.

Let's start with the fact that it's not $70 per hour in wages. According to Kristin Dziczek of the Center for Automative Research--who was my primary source for the figures you are about to read--average wages for workers at Chrysler, Ford, and General Motors were just $28 per hour as of 2007. That works out to a little less than $60,000 a year in gross income--hardly outrageous, particularly when you consider the physical demands of automobile assembly work and the skills most workers must acquire over the course of their careers.

More important, and contrary to what you may have heard, the wages aren't that much bigger than what Honda, Toyota, and other foreign manufacturers pay employees in their U.S. factories. While we can't be sure precisely how much those workers make, because the companies don't make the information public, the best estimates suggests the corresponding 2007 figure for these "transplants"--as the foreign-owned factories are known--was somewhere between $20 and $26 per hour, and most likely around $24 or $25. That would put average worker's annual salary at $52,000 a year.

So the "wage gap," per se, has been a lot smaller than you've heard. And this is no accident. If the transplants paid their employees far less than what the Big Three pay their unionized workers, the United Auto Workers would have a much better shot of organizing the transplants' factories. Those factories remain non-unionized and management very much wants to keep it that way.

But then what's the source of that $70 hourly figure? It didn't come out of thin air. Analysts came up with it by including the cost of all employer-provided benefits--namely, health insurance and pensions--and then dividing by the number of workers. The result, they found, was that benefits for Big Three cost about $42 per hour, per employee. Add that to the wages--again, $28 per hour--and you get the $70 figure. Voila.

Except ... notice something weird about this calculation? It's not as if each active worker is getting health benefits and pensions worth $42 per hour. That would come to nearly twice his or her wages. (Talk about gold-plated coverage!) Instead, each active worker is getting benefits equal only to a fraction of that--probably around $10 per hour, according to estimates from the International Motor Vehicle Program. The number only gets to $70 an hour if you include the cost of benefits for retirees--in other words, the cost of benefits for other people. One of the few people to grasp this was Portfolio.com's Felix Salmon. As he noted friday, the claim that workers are getting $70 an hour in compensation is just "not true."

Of course, the cost of benefits for those retirees--you may have heard people refer to them as "legacy costs"--do represent an extra cost burden that only the Big Three shoulder. And, yes, it makes it difficult for the Big Three to compete with foreign-owned automakers that don't have to pay the same costs. But don't forget why those costs are so high. While the transplants don't offer the same kind of benefits that the Big Three do, the main reason for their present cost advantage is that they just don't have many retirees.

The first foreign-owned plants didn't start up here until the 1980s; many of the existing ones came well after that. As of a year ago, Toyota's entire U.S. operation had less than 1,000 retirees. Compare that to a company like General Motors, which has been around for more than a century and which supports literally hundreds of thousands of former workers and spouses. As you might expect, many of these have the sorts of advanced medical problems you expect from people to develop in old age. And, it should go without saying, those conditions cost a ton of money to treat.

To be sure, we've known about these demographics for a while. Management and labor in Detroit should have figured out a solution it long ago. But while the Big Three were late in addressing this problem, they did address it eventually.

Notice how, in this article, I've constantly referred to 2007 figures? There's a good reason. In 2007, the Big Three signed a breakthrough contract with the United Auto Workers (UAW) designed, once and for all, to eliminate the compensation gap between domestic and foreign automakers in the U.S.

The agreement sought to do so, first, by creating a private trust for financing future retiree benefits--effectively removing that burden from the companies' books. The auto companies agreed to deposit start-up money in the fund; after that, however, it would be up to the unions to manage the money. And it was widely understood that, given the realities of investment returns and health care economics, over time retiree health benefits would likely become less generous.

In addition, management and labor agreed to change health benefits for all workers, active or retired, so that the coverage looked more like the policies most people have today, complete with co-payments and deductibles. The new UAW agreement also changed the salary structure, by creating a two-tiered wage system. Under this new arrangement, the salary scale for newly hired workers would be lower than the salary scale for existing workers.

One can debate the propriety and wisdom of these steps; two-tiered wage structures, in particular, raise various ethical concerns. But one thing is certain: It was a radical change that promised to make Detroit far more competitive. If carried out as planned, by 2010--the final year of this existing contract--total compensation for the average UAW worker would actually be less than total compensation for the average non-unionized worker at a transplant factory. The only problem is that it will be several years before these gains show up on the bottom line--years the industry probably won't have if it doesn't get financial assistance from the government.

Make no mistake: The argument over a proposed rescue package is complicated, in no small part because over the years both management and labor made some truly awful decisions while postponing the inevitable reckoning with economic reality. And even if the government does provide money, it's a tough call whether restructuring should proceed with or without a formal bankruptcy filing. Either way, yet more downsizing is inevitable.

But the next time you hear somebody say the unions have to make serious salary and benefit concessions, keep in mind that they already have--enough to keep the companies competitive, if only they can survive this crisis.

[Mandark]

The only point of this bill is to buy the DEMs time to pass Card Check so the UAW will have an upper hand when the next debate happens in March/April. Its sickening Bush is going along with it (but completely expected) and its awesome how the GOP seems to want to fillibuster the fuck out of it. 

Card check is a mechanism for officially recognizing new unions.  It does nothing to affect existing unions.

So what the hell are you talking about?

[Mandark]

http://www.cbsnews.com/stories/2008/11/24/opinion/main4630103.shtml

Cohn's been all over the auto crisis at the New Republic.  The $70/hr figure is really disingenuous and it's good to see it get smacked down.

The fact that the wage gap is in reality so small makes the behavior of the Senate Republicans that much worse.  Why make a bailout contingent on immediate wage cuts, other than misanthropy?

[Van Cruncheon]

as with all things republican, virulent ideological hatred. specifically, hatred of those dirty socialist unions.

this is gonna be the very DEATH of republican economic conservatism, and at a nasty price.

[Mandark]

as with all things republican, virulent ideological hatred. specifically, hatred of those dirty socialist unions.

this is gonna be the very DEATH of republican economic conservatism, and at a nasty price.

Laissez faire never dies.  It's just buried deep in the earth until it makes a catastrophic reemergence, like a cliched epic fantasy villain.

But yeah, it's remarkable how any debate involving organized labor even tangentially suddenly becomes a union-busting crusade for Republicans, no matter what the central issue is.  See education reform and the creation of the Department of Homeland Security (which ultimately led to those smear ads against triple amputee Max Cleland).

It's possible that they never intended to vote for any sort of bailout and this was just a poison pill to make it look like the damn UAW (making $70 an hour!) was killing the deal.  Maybe a bit of both.

Blech.

[siamesedreamer]

Suck it down UAW.

Now its time to go into bankruptcy to so they can void the contracts. Get some sanity back into the cost structures. Seriously, how the fuck did the DEMs think they could still keep bullshit like the jobs bank program going? Mad props to the two Montana DEM senators...

[Eric P]

man, it's like SD didn't read shit else in this thread

[siamesedreamer]

What's the point?

Anyway, now Bush says he'll consider using TARP money to bail them out.

  Bush

[Brehvolution]

DOW is only down 150 so far, but oil is up $4.

[ShogunOfFear]

It's gonna suck living in Detroit with no car companies and shitty sports teams.

[G The Resurrected]

More like Auto Failout

seriously dont know what this world is coming too currently but I say we retroactively go after all those fucks that got millions and millions in options and incentives from all these big corporations. 10 million bucks for a bonus they must be INSANE!! thats enough to keep a lot of people working.

[Van Cruncheon]

It's a sad sad day when the shrub is smarter than the rest of his useless party

[Kestastrophe]

Previous 80 years: "Hoover was asleep at the wheel"

Last 10 weeks: "Let shitty companies fail"

smh

[Kestastrophe]

Gettelfinger (UAW rep): "Even if we work for free, GM cannot make it out of December"

[Ganhyun]

It's a sad sad day when the shrub is smarter than the rest of his useless party

Really? Only Republicans voted against this? You guys think that? Sorry to burst your anti-republican bubble.

http://www.weeklystandard.com/weblogs/TWSFP/2008/12/senate_democrats_had_enough_re_1.asp

From that link on this:

Nancy Pelosi says that Senate Republicans were "irresponsible" for opposing the auto bailout, which failed on a cloture vote last night 52 to 35.


Senate Republicans’ refusal to support the bipartisan legislation passed by the House and negotiated in good faith with the White House, the Senate and the automakers is irresponsible, especially at a time of economic hardship. The consequences of the Senate Republicans’ failure to act could be devastating to our economy, detrimental to workers, and destructive to the American automobile industry


The problem with Pelosi's statement is that 10 Republican Senators voted with the Democrats last night, which means the Democrats could have reached 60 votes if the entire Democratic caucus voted for the bill.

But eight Democrats bailed on the bailout (Reid, it should be noted, voted against it for procedural reasons, in order to bring it up for a vote again).

Four Democrats voted 'nay': Baucus, Tester, Lincoln, and Reid.

Four Democrats did not vote: Biden, Kennedy, Kerry, and Wyden.

(And, of course, the Democrats would have another member right now if Blagojevich had sold that Senate seat before he was busted.)


I understand Reid doing to to bring it back up for a vote again and Biden wasn't there I think.

[Kestastrophe]

Nay votes:

31 Republicans
4 Democrats

Seems pretty one sided to me

[siamesedreamer]

Gettelfinger (UAW rep): "Even if we work for free, GM cannot make it out of December"

But, you didn't want to work for free.

In fact, you wanted to delay any wage cuts until 2011. Which actually means you had absolutely no intention of accepting wage cuts in the first place.

[Ganhyun]

Nay votes:

31 Republicans
4 Democrats

Seems pretty one sided to me

Nice Spin. My point was that it wasn't only the Republican party that stopped this Bill. There were Democrats who voted against it to. This thread was turning into a only Republicans voted against it thread.

But don't forget, besides those 4 that voted against, 4 more didn't vote at all.  And as I said, Biden was expected, but those other 3 just decided to stay at home and drink lattes I guess.

[ShogunOfFear]

Perhaps we should sell their seats then?

The bail out cannot guarantee success of these poorly managed companies.  I'd like to know what the plan is if they get the money and they still fall through.  What then?

[siamesedreamer]

Welp, that's that. RGE is reporting Paulson has agreed to use TARP funds.

So much for the needed restructuring...

[Kestastrophe]

Nay votes:

31 Republicans
4 Democrats

Seems pretty one sided to me

Nice Spin. My point was that it wasn't only the Republican party that stopped this Bill. There were Democrats who voted against it to. This thread was turning into a only Republicans voted against it thread.

But don't forget, besides those 4 that voted against, 4 more didn't vote at all.  And as I said, Biden was expected, but those other 3 just decided to stay at home and drink lattes I guess.

spin? please. that voting record was taken right from the source you posted. I have not read this entire thread so I cannot comment if someone claimed that only republicans voted against, but that might as well have been the case.

[Brehvolution]

Gettelfinger (UAW rep): "Even if we work for free, GM cannot make it out of December"

But, you didn't want to work for free.

In fact, you wanted to delay any wage cuts until 2011. Which actually means you had absolutely no intention of accepting wage cuts in the first place.

Why should they? $50,000 to $60,000 a year is living so rich? Fuck the republicans for pushing for these concessions. Worker pay is not the problem here!!!!!!

[patrickula]

I guess this works out... I'd rather they use TARP anyway (as was the original request).
I guess Congress just blew their chance to actually regulate this thing though, good jon wannabe union busters.
I'm pretty amazed by the level of anti-UAW bile I've been seeing around the internet today... people need to get their facts straight and read articles like the one Drinky posted...  I'm not a huge fan or anything but people are misdirecting their ire here, and seem all too eager to let a big part of our economy die.

[siamesedreamer]

[Van Cruncheon]

Welp, that's that. RGE is reporting Paulson has agreed to use TARP funds.

So much for the needed restructuring...

the restructuring is continuing regardless, doofus -- do you really think gm wants to die? the uaw made its concessions two years ago when the writing was on the table.

[Kestastrophe]

Already debunked in article posted earlier: Auto-manufacturers only pay a small fraction of pension and health care costs (most of which were defined benefit). Actual UAW worker wages are substantially the same as foreign competitors.

I do agree that the wages some workers make is unjustified. I have a few family members that are UAW carholders and they make $25+ for what amounts to pushing a broom around. If they finish their work in an alotted amount of time, they are not allowed to do any further work and thus sit around most of the day. At the same time I have found it nearly impossible to get a $30,000 job with a master's degree. I think that there are cuts that could be made with the UAW, but it is nothing nearly as dramatic as the "$70 versus $30 per hour" argument that you see floating around.

[FlameOfCallandor]

I do agree that the wages some workers make is unjustified. I have a few family members that are UAW carholders and they make $25+ for what amounts to pushing a broom around. If they finish their work in an alotted amount of time, they are not allowed to do any further work and thus sit around most of the day.

Wow, just wow. It's like kindergarten.

[siamesedreamer]

Actual UAW worker wages are substantially the same as foreign competitors.

Yep...that's why after selling roughly the same number of cars Toyota made $1.7 billion and GM lost $9 billion.

[Eric P]

Actual UAW worker wages are substantially the same as foreign competitors.

Yep...that's why after selling roughly the same number of cars Toyota made $1.7 billion and GM lost $9 billion.

this statement is incredible.  i am going to print it out and hang it on my cubicle.



this is an amazingly laser focused worldview and i will keep it and look at it from time to time with a kind of awe and wonder.

[y2kev]

eric p

[Phoenix Dark]

Actual UAW worker wages are substantially the same as foreign competitors.

Yep...that's why after selling roughly the same number of cars Toyota made $1.7 billion and GM lost $9 billion.

you can't be serious

[TakingBackSunday]

Jesus I don't understand it

how can anyone be happy about this

[ToxicAdam]

I guess Republicans never want to win in Michigan, Ohio or Indiana again.


Dumb party.

[Brehvolution]

GM to close all NA plant for the first 6 weeks of 2009.

[ferrarimanf355]

GM to close all NA plant for the first 6 weeks of 2009.

Including the Corvette factory?  :'(

[brawndolicious]

I don't think SD was being serious.  It has must be some sort of ninja-troll that nobody can notice.  It will require further study.

Including the Corvette factory?  :'(

I'm betting that most car enthusiasts will hold a grudge against the republican party after this.

[Eric P]

An interesting aside here is that now the Republicans are a Southern regional party there's a vested interest in supporting the foreign automakers over the domestic ones, since that's where the non-union foreign plants reside.

and with that, i gained enlightenment and all became clear

[ferrarimanf355]

Including the Corvette factory?  :'(

I'm betting that most car enthusiasts will hold a grudge against the republican party after this.

You got that right. Fuck them, fuck them in the ass.

[patrickula]

An interesting aside here is that now the Republicans are a Southern regional party there's a vested interest in supporting the foreign automakers over the domestic ones, since that's where the non-union foreign plants reside.

and with that, i gained enlightenment and all became clear

They're true patriots

[Mandark]

An interesting aside here is that now the Republicans are a Southern regional party there's a vested interest in supporting the foreign automakers over the domestic ones, since that's where the non-union foreign plants reside.

and with that, i gained enlightenment and all became clear

I was gonna say.  The main opposition in the Senate came from Senators in states with foreign-owned auto factories.  A big element of this is pure interest group politics.

http://timesfreepress.com/news/2008/jul/24/chattanooga-vw-incentives-largest-state/?print

Here are preliminary estimates, subject to change, of what is being offered for the VW plant and related development:

* $81 million — Property given to Volkswagen. The city and county will provide Volkswagen about 1,350 acres of the Enterprise South industrial park. The land is listed at $60,000 an acre.

* $30 million for worker training. Tennessee will pay for recruitment, screening and training of new workers hired for the plant and will help pay for new training center to be built at Enterprise South. Comparable with retraining incentives at GM’s Saturn plant, the state would spend about $12,000 per employee. Federal, state and local governments also have pledged to build at least a $6 million technical training center on site. Training incentives could be even more over time.

* $43 million on roads, highway connections. Federal and state governments will spend more than $20 million on connector roads and a 4-lane thoroughfare through Enterprise South. A $23 million interchange on Interstate 75 at mile marker 9 was completed in 2006.

* $3.5 million in rail line upgrades. Through the Hamilton County Railroad Authority, the state, city and county have pledged to upgrade rail connections to the VW site from both the Norfolk Southern and the CSX railroads.

* $200 million — Job tax credits over 20 years. A state-offered job tax credit of $5,000 per job over 20 years is available on corporate taxes for companies investing at least $1 billion. It is valued at $100,000 over the next two decades for potentially 2,000 employees VW plans to hire.

* $150 million to $350 million — Property tax breaks over 30 years

Pending approval, the city and county will give up all but the educational component of local property taxes on the $1 billion plant for 30 years. VW will pay at least $5.5 million annually in school property taxes. But the rest of the property tax abatement initially would save at least $12 million a year on a $1 billion plant. Plant machinery is assessed at 30 percent of value and will depreciate after eight years, so the ongoing value of the personalty tax break could drop. But taxes on the land and buildings, assessed at 40 percent of value, will maintain the tax break through 2039, assuming the company meets job and investment targets.

* Other incentives. State and local governments also have pledged to help prepare the site, add utilities and fire protection, offer sales tax exemptions on industrial machinery purchases and pollution control equipment and give job tax credits to suppliers that locate immediately around the plant. TVA and EPB will offer some low-cost loans from the Valley Advantage Fund and provide several million dollars worth of growth credits for power purchases. Local utilities also will extend service to the new plant. The value of such incentives has not yet been calculated.

Sources: Tennessee Department of Economic and Community Development, Volkswagen AG, Hamilton County trustee’s office, Chattanooga mayor’s office

Above: A video of Bob Corker, currently leading the crusade against the Big Three bailout, damn near choking up because he's so proud of the work the Tennessee government has done in getting a VW plant there.

Mmmmmm  hmmmmm.

[Beardo]

At least foreign automakers make a product that people buy. ZING!

[siamesedreamer]

Actual UAW worker wages are substantially the same as foreign competitors.

Yep...that's why after selling roughly the same number of cars Toyota made $1.7 billion and GM lost $9 billion.

this statement is incredible.  i am going to print it out and hang it on my cubicle.

(Image removed from quote.)

this is an amazingly laser focused worldview and i will keep it and look at it from time to time with a kind of awe and wonder.

Awesome...

Pass it around the office for all to see.

[Fresh Prince]

At least foreign automakers make a product that people buy. ZING!

[patrickula]

At least foreign automakers make a product that people buy. ZING!

http://online.wsj.com/mdc/public/page/2_3022-autosales.html#autosalesD


Nope, nobody buying domestic cars here

The big 3's 47.6% market share in nov. 2008

[Phoenix Dark]

http://thenewshole.msnbc.msn.com/archive/2008/12/12/1713569.aspx

whoops

[recursivelyenumerable]

well I agree with point 2

[Van Cruncheon]

they take this war on the middle class busines seriously

[Mandark]

"Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it."

I like how it's just assumed that they should do things which would hurt unions.  It really is a bogeyman complex for them.

[Phoenix Dark]

"Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it."

I like how it's just assumed that they should do things which would hurt unions.  It really is a bogeyman complex for them.

It's kinda like applying the Bush Doctrine to organized labor

[Mandark]

"Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it."

I like how it's just assumed that they should do things which would hurt unions.  It really is a bogeyman complex for them.

It's kinda like applying the Bush Doctrine to organized labor

In what respect, Charlie?

[TakingBackSunday]

[AdmiralViscen]

http://www.detnews.com/apps/pbcs.dll/article?AID=/20081213/AUTO01/812130355/1148/&source=nletter-business

December 13, 2008
Big 3 rescue wins rivals' support
Foreign-based carmakers fear backlash collapse of Detroit's auto industry would have on supply chain.
Christine Tierney / The Detroit News

WASHINGTON -- They may be unrelenting rivals of Detroit's Big Three, but foreign-based automakers don't relish the prospect that one or more of Detroit's automakers might go under.

On the contrary, the risk that one of the U.S. car companies could collapse deeply worries Asian and German manufacturers with U.S. factories.

As the industry's outlook has deteriorated in recent months, executives at foreign car companies have said they want to see Detroit's cash-strapped automakers get through the crisis, noting that they all share the same network of suppliers.

"We're joined at the hip with our Detroit brethren in manufacturing," said Irv Miller, group vice president and chief spokesman at Toyota Motor Corp.'s U.S. sales subsidiary. Whatever the U.S. government proposes to keep the U.S. automakers afloat, "we support it," Miller said.

On Friday the Bush administration signaled that it would extend a financial lifeline to General Motors Corp. and Chrysler LLC after a bailout bill died Thursday night in the Senate, where it ran into fierce opposition from Republicans. Some of the bill's most vocal critics, such as Sen. Richard Shelby of Alabama and Sen. Bob Corker of Tennessee, represent southern states that have successfully courted investment from foreign automakers.

In the past few weeks, as senators from states with foreign transplants have grown more strident in their criticism of Detroit's top managers and the United Auto Workers union, executives from Japanese and German companies have tried to distance themselves from those sentiments.

Honda executives made it clear last month that they didn't share the views expressed by Rep. Mike Pence, R-Ind., who said during the opening of Honda Motor Co.'s new assembly plant in Greensburg, Ind., that he would rather see the U.S. automakers file for bankruptcy than receive taxpayer money.

Jeffrey Smith, assistant vice president for corporate affairs at American Honda, told reporters, "Honda supports measures that would maintain the short- and long-term viability and stability of the auto industry."

Like his colleagues at Toyota, Smith noted that all automakers that have U.S. production facilities are "deeply and closely integrated at the supply base."

Some executives at foreign automakers are being tactful to prevent a resurgence of the kind of protectionism and backlash that flared in the 1970s and 1980s. But those sentiments have subsided, particularly in regions where German automakers BMW AG and Daimler AG's Mercedes-Benz and the Japanese and Koreans have built factories.

Executives at the Japanese manufacturers have been surprised to hear lawmakers assert that their workers earn far less than workers employed by Detroit's automakers. One executive who spoke on condition of anonymity confirmed UAW President Ron Gettelfinger's remarks Friday that team members, or line workers, at Toyota's largest North American assembly plant in Georgetown, Ky., earned more than the average UAW worker.

According to Gettelfinger, a UAW worker earns wages of just over $28 an hour, on average, compared with $30.45 an hour for Georgetown's non-union workers. That includes profit-sharing bonuses that are likely to decline for the current year.