There is little doubt but that the political fix is in, thanks to those meetings late last week among Big Three auto executives, United Auto Workers union officials and leading Democrats. The outgoing Bush administration has already set up a $25 billion bailout program of loans with some modest strings attached on how the money can be spent. But Big Three officials want at least another $50 billion and fewer or no strings. House Speaker Nancy Pelosi is ready to move legislation in a lame duck session of Congress. And even if the lame duck doesn’t fly, President-elect Barack Obama has made clear his support for a big auto bailout. The ostensible reason for Washington providing aid to Detroit is that sales are down, cash reserves are all but depleted, the Big Three are rapidly losing market share, and foreign companies are steadily increasing production at their very profitable plants here in America.
The basic reason why Asian automakers make money on their U.S. plants and the Big Three don’t is because the latter must pay union wages that average $60,000 annually, plus gold-pated pension and health care benefits that double that amount per worker. A 2003 study by the Center for Automotive Research found that UAW compensation is 68 percent higher than the average for the U.S. manufacturing sector. And UAW workers who “lose” their jobs go into a jobs bank that guarantees them full salaries for doing nothing as long as they don’t accept transfers to open positions in other plants. Officials won’t say how many workers are in the Jobs Bank, but a 2005 Detroit Free Press investigation estimated the bank adds about $800 million annually to Detroit’s costs. And what about executive compensation? GM’s Rick Wagoner’s total compensation for 2007, for example, was $14.4 million, or about $40,000 per day. Those are the kinds of compensation figures that should go to successful executives, not those who come hat-in-hand to Washington for a no-strings-attached bailout. To top it all off, there are more than 540,000 UAW retirees whose pensions and health care coverage far exceed that of the average American worker.
If President-elect Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi really want to help Detroit get back on its feet, they will tell the UAW it must accept wage, benefit and pension cuts that put the Big Three’s labor costs at the same level as the Asian automakers here. That won’t guarantee the survival of the Big Three, but it will let them compete on equal terms – and give them a real chance to survive.
