Who's Online
We have 164 guests and 1 member online
Business News Feed
|
Reuters: Business News
|
| Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. |
|
-
Merrill brokerage chief McCann to leave
NEW YORK (Reuters) - Bob McCann, head of brokerage at Merrill Lynch & Co, announced his plans to leave the securities firm, just days after its acquisition by Bank of...
-
Asia stocks up on hopes of recovery
HONG KONG (Reuters) - Asian stocks edged up for a seventh day on Tuesday, boosted by hopes for a global economic recovery later in 2009, though the rising yen and...
-
Oil steady above $48 on MidEast, Russian tensions
SINGAPORE (Reuters) - Oil was steady above $48 on Tuesday after rising 5 percent overnight, as Israel's deepening incursion into Gaza and a spat between Russia and Ukraine over gas...
-
Prosecutors seek to jail Madoff
NEW YORK/WASHINGTON (Reuters) - U.S. prosecutors asked a judge to jail accused swindler Bernard Madoff on Monday, saying he sent jewelry and other items worth more than $1 million to...
-
Car sales plunge heralding bleak 2009
DETROIT (Reuters) - U.S. auto sales plunged by 36 percent in December led by outsized declines at Chrysler LLC, Hyundai Motor and Toyota Motor Corp as the battered industry closed...
-
Apple's Jobs reassures investors about his health
NEW YORK (Reuters) - Apple Inc Chief Executive Steve Jobs sought to soothe investor concerns about his health on Monday, saying his weight loss was caused by a hormone imbalance...
-
Economists seek solutions, signs of life in housing
SAN FRANCISCO (Reuters) - Top economists at the Allied Social Sciences Association's annual meeting have been searching -- in some cases, in vain -- for signs of life in the...
-
Cigna to cut 1,100 jobs, citing weak economy
LOS ANGELES (Reuters) - Health insurer Cigna Corp said on Monday it will cut 1,100 jobs, or about 4 percent of its workforce, and consolidate certain operations as it...
-
Fed buys MBS in latest unconventional move
NEW YORK (Reuters) - The Federal Reserve on Monday kick-started its latest unconventional program to boost the moribund economy, this time taking aim at the heart of the slumping housing...
-
GE's finance arm launches $10 billion FDIC-backed debt
NEW YORK (Reuters) - General Electric Co's finance arm on Monday launched a $10 billion sale of FDIC-backed debt, the largest sale under the government guarantee program since its...
|
|
Written by Jordan Brown
|
|
Tuesday, 18 November 2008 18:40 |
Let the Big Three Sink
In their ongoing effort to support every failing company, industry, and state government in this country, members of Congress are considering a bailout of GM, Ford, and Chrysler. Their reasoning, if one can call it that, is that the auto manufacturers are just too big to fail, and thus deserve a portion of the TARP funds. According to Michigan (surprise, surprise) Senator Carl Levin, "One out of 10 jobs in this country are auto-related. Twenty percent of retail sales are auto-related or automobiles, so this is a national problem." Of course, Levin doesn’t specify whether his figures take into account cars and parts made by the other, non-failing auto manufacturers. Nor does he specify what ‘auto-related’ means. Does that include manufacturers of replacement car parts? Does it include car repairs and regular services, like oil changes and brake-pad replacement? The numbers he cites are vague at best, downright dishonest at worst--in short, just what we have come to expect from those championing corporate handouts.
But the issue Levin and other bailout proponents fail to address is why the Big Three automakers are failing in the first place. Executive pay, that ready scapegoat of ‘progressives,’ certainly isn’t the central problem this time around, despite what they’d have you believe. At G.M., the 2007 pay and benefits package rose to around $15.7 million for CEO Rick Wagoner. That’s certainly a lot of money, especially considering the performance of G.M. that year, but it is a drop in the bucket compared to G.M.’s multi-billion dollar losses. The same applies to Ford and Chrysler, both of which paid millions to their CEOs, but have suffered losses in the tens of billions.
No, the real reason for these companies’ failure is the ridiculously inflated wage and benefit packages laborers receive. According to a 2006 Wall Street Journal article cited by Cal Thomas, G.M. hourly employees received an average of $81.18 an hour. In 2008, that number dropped slightly to $78.21 an hour, with new hires receiving $26.65. And the United Auto Workers contract that sets wages defines an auto-production worker job rather broadly, ensuring that even janitors and grounds maintenance employees receive at least the minimum $26 an hour.
These absurdly high wages get passed onto the consumer, raising the cost of each car that rolls off the assembly line and ensuring that they cannot compete with non-union corporations and plants. These artificially high wages can also harm the employees in the long run, as they are often laid off en masse when the expensive cars they build fail to sell in sufficient numbers. This happens less frequently at non-union plants, as wages are competitive, but not inflated beyond sustainability. Such is the case in Alabama, home to three non-union plants, none of which have had to lay off employees. While the plants are facing economic troubles, they are in far better shape than their Midwestern counterparts.
While unions are not inherently bad, the role government plays in organized labor is. Workers have the right to organize, of course, but should not have the legally-enforced ‘right’ to force non-members to join or pay dues, as is the case in many states. The federal government also takes a hypocritical stand on the issue of unions, using anti-trust laws to break up large corporations while simultaneously enforcing labor monopolies, oblivious to the contradiction in their own actions. Just to prove they don’t really don’t get it, Congress has introduced the “Employee Free Choice Act,” which would amend the "National Labor Relations Act" and eliminate the requirement for a secret ballot-vote in order to unionize. The misleading title of the bill wasn’t lost on Minnesota Republican John Kline, at least:
“It is beyond me how one can possibly claim that a system whereby everyone your employer, your union organizer, and your co-workers knows exactly how you vote on the issue of unionization gives an employee 'free choice.... It seems pretty clear to me that the only way to ensure that a worker is 'free to choose' is to ensure that there's a private ballot, so that no one knows how you voted. I cannot fathom how we were about to sit there today and debate a proposal to take away a worker's democratic right to vote in a secret-ballot election and call it 'Employee Free Choice.’”
In addition to the problem of excessive wages and benefits, the Big Three are also facing stiff competition from car manufacturers more in-tune with consumers and market forces. This is most evident in Detroit’s obsession with large, gas-guzzling vehicles that don’t sell when oil prices are high and environmental concerns are on the rise. Congress has recognized this problem, and proposes to fix it through regulation tied to the bailout. But this won’t solve the problem, it will just add another layer of bureaucracy and put off the inevitable; Congress does not, and cannot, know how many cars of a particular class or model consumers want, and any quotas, penalties or bonuses will lead to over- or underproduction.
There will always be a market for large gas-guzzling cars, and there’s nothing wrong with that. In a truly free market economy, one or more corporations would produce such vehicles, while the rest would produce the more fuel efficient cars that an increasing number of drivers want. Companies that refuse to provide what consumers desire at a price they are willing to pay would fail, to be replaced by corporations more able or willing to meet market demands. But Congressmen like Levin are not going to let the out-of-touch manufacturers in Detroit fail, despite their own dissatisfaction with the cars being produced, preferring instead to throw our money at the problem and hope it goes away. Unfortunately for all of us, using taxpayer dollars to finance inefficient corporations ensures that we all pay more for cars that fewer of us want, while those corporations offering competitive products and prices are penalized for their success.
If Congress refuses to bail out the Big Three, those corporations will likely file for bankruptcy. A lot of people will lose their jobs, but most of them will be able to find new jobs—albeit at a lower rate of pay—with the other, solvent car manufacturers. The executives the leftists worry about will probably lose their jobs and benefits packages too, but will find new jobs with big paychecks and stock options elsewhere. The world won’t come to an end. In fact, for many of us things will get a little better as workers and capital are utilized more efficiently to produce cars we can actually afford to drive. Only the Washington influence peddlers and their lobbyist friends will be left out in the cold if the American people refuse to fund another bailout, and that’s okay with me. |
|
|
|
