Re: Bloated benefits for unions are sinking automakers
- From: "Bugman" <jmposing@xxxxxxxxxxx>
- Date: Sun, 16 Nov 2008 10:06:01 -0600
"jose" <josefsoplar@xxxxxxxxx> wrote in message
Bloated benefits for unions are sinking automakers
Greg Lewis is a professor of English at St. John Fisher College,
Rochester, N.Y., and author of the forthcoming book "The Politics of
Do you ever have an original thought? All you do is cut and paste other
The election results represent an exercise in poetic justice in that
Barack Obama is inheriting a set of problems largely of his own
ideology's making. The kicker is that the solutions likely to emerge
based on that ideology make it all too likely that the problems will
The current auto-industry panic is instructive of Obama's dilemma. The
crisis facing America's Big Three auto manufacturers has, arguably, a
single source: legacy costs resulting from union contracts that were
negotiated half a century ago. The financial burden thus incurred
weighs down their balance sheets to such a degree that, even if the
industry in which they compete were thriving, it would be extremely
difficult to maintain long-term profitability.
As automobile manufacturing became a global industry, the foreign
manufacturers that expanded their operations into the United States
flourished. But while Toyota Motor Corp. and Honda Motor Co. Ltd.,
along with relative latecomers Hyundai Motor Co. and Kia Motors Corp.,
have a significant manufacturing and sales presence in the United
States, they don't have the staggering labor-related financial
obligations under which General Motors Corp., Chrysler L.L.C. and Ford
Motor Co. are struggling.
GM, for instance, has about 450,000 retirees - more than three times
the number of its current full-time employees - to whom it pays
pensions and for whom it provides medical care. By some estimates,
medical costs alone add $1,500 to the average cost of each GM
automobile. And the company is facing an unfunded liability of more
than $80 billion, about half its annual pre-downturn gross sales, for
future health-care costs for employees and retirees and their
Toyota, on the other hand, having gone to school on the problems
looming for American auto companies as it set up U.S. operations, has
fewer than a thousand retirees. Even when that number balloons into
the thousands over the next decade, the company's liabilities for its
retirees will remain right where they are today: at zero. That's
because Toyota has put the responsibility for funding their
retirements on the shoulders of the employees themselves, through
individual investment accounts to which the company contributes.
Even U.S. automotive technology has suffered because of union-labor
As foreign manufacturers entered the U.S. market aggressively in the
1970s and '80s, American car companies, faced with growing labor-
related expenses that made drastic cost-cutting necessary, found it
necessary to save money by skimping on retooling their manufacturing
operations. As a result, their products suffered against the
competition in both technological innovation and quality.
Without the balance-sheet-killing albatross resulting from union
contracts, foreign manufacturers are doing well in the United States.
And therein lies the rub for the president-elect.
If Obama does what might please his ideological supporters and bails
out the auto industry by essentially nationalizing GM, Ford and
Chrysler, he'll be putting the burden of saving the industry from the
consequences of union contracts negotiated by his leftist political
forbears squarely on the shoulders of U.S. taxpayers. In doing so,
he'll please the Left while at the same time almost assuring that
these companies will either sink into oblivion or become the corporate
equivalent of permanent wards of the state.
On the other hand, if he allows them to enter into bankruptcy, the
companies might have a fighting chance to reorganize, possibly
jettisoning some of the financial baggage resulting from back-end-
heavy labor agreements. They might conceivably emerge even stronger as
a result. The thought of the howls of protest that would be raised by
Obama's leftist base in that event, however, are likely to prevent the
president-elect from pursuing that course of action.
The bottom line is that if Obama ends up bailing out the auto
industry, then the U.S. taxpayer ends up underwriting the leftist
agenda of the last half century, as manifested in labor agreements
antithetical to capitalism. That it has taken so long for this leftist
tactic, in tandem with the current exacerbating financial crisis, to
finally bring the auto industry to its knees is a testament to the
resilience of capitalism. That Obama's "solution" to this crisis might
spell the end of U.S. automobile manufacturing should not be lost on
those of us who will have to bear the financial burden of "rescuing"
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