Mickey Kaus, a moderate Democrat, explains how the proposed auto bailout contains little leverage for the proposed “auto czar” to really cut the excessive labor costs that threaten the automakers’ survival, and how it is unlikely that the government will “get its money back,” contrary to what the bailout’s (mostly Democratic) supporters claim.
We earlier noted that auto workers at American-owned plants are paid $70 an hour in compensation, while workers at the U.S. factories owned by foreign car markers get paid less than $50 an hour. The U.S.-owned automakers will not be competitive until that disparity is reduced, but that is unlikely to happen, because any auto czar will be accountable to the Obama Administration and Congress, which are dominated by liberals supported by the United Auto Workers union. State dealer franchise laws in states like New Jersey, which fleece automakers to perpetuate underperforming auto dealerships, also need to be preempted by federal law to reduce the U.S. automakers’ costs.
Nobel Prize-winning economist Gary Becker explains why bankruptcy would be better for American consumers and taxpayers than a bailout, since filing for bankruptcy would allow the automakers to cut their inflated labor costs.
Failure to cut labor costs will make any bailout an exercise in futility, as the British government found when it foolishly spent billions of dollars in the 1970s in an abortive effort to bail out the failing British car industry. (Today, Europe’s largest auto plant is in England, but it’s owned by the Japanese automaker Nissan. So even if American automakers were to not only go bankrupt (like the airlines, which keep operating even in bankruptcy), but also stop producing cars, the cars still might be produced in the U.S. by a foreign car company).
In the Wall Street Journal, Holman Jenkins argues that even a multibillion dollar bailout will simply be wasted, without turning around the auto makers’ fortunes, if federal CAFE (fuel-economy) regulations are not repealed or reformed. He notes that a gas tax would be a less economically burdensome and more effective way of increasing cars’ gas mileage than CAFE standards, and would place American automakers at less of a disadvantage relative to their foreign competitors.
Manhattan financial analyst Eric T. Singer argues that the bailout and the proposed “Car Czar” will harm the auto industry by giving political priorities like “union jobs and green initiatives” priority over producing affordable cars motorists actually want, resulting in the auto industry limping along on “life support,” at a tab of billions of dollars a year in taxpayer subsidies.
Loading ...
Manhattan financial analyst Eric T. Singer writes that the auto makers
“will have to put up with a 'Car Czar'. It is very appropriate that our Congress, which has lower turnover than the old Soviet Union’s Politburo, would use the term describing a Russian dictator, to identify the key missing ingredient in the car companies' organizational charts. . .
What will be the role of the Car Czar? Just as Stalin had show trials, we are now often treated to Congressional hearings to spin the latest danger or smooth over the latest bump. The Car Czar will be used in the Congressional hearings to assure us that when there is a formal bankruptcy early next year, proper protection will be given to the union jobs and green initiatives, and that the new Five Year Plan will work. All will be well in March, with just one more dose of, say, $50 billion on top of today’s $15 billion, until the next time they run out of money, which I guess will start to be apparent about six months later. The Car Czar will also be able to give the car companies our 535 representatives’ expert thinking on robotics, catalytic converters, new transmission technologies, mileage tradeoffs, styling, hot colors, and energy efficient light bulbs for cars.
The idea of repealing CAFÉ requirements, which placed a major burden on the backs of the car companies, is off the table. Of course, the Speaker of the House has stated there will not be 'an endless flow of money' unless there is a restructuring, which suggests an ongoing role for the Car Czar. 'We call this a barbershop. Everyone is getting haircuts, in terms of conditions.'
Which leads to my next question: Who does your hair? Because not all barbershops are created equal. We used to have a financial barbershop that offered tried and true haircuts. It was called the United States Bankruptcy Court. And if you overplayed your hand relative to other stake holders, you knew you might lose out altogether. But with a Car Czar, and a major seat for Big Labor at the table, no one even wants to use the unpleasant word bankruptcy.
Because it won’t be a bankruptcy. It will be something far worse. It will be the Thing That Wouldn’t Die. It won’t attract enough car buyers to survive, but it won’t be dead enough to bury. It won’t be honest about what it really takes to live. It will just be on life support, under the watchful eye of the Car Czar. And like all Mummies, it will walk slowly, with its arms raised, hoping to capture a few live humans.”
I have bought cars from American companies since my first vehicle (a Chevy Cavalier).
If any form of a government bailout passes, that will be THE LAST TIME I purchase a vehicle from an auto company headquartered in America ever again. I have written to the “Big Three” to let them know that, and plan to also email the UAW…
If the American Auto industry is interested in vindicating the government for their ridiculous “environmental†standards, most of which have nothing to do with the environment, the car companies should SUE THE EPA.
Better yet, maybe the EPA ought to be forced (by the “Car Czar” –could we come up with a more idiotic phrase??) to submit to”Economic Impact” research and release an “Economic Impact” statement for every single decision they make.