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Published: November 22, 2008

The irony of auto executives flying via corporate jet to Washington to beg for federal bailout money was not lost on anyone.

General Motors has already announced it will shed two of the jets, dropping its fleet to three from a high of seven early in the year but such symbolism may have been far too little and too late to save the "Big Three" in their current form.

In no particular order, there are at least three big problems that America's automakers need to address:

  • Management. G. Richard Wagoner, CEO of General Motors, made $24 million in each of the last two years while running the company into the ground, and got a 33 percent increase in his base salary for this year. He should not be around to profit from any government intervention on GM's behalf, and the same is true of his cohorts at Ford and Chrysler, Alan Mulally and Robert Nardelli, respectively. Mulally made $21.7 million last year. According to CNNMoney.com, that included three-quarters of a million dollars to fly him, his family and friends around the country, "to ease the burden of Mr. Mulally moving to Southeast Michigan and away from his family in Seattle." Nardelli, whose company is owned by a private venture capital firm, has not disclosed his salary, but it's likely in the same range.

  • Labor. American autoworkers earn in the neighborhood of $70 per hour to build cars, including a lucrative benefit package. Depending whose math you believe, that's some $20 per hour more than workers at domestic factories for Toyota, Honda and the like. Fifty dollars an hour, including benefits, hardly seems oppressive.

  • Goodwill. This, like GM's share price and Chrysler's before it, is approaching zero. In Congress, Republicans are balking at paying to bail out either the unionized job force or the CEOs. Democrats, while more sympathetic to the unions, are reluctant to enable companies that have flouted EPA standards for years and can't be seen as bailing out overpaid, underperforming executives. So there's no natural political allies for the automakers. The refusal of any of the CEOs to consider foregoing salary or perks didn't help their case. As one online commentator noted, it's reasonable to ask a bum to stop peeing on your leg if he wants to "borrow" a dollar.

    The problem is that the auto companies are not isolated corporate entities. Their retail operations — the dealerships — are integral members of local business communities around the country, including in towns and cities across Vermont. As they are in a fiercely competitive marketplace, they tend to be well-run, profitable companies, unlike their corporate parents.

    That's the constituency Congress needs to keep in mind as they negotiate a bailout package of some kind.

    Given the problems facing the industry — beyond the lousy economy — it's reasonable to consider some sort of controlled bankruptcy process — purging inefficient top management as well as providing a way to rework union contracts into a form that doesn't guarantee the companies will fail — instead of just throwing cash at companies that have shown they can't succeed on their own.

    We've been down this road before. The Chrysler bailout made Lee Iacocca rich and while it delayed the time before the company failed, it didn't solve the underlying issues. And it's not fair to better-run car companies to pay off only the inefficient ones.

    What's good for GM is what's good for the U.S.A. … but handing over wads of tax money with no strings attached to badly run corporations isn't good for either.








    READER COMMENTS


    The way I see it . . . my taxes go up either way. Perhaps Chavez has it right . . . then Obama would be our only CEO.
    -- Posted by Sir Parley on Tue, Nov 25, 2008, 8:08 am EST

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    First, thanks to Joe Patten for stating the full story on auto worker wages (including legacy costs). Many journalists and editorialists, and Congress neglect to mention that the Big 3 Auto companies "hourly wages" include large legacy costs for retirees, while the "clean slate" foreign car companies in Southern U.S. plants have significantly lower legacy costs. At least the U.S. car companies are honoring their promises to retirees, unlike some of the airlines and other industries. Are some American workers in other industries jealous because their employers might have shafted them and ditched their pension obligations? If so, then in those cases, they should blame their former employers, and not the workers of GM, Ford and Chrysler.

    Those who want the UAW to die off and want (wish for) GM, Ford, Chrysler to go into bankruptcy, neglect to mention that retiree pension costs would be dumped on the Federal Government, in the form of the Pension Benefit Guaranty Corporation (http://www.pbgc.gov/). That means our tax dollars.

    The proponents of status quo private health care insurance would see the collapse of the largest health care providers in the Manufacturing Midwestern States. If the numbers of Americans without health care insurance dramatically goes up, then those of us who still have health care insurance will see our premiums skyrocket.

    Does anybody remember after 9/11 how GM, Ford, Chrysler helped keep the U.S. Economy going by selling vehicles at deep discounts (basically at cost)? These companies did this to stay in business and honor their legacy cost promises, and hopefully gain some marketshare. Did President Bush and Congress ever thank GM, Ford and Chrysler for helping out in the last recovery from recession? I don't think so. In contrast, the airline industry had their hand out in Washington after 9/11. But the U.S. Big 3 manufacturers continued to keep making and selling vehicles in 2002 and 2003.

    Yes, GM and Rick Wagoner are burning through cash at a current rate of $2 Billion per month. But President Bush and Congress continue to burn through $10-12 Billion per month, for over 5 years, in Iraq. Wake up people! It's our tax dollars! Where were Sen. Christopher Dodd and Sen. Richard Shelby back then? They got real concerned about a $25 Billion LOAN (= only 2 months in Iraq) to 3 struggling companies, but said virtually nothing about the mismanagement and looting of our tax dollars in Iraq by fraud of no-bid contractors! President Bush was supposed to be the CEO-Prez. But for as bad as Rick Wagoner is portrayed, he is not nearly as incompetent as President Bush.

    Yes, Wagoner, Nardelli and Mulally flew on their corporate jets. Silly them, they should have car-pooled (or plane-pooled). But what about all the jet fuel that Barack Obama and John McCain burned up for well over a year on campaign stops, criss-crossing the country? Many of the candidates flew back and forth between Iowa and New Hampshire (maybe over Vermont air-space), on donated corporate jets. How did Chris Dodd get around between IA and NH? Did he fly coach class on Northwest Airlines?
    -- Posted by Ron Pulcer on Mon, Nov 24, 2008, 3:07 pm EST

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    "GM, which negotiated the four-year deal that serves as a template for UAW deals with Chrysler and Ford, says its total hourly labor costs dropped 6 percent this year from pre-contract levels, from $73.26 in 2006 to around $69 per hour. The new cost includes laborers' wages of $29.78 per hour, plus benefits, pensions and the cost of providing health care to more than 432,000 GM retirees, GM spokesman Tony Sapienza said." From mediamatters.org

    Benefits to current employees run about $13 so $30 is for legacy costs, meaning big three workers wages in line with other car makers.
    -- Posted by joe patten on Mon, Nov 24, 2008, 8:32 am EST

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    With the possible exception of a public sector job in Massachusetts, working for a car company while belonging to the UAW is as good as it gets. Management is guilty of making it possible and the union is guilty of denying reality.

    The car companies will be "saved" by a bailout because the Democrats fear losing union support if the companies are allowed to fail.

    I hope the formerly Big Three can pull back from the brink. They're making some good cars these days. The new Chevy Malibu is every bit as good as a Camry or Accord - maybe better.
    -- Posted by Mr. Moderate on Sat, Nov 22, 2008, 12:59 pm EST

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    American auto companies have been spending money like a drunken sailor - with the same disastrous effect. They have provided swarms of semi-skilled workers with full dental and medical benefits until death with no co-pay, they have created a system whereby laid off workers receive 95% of their pay for doing nothing, and provide retirement pay beyond the expectations of the vast majority of taxpayers. They have spent enormous sums lobbying against efforts to force fuel efficiency upon them and have lacked the intelligence and foresight of the foreign auto makers to make vehicles the American public wants and can afford.
    They deserve to fail. It may hurt for a while, but sooner or later America will be buying cars again, lots of them. The production capacity of the three will be replaced either by foreign companies or by American entrepreneurs who will have learned from the folly of these losers.

    A bankruptcy is the best solution, managed or not.
    -- Posted by John Aicher on Sat, Nov 22, 2008, 8:42 am EST

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