Anybody who knows me knows what Detroit means to me. If you’ve been keeping track, you also know I was against the financial bailout. The Auto Industry bailout has been harder for me to decide my true feelings. I can come up with compelling arguments both ways, not to mention the emotional investment I have with Detroit (and the family ties to Ford).
First, the financial industry is really a bunch of douchebags (sorry, friends, who work there, but you know it, too) who are too greedy for their own good. The workers in the Big 3 are, for the most part, hard working, blue collar factory workers who deserve every dollar they get. If the financial industry was bailed out, so should be the Big 3. +1 for the bailout.
But, cars are fairly substitute-able, and I’m happy to have the best company win. -1 for the bailout.
But, we’ve already given $3.5 TRILLION dollars to financial companies.. What’s another $25 billion to keep people in their jobs long enough to make a difference and hopefully cause these companies to change for the better? I likely wouldn’t feel this way if we hadn’t given so much out already, but since we have, hey, let’s just keep going! +1 for the bailout.
The Big-3 haven’t been mismanaged for a couple years, they’ve been mismanaged for at least three decades now. They don’t deserve a bailout on that basis alone. Moreover, their executives don’t even understand how badly they’ve mismanaged the companies. It’s shocking to me how much of an idiot Rick Wagoner is. And let’s not get started on the executive pay which is clearly not tied to financial performance. -1 for the bailout.
The Biggest Reason: Unions
But, the biggest reason why I think the Big 3 should NOT be bailed out is because of the unions. There is no question in my mind (and this comes from someone with grandparents receiving a pension check — which they don’t need to survive — each month from Ford) that the unions are at least 80% to blame for the failure of the Big 3.
The Big 3 are unfathomably nice. It’s shocking to me, really. As a 24 year old, I can’t imagine any company being as nice to me as the Big 3 are to their current and former workers. (Hey, I’m not complaining about the many discounts my family has received on Fords, Jaguars, Volvos, and others. But we probably didn’t deserve it.)
And the Big 3 continuously backs down the unions. The unions finally made some concessions a couple years ago, but not nearly enough, and not nearly early enough.
But now, in the midst of bankruptcy of the Big 3, they say they won’t make any concessions. Seriously: are they sick?
Now I am 100% confident that the Big 3 must go bankrupt. For one reason: to be able to have a fair way to get out of the unions. This is their chance for a mulligan. A chance to get with the times, and offer competitive pay and benefits, without losing their shirts in the process. Something that benefits both the employees and the employer and aligns the interests of all involved, from the factory workers to the CEO.
UPDATE (11/19/08): I just saw Gary Becker, Nobel laureate and UChicago professor, had written much of the same as I did:Nevertheless, I believe bankruptcy is better than a bailout for American consumers and taxpayers. The main problem with American auto companies is that during the good times of the 1970s, 1980s and 1990s, they made overly generous settlements with the United Auto workers (UAW) on wages, pensions, and health benefits. Only a couple of years ago, GM was paying $5 billion per year in health benefits to retirees and current employees because their plans had wide health coverage with minimal co-payments and deductibility on health claims by present and retired employees. In those days, the UAW was one of the most powerful unions in the US, and it bargained aggressively with the auto manufacturers, carrying out strikes when its demands were not met. When the American auto industry began to face tough competition from Japanese and German carmakers, they were saddled with excessive pay to their workers, and vastly excessive pensions and health benefits to their current and retired workers.
