Yesterday I was watching the news with my dear mother and my girlfriend, and my mom raise the question on what we should do with the Auto Industry. My girlfriend right away jumped in and claim that we should give the money but with conditions and clear expectations.
Couple of days ago in my post “Bail out Mode” I express my dissatisfaction with any bail out specially an industry control by unions. The disarray of the auto industry has been cause in part of an incompetent management, and for the incomprehensive and greedy unions that every day has more power under the claim “rights for the workers”.
A top executive of GM admitted last year they missed the transition to small consumption cars, unlike Honda & Toyota, jumping too late into the boat, but what he did not say is that this was cause by the law propose by Bill Clinton and finally singed by George W Bush treating SUVs as a trucks not as a cars, so it will not be under the regulation of at least 27 mph per gallon consumption that cars have. With this “glitch” the auto industry had the chance to build a SUV for less money since they use the same frame of big trucks and it some times triple the profit over small cars, in other words we were motivating the high gas consumption vehicles. The other case is the UAW, which is the union of the auto industry. They are as responsible as the management of the Big 3 (GM, Ford and Chrysler), with forcing so unrealistic wages for the employees, and ridiculous retirements plans that were unsustainable. For example while a employee average on GM is pay 72 dollars/hour, and employee on Toyota get 32 dollars/hour, also their retirement it was 100% of their salary, but it gets better, they also have what they call job bank for certain member unions that were layoff, to get 95% of their salary, the amount of “employees” that were under this condition got up to 15,000 and after negotiations it was trim down to 3,000. This are American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in job banks set up by Detroit automakers and Delphi Corp. as part of an extraordinary job security agreement with the United Auto Workers union.
The jobs bank programs were the price the industry paid in the 1980s to win UAW support for controversial efforts to boost productivity through increased automation and more flexible manufacturing in other words it does not matter the economy conditions, the reality of the economy or the corporations they will get pay. After numerous negotiations between UAW and the management, now that everything is collapsing they want to get to an understanding.
In my opinion we should let the auto industry collapse, first it of all it’s no such thing of “too big to let it fail” in an economy of 15 trillion dollars. If they go away another one will come and fill that space left in the market. United States is the leading country on free market and globalization in the world. If we keep bailing out different industries as I think it will keep happening we will be sending the wrong message to other countries as China, France, and Germany. We have to stop this protectionism policy of subsidizes and intervention.
The faster we let them go, the better; the best example is the finance institutions we have been trying to keep them alive for this past whole year, and still they collapsed, the same thing it will happen with the auto industry we will help them today, and it will be worse on the long run, the bottom line is that unions in theory is a noble cause, but the fact is that it’s one of our cancer in our society, and the management of this corporations should pay the prices of it too, to manage one of the most incompetent industry in United States.