The hard reality is that the Big Three automakers could be facing bankruptcy if they don’t get a combined $14 billion in “loans” in order to stay in business and support their business model. However, the reality is that this is really a bailout of the United Autoworkers who need this bailout to keep their wages and benefits even as General Motors, Ford, and Chrysler go down the tubes.
Everyone has been talking about how we need manufacturing jobs and not bankruptcy of the Big Three. However, I will give you the reason why Ford, General Motors, and Chrysler need to pursue a Chapter 11 bankruptcy filing. I give you Delta Airlines.
As early as 2004 and in to 2005, Delta pursued cost-cutting measures that ended up cutting service, but did nothing for both executive pay and the pay received by union employees working for Delta. Everything came to a head with the company’s Chapter 11 filing on September 14, 2005 citing fuel prices and high labor costs.
While the company was in bankruptcy, unionized airline pilots took a cut in pay of 14 percent, executive officers took one of 15 percent, and CEO Gerald Grinstein took one of 25 percent. Also, the company laid off somewhere between 7,000 to 9,000 of the 52,000 employees.
On April 25, 2007, Delta had their bankruptcy strategy approved and emerged from bankruptcy five days later. This proves that a Chapter 11 filing will not kill a company, but restructure it so that it can function free of constraints from management and the unions and make a profit in order to stay viable.
According to the Heritage Foundation, GM, Ford, and Chrysler are paying $73.26, $70.51, and $75.86 in per-hour wages and benefits respectively. By comparison, the foreign carmakers like Toyota, BMW, Nissan, Honda, and Mercedes are profitable thanks to their locations in right-to-work states like Alabama, Georgia, Tennessee, and South Carolina at a fraction of what the Big Three pay in wages and benefits. This does not include the new Kia plant that will employ 2,500 new autoworkers in West Point, Georgia at just $17 per hour in wages. On a side note, the average American makes only $25.36 per hour in the same category.
Business executives and owners (past and present) are irritated by the difference in the earnings between the two biggest car-selling companies in the world, GM and Toyota. Last year, both companies sold 9.37 million cars each. The difference became the labor costs with GM posting a loss of $38.7 billion (a loss of $4,130.20 per car sold) versus Toyota making a profit of $17.7 billion ($1,889.01 in profit per car sold). The Big Three are fighting a losing battle thanks to the UAW who wins if the bailout passes.
What would be simple to avoid any bankruptcy would be for both sides to agree to necessary pay cuts. The UAW isn’t willing to do it because they will lose all leverage in negotiating. Where are the CEO’s telling these union thug bosses that they can either have their jobs at a lower wage or have no jobs at no wages?
All of this has led to Americans losing sympathy for the unions, who have been noticeably absent in the media’s coverage of the ongoing behind-the-scenes work on the bailout. As it would turn out, there are reasons why the American people no longer want to support the unions.
First, more Americans work in white-collar jobs that pay higher wages and provide more benefits because of the skill and education required to obtain and keep those times of jobs. When Americans were making more money during the 1980’s during the Reagan years and the new types of business leaders that were making changes for the better while maintaining and increasing profitability, the sympathy for unionization went out the window and down the drain.
Second, there are the list of high-profile unions that have gone on strike and why they did. Consider that in my lifetime, the biggest strikes were in Major League Baseball, the National Football League, the National Basketball Association, the National Hockey League, and the Screenwriters Guild. All of them wanted just one thing: more money.
When you have even the bluest of blue-collar workers being told to support millionaires on strike, even they begin starting to think the unions have outlived their usefulness. No longer are they fighting overbearing bosses, dangerous working conditions, or oppressive hours. The unions are fighting for the almighty dollar and for political influence and clout.
It’s time to tell the automakers to drop dead to force bankruptcy so that we can restructure the costs of the manufacturing sector so as to compete with the global economy. As long as we are bailing out failed companies in pro-union states thanks to the unions at the expense of taxpayers in successful right-to-work states, America will never be able to compete with the rest of the world.