auto industry

Were Lada factories this bad?

by Ivan Osorio on November 14, 2008 · 2 comments

in Bailout Watch, Economy

As the Senate prepares to debate the proposed $25 billion bailout bill for the Big Three Detroit automakers, it’s worth pointing out — as many times as possible — just what this money might be going to pay for. First, as Larry Kudlow, points out, there are uncompetitive salaries.

Here’s a stat from my friend, blogger Mark Perry: Total compensation per hour for the big-three carmakers is $73.20. That’s a 52 percent differential from Toyota’s (Detroit South) $48 compensation (wages + health and retirement benefits). In fact, the oversized UAW-driven pay package for Detroit is 132 percent higher than that of the entire manufacturing sector of the U.S., which comes in at $31.59.

Yet that’s not all. As The Wall Street Journal‘s Paul Ingrassia notes, Detroit doesn’t need more money, but radical change, including getting rid of union contracts, which, as he noted on NPR this week, include burdensome work rules. Here’s one example he cites in his Journal op ed:

A few years ago the UAW even waged a spirited fight to protect the “right” of workers to smoke on the assembly line, something that simply isn’t allowed at, say, Honda’s U.S. factories. Aside from the obvious health risk, what about cigarette ashes falling onto those fine leather seats being bolted into the cars? Why was this even an issue?

In what other industry would this even be tolerated?

Yet even that is not all — then there is the UAW “Jobs Bank,” which keeps allegedly laid-off auto workers on at full salary and not working. This is beyond Soviet. In the former Communist bloc, people had a saying: “We pretend to work and they pretend to pay us.” Not even pretending to work and getting paid for real beats that every time.

If Detroit deserves anything, it’s a Lada plant.

Bailout on Wheels Rolls Down Slippery Slope

by Iain Murray on November 10, 2008

in Bailout Watch

Ah, that slippery slope. All of a sudden, Nancy Pelosi has come to the conclusion that ensuring union retirees receive large amounts of taxpayers’ money is central to the country’s financial stability. And after all, it’s only $25 billion (or maybe $50 billion, still nowhere near $700 billion, or maybe $2 trillion). As my colleague Sam Kazman commented, even though multi-billion dollar bailouts may no longer be the rarity they once were, that does not entitle either the auto industry or the UAW to Cole Porter’s Anything Goes status. Moreover, as Professor Bainbridge points out, all of the problems facing the Big Three would be better solved by bankruptcy than bailout. Yet it seems that Bailout Mania has crossed the pond, with the unions in Britain demanding a $20 billion bailout for the virtually non-existant British auto industry.

In this sort of climate, we should remember a simple fact about the free market, eloquently expressed by none other than PJ O’Rourke in his must-read, if controversial, essay “We Blew It” in the latest Weekly Standard:

What will destroy our country and us is not the financial crisis but the fact that liberals think the free market is some kind of sect or cult, which conservatives have asked Americans to take on faith. That’s not what the free market is. The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. “Jeeze, 230 pounds!” But you can’t pass a law making yourself weigh 185. Liberals think you can. And voters—all the voters, right up to the tippy-top corner office of Goldman Sachs—think so too.

Indeed. And subsidizing food bills won’t help either. Someone near and dear to me has similar thoughts at her new blog.

Cross-posted from The Corner.

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