Posts Tagged ‘GM’



November 25, 2008

One group being blamed for the Big Three automakers is unions.  They demand high wages, pensions, great healthcare, and a number of other concessions.  The UAW drives up the cost of producing cars, reducing the margin the US automakers make on every car, raising the price of cars, or both.  Are they worth it?

In general, unions have been a good force in the labor market.  Even though I do not work in a unionized store and have never been a member of a union, I have seen some benefits from them.  My workplace is safer than it might be because of safety laws inspired by unions.  I also probably make more money than I would be if unions had not existed.

However, I feel that some unions have outlived their usefulness.  I think the UAW may very well be one of these unions.  As I stated in the last post, the Big Three pay a lot more per hour to their employees than the Japanese car makers do.  The union is giving the Japanese car makers a competative advantage over their employers.  It is a case of biting the hand tha feeds you.

I think the UAW needs to take a serious look at how it can help Ford, GM and Chrysler reduce their labor costs and still provide suitable pay and benefits.  Everyone is going to have to give something up if they are going to stay in business.


Should We Bailout The Car Companies?

November 17, 2008

So, the US government has already pumped a bunch of capital into national banks.  Now the auto industry is asking for a handout.  Should we give it to them?

I think the government should loan GM (and the others) money, but with one stiupluation: they go into bankruptcy.  This does a number of things:

First, it lets a judge alter GM’s debt and labor contracts.  This would lower GM’s debt payments and labor costs.  GM’s average hourly rate (with fringe benefits) is $71 an hour.  Toyota’s is $47.  I know the labor unions will cry about it, but if GM goes under, the unions are not going to be much help to the tens of thousands of unemployed union memebers, will they?  The unions worked with the airlines that went into bankruptcy, and that allowed the airlines to come back out.  The UAW needs to consider doing the same thing or have it done for them.

Second, going into bankruptcy lets the US government give GM “debtor in possession financing.”  This lets GM keep running, but give the US government dibs on repayment and assets if GM goes belly-up.  This gives the tax-payer the most protection.

GM has been hemorriging money for years, even before the credit crunch.  They need some punishment to go along with any help they get.