The proposed bailout of the Big 3 auto companies, killed in the Senate on December 11, is burning up the media and the internet. And if you are interested in how the problem is being approached, you need look no further than the comments issuing from the two sides and the two political parties.
Democrats are relying on emotion and provocation, while Republicans like US senator Corker of Tennessee are calmly talking about the facts of the case. “We were about three words away from a deal,” said Corker, the GOP’s point man in the negotiations, referring to any date in 2009 on which the United Auto Workers union would accept wage cuts. Since the unions refused to name a date before 2011 when their contract expires, the deal fell through. Meanwhile the car companies are painting the picture as dire in order to get the cash quickly with no scrutiny.
Democrats do not want the facts to come out, and wish to manipulate the process emotionally because they want the bailout to proceed with no major concessions from the unions. Since money flowing to the unions flows directly back to the Democrat party in campaign contributions, Democrats are pushing for a straight bailout, with no regard for the well-being of the nation or the taxpayer.
This is a standard Democrat tactic. Unions rarely give in. And when companies go bust as a result of union intransigence – as hundreds of companies have gone bust under the weight of union demands in the last 50 years, killing millions of jobs and trillions in wealth – the unions simply say it was an evil capitalist plot to save the rich company owners at the expense of the workers.
But America has caught on to union tactics. 70% of the public opposes a bailout of the Big 3 car companies that have been in trouble for decades while 40% of American think that cars from Ford, GM and Chrysler cars are inferior to foreign nameplate including ‘foreign’ cars made here in the US.
The Big 3 certainly have been poorly managed, and conservatives agree that all workers should take a pay cut including management and white collar. But the main problem is that unionized assembly-line workers today are earning roughly $72 per hour in wages and benefits. Meanwhile non-unionized workers at Toyota, Nissan and other foreign companies in the southern United States earn $48. And who is running to the government for a bailout?
UAW president Ron Gettelfinger is manipulating the situation for his ends. He is saying that his unionized workers are getting roughly the same hourly wage as workers at successful American Toyota plants and other non-union factories. Whether this is true or not is suspect because liberals always manipulate the facts, for instance representing entry-level wages as the norm for all workers. All we know is that “wages” are different from the total cost to the company per employee as stated above – 72 union versus 48 non-union. This discrepancy is due to union demands. Until those union figures are cut, the Big 3 are not going to become viable.
Why should somebody making $20 an hour in Arizona or $30 an hour in Florida pay the taxes to bail out people making $72 an hour in Michigan?
Sen. Tom Coburn, a Republican US senator from Oklahoma recently lit up the media with the fact that both GM and Toyota worldwide sold the same number of cars in 2007 – roughly 9.4 million – yet GM lost $38.7 billion while Toyota profited $17.7 billion.
This simple fact spread like a prairie fire because it puts the whole situation in perspective. Because Toyota runs their company like a business while the unions run GM like a feudal fiefdom with the workers as the owners.
In order to see more contrast in the way that liberals approach the bailout, here’s Democrat congressman Barney Frank of Massachusetts, chairman of the House financial services committee, talking to Lesley Stahl on 60 Minutes:
“No. We’re not propping up companies. That’s your mistake. We’re propping up individuals. The world doesn’t consist of companies. The world is people. The country is people.”
This is rather weird coming from a person of an ideology that insistently tars the tobacco companies and oil companies as evil corporations. And when Stahl pointed out that Frank is then talking about welfare, Frank said:
“Yeah, I’m for welfare. You’re not? Are you for letting people starve?”
Frank then went on to oppose bankruptcy because it harms individual workers:
“There’s only one thing you can do in bankruptcy: break your word, break your deals. It allows you to say to the small businesses who have been catering lunches for you…the workers, ‘Sorry, we’re not paying you’.”
So rather than debate rationally about an industry that has been failing for decades, Frank immediately puts it into the most extreme emotional terms using cheap theatrical tactics that do nothing to advance the debate.
When the bailout failed on Thursday evening, December 11, Democrat majority leader US senator Harry Reid of Nevada said, ““I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”
Think about that. What a horrible thing to say. But convenient. That is a direct emotional attack on the failure of the bill and another way to talk down the stock market and make the economy worse. Liberals do that in order to try and impose their agenda.
Democrat House speaker Nancy Pelosi used the most base attack after the bill failed:
“Senate Republicans’ refusal to support the bipartisan legislation passed by the House and negotiated in good faith with the White House, the Senate and the automakers is irresponsible, especially at a time of economic hardship. The consequences of the Senate Republicans’ failure to act could be devastating to our economy, detrimental to workers, and destructive to the American automobile industry unless the president immediately directs Secretary Paulson to explore other short-term financial assistance options, including TARP and those available to the Federal Reserve. That is the only viable option available at this time.“
In an irresponsible statement like this, Pelosi makes no mention of the unions. She then goes on to make an immediate appeal for Bush to help the car companies using money already allotted last September in the $700 billion bailout. This is the Democrat fall-back position to get their money because they know they will get it. But when the companies come back next April for more money, there will be no public stomach for more cash.
Now here is Republican senator Corker in a statement before the bailout vote came up. Listen to his rational tone explaining the problem and a possible solution:
So we’re really talking — I just want to make this clear to people. We’re talking about three entities that we need to talk to: General Motors, Cerberus or Chrysler and the U.A.W. and there are three things that are basically causing these companies difficulty. One is the capital structure. The debt that these companies have is not sustainable. It doesn’t matter how much money we were to put into General Motors with the $62 billion in debt that they have today, there is no way that they can sustain their company. They cannot. G.M. only has a market cap today of around $2 billion. $2 billion. Toyota has a market cap of $130 billion. BMW has a market cap of $14 billion. This is a company that has a huge amount of debt and very little value. Chrysler probably has no value. They’re privately held. And so we have two companies that we need to deal with in a very similar way, as it turns out. Let me lay something out.
Several paragraphs later Corker laid out the three rational ‘covenants’ that need to be met:
The first covenant is that by March 15, the outstanding indebtedness at the two companies that are going to apply for this has to be reduced by two-thirds, two-thirds, or the companies have to file for bankruptcy on March 15th. That gives the companies, it gives the bondholders, which we’ve talked to on the phone, plenty of incentive to make sure that the debt is reduced by two-thirds so these companies have a capital structure that allows them to go forward. This is the only way they’re going to be successful. We’ve had plenty of people testify and say that if we put our money on top of the $62 billion in debt that G.M. has, there is no way they can be successful. Even if we’re selling 20 million cars a year in our country, and today we know we’re selling at a $10 million rate.
So that’s number one. Give them the money. If by March 15th, they haven’t reduced their capital structure in that regard — and by the way, we’ve talked to people on all sides who believe this can happen. But it can only happen with the stick of government, meaning that we’re going to force them into bankruptcy if they don’t do this. That’s the first covenant. The second covenant is – and I listened to Mr. Gettelfinger’s testimony and talked to him on the phone this morning– he says the only way the U.A.W. can make concessions is if they see the bondholders have done so first. This legislation makes that happen by March 15th. So, secondly, after the U.A.W. has seen that the bondholders have — quote – “taken a haircut” – a word that’s used around here a lot — they have to do two things.
Number one, they have to convert half of the VEBA obligations–Voluntary Employee Benefit Association obligations– they have to convert half of those to equity. If a company goes bankrupt, these future payments are never going to happen anyway. And that again, that reduces the debt at G.M. by another $10.5 billion, and it gives the U.A.W. equity in a company that actually has value now, because the debt by the bondholders has been reduced too. That’s the second covenant. Very, very simple. And then the third thing they have to do is at that same public meeting where they take a vote, they have to agree to have a contract in place that puts them on parity — on parity – with companies like Toyota and Nissan and Volkswagen and other companies here in our country.
Now look at this accusatory statement from United Auto Workers president Ron Gettelfinger: “We wondered, quite frankly, if we were just being set up.” Gettelfinger added that Republicans are seeking restructuring “on the backs of workers and retirees”. He then said that some Republicans from southern states see the bailout negotiations as a way to “cripple the union” while helping out the Japanese, South Korean and German automakers that have located plants in their home districts.
“They thought perhaps they could have a twofer here maybe — pierce the heart of organized labor while representing the foreign brands,” Gettelfinger said.
“Pierce the heart of organized labor”? That is wording that poisons the debate as Democrats always do because they know they cannot win on the merits.
The reason that Gettelfinger has made no concessions is that he knows that President Bush will give the $14 billion that the industry says is needs… for the next few months. Some estimate say Bush will give $40 billion.
Ultimately this bailout is going to cost $100 billion and more and will not solve the basic problem in the industry, and that is labor costs. Until there is a serious change in the way that GM, Ford and Chrysler deal with their past and present employee pay scales, health plans and retirement payments, those companies never will survive.
Naturally Republicrat commentator Bill Kristol of the once-conservative Weekly Standard fretted that “McCain got 40% of the union vote” and that Republican intransigence on this bailout is going to hurt the GOP politically. Note that Kristol does not mention that the recalcitrant Republican senators are standing up for what is right, for common sense and for the well-being of the taxpayers of America. Like a good liberal, Kristol sees only political calculation at work. He might as well join the UAW.
Please visit my website at www.nikitas3.com for more common sense.