Should we bailout the US big 3 automakers? Apparently that’s the new question on the street. Not only is the housing market going down the toilet but the automakers are apparently failing fast. They are in dire need of help or else millions of jobs will be lost, approximately 2.6 million jobs. I say no. Let them go bankrupt.
I understand that it’s going to affect many different sectors of the economy. Everyone who supplies parts to the automakers will suffer. They might shut down as well. And yes millions of retirees will likely be affected.
But here’s the deal. Honda and Toyota are doing okay, not well because honestly the car market in general is in trouble. With this economy whose buying cars? But they are surviving because they don’t hire union workers. Besides the fact people are buying more imports than US made cars, the truth is unions and their demands are sinking the automakers. Union workers make an average of $73/hr. Honda and Toyota pay about half at $47/hr. That means union workers at the Big three make an average of $150k/year, while their competitors make $90k/year. I don’t think the affordability of these type of manufactoring jobs sustainable.
But the unions are refusing to make concessions. I think that if they refuse to make concessions then let them go bankrupt and renegotiate with the unions. That will restructure the organizations into something similar to Honda and Toyota.
Besides in the 1990s the US government gave out loans to the Big 3 to develop more fuel efficient cars. They did the research then shelved it because they felt big SUVs, trucks, cars were the way to go. Honda and Toyota were nervous about this leap forward in research and heavily invested in the hybrid technology. What came out for them? The Prius. Yep it turned into a goldmine. Imagine what might have happened if the Big 3 had done the same?
So should we bailout the big 3? I like the idea of encouraging them to invest in cars not run on gasoline. But like the 1990s will we do all the research to shelve it?
12 responses so far ↓
1 Fabulously Broke // Nov 20, 2008 at 10:01 am
NO BAIL OUT
These companies (I’m sorry) have to learn that money is not infinite and if they get in trouble, they can’t go to Mommy and Daddy (U.S. Govt or any govt in general) and ask for a bailout
Please. It’s a competitive market and governments can’t be propping these companies when they are down in the dumps but then not taking a huge profit or some sort of kick back from them when they do really well.
jobs will NOT be lost if they all agree to take a cut in the wages and the union stops trying to make unreasonable demands that just can’t be met. THe market can only hold so much
People would be HAPPY to keep their jobs at the pay of the Toyota/Honda workers, it’s not the workers that are causing trouble but the unions.
And the company should take FULL RESPONSIBILITY for killing those jobs only because they did that research in the 90s like you said but then shelved it. WTF? They got money to do research and didn’t look far ahead in the future the way the imports did and think that maybe a hybrid would be the way to go?
I think they just spent all the money on fancy dinners and outings up to a retreat in the woods to go hunting.
2 Fabulously Broke // Nov 20, 2008 at 10:02 am
Oh and that bailout, would be coming from U.S. taxpayer pockets to subsidize unreasonable wages in a market that is trimming down and becoming more competitive.
It’s BUSINESS. Not an inheritance. The government and the U.S. taxpayers don’t owe these companies anything.
3 Kristy // Nov 20, 2008 at 10:13 am
I agree. We shouldn’t bail them out, just like we shouldn’t bail out homeowners either. My question is this: Why do you think we should bail out homeowner but not the big 3?
4 SP // Nov 20, 2008 at 11:29 am
“it’s not the workers that are causing trouble but the unions.”
The unions do include a lot of workers. I’m not exactly pro-union or anything, but I think the huge “salary” descrepensy includes benefits, namely like health care. And a lot of that cost is already promised out. I think all the retirees get health care, pension, etc. The big problem with union deals isn’t so much that young healthy guy is making $2/hr more than he should, but that boomer who is about to retire and is counting on the company to provide.
I am not certain about this, but I think Toyota/Honda don’t have to cover as much health costs because health care is nationalized and a lot cheaper in Japan. So it isn’t like welders at Ford are literally taking home $150k. (This isn’t to say no one is overpaid, just adding perspective.)
Yeah, they do need to do massive restructuring, no matter if they get a bailout or not. But the USA also needs to do something about health care such that insurance companies aren’t taking such a huge slice of the pie. Nationalized? I don’t know. I just hope someone can figure it out.
5 tom // Nov 20, 2008 at 12:07 pm
No Bailout… but there are some discreptancies to mention:
Millions will not lose their jobs. That will only happen if the auto industry ceases to exist, which it will not.
Old Gm UAW members make $73/hr which includes all benefits (full pension, full paid healthcare). New GM UAW members make as much as their Toyota counterparts, get no pension from GM, and have to contribute to their healthcare costs. I agree, the union has made consessions. Problem is current experienced and retired employees. Their healthcare and pensions have already been cut, and you cannot take them away. Toytoa and Honda don’t have to cover as much heathcare costs in the US because the workers help pay and they don’t get retiree healthcare, nor do they get a pension (it’s a defined contribution program). It’s not because healthcare is nationalized.
Fuel Efficient Vehicles. The Big 3 are chastized because they didn’t develop the Prius. The hybrid sector of the market is tiny (less than 3%). Most hybrids make little to no money. Toyota says the make money on the Prius (I’d like to know how much). Toyota is perceived as the leader in hybrids, when in fact, GM has more hybrid models. They even turned their “gas guzzling” SUVs and trucks into hybrids. Ford was the #2 seller of hybrids. I don’t, for a minute, think that they squandered the loans and shelved the research. Look at the Volt. GM, hopefully, will be the first to sell a plug-in hybrid. Chrysler and Toyota are not far behind, but they are behind.
The Big 3 are getting a somewhat deserved bad-rap, but I blame most of that on the UAW. The Big 3 allowed the UAW to get too powerful that they could not negotiate economically viable contracts. Where the Big 3 is deserving of a bad-rap is with SUVs. They should have had the foresight to see gas will be more than $1 and start marketing and retooling for smaller efficient cars.
That all said, let them go bankrupt, re-negotiate contracts, with dealers, with UAW, with suppliers. Restructure the companies, retool manufacturing ops, and refresh upper management.
6 LAL // Nov 20, 2008 at 12:57 pm
I don’t want to bailout the homeowners. I do want to stabilize the market and prevent more foreclosures. I think that if we keep people in their homes by perhaps stopping adjustments of arms, then they will be less likely to walk away.
I’m not affected personally by either. But I think that with the Big 3 a lot of people with the union want to keep their benefits. But the problem is it’s unsustainable.
With housing market, what are we going to lose by freezing rates? Will we have to ante up the difference? If we freeze rates and allow people to stay in their homes it might help the market stabilize faster.
No help and more foreclosures? Not only people but banks will be in real trouble. Personally I think banks should just stop adjustments and try to get people to stay in their homes instead of bailing and the banks being left with tons of homes! Right now the inventory is steeply climbing. What would happen if people did stay in their homes, yes at a discounted rate, but the bank didn’t have empty homes?
7 Kristy // Nov 20, 2008 at 1:11 pm
Yep, no help and more foreclosures. It will bring housing costs to where they should be instead of the inflated values we have seen in the recent past.
By letting them stay in their homes at a discounted rate is promoting bad behaviour. Basically, you can buy whatever you want, whether you can afford it or not and the government will bail you out.
The banks should never have loaned these people the money in the first place, so let them fail too. What it boils down to if we bail the homeowners out or freeze their mortgage rates (which is the same thing IMO) is that the responsible people pay for the irresponsible. Maybe I should just start buying things I can’t afford either and hopefully the government will bail me out!
8 fengshui // Nov 20, 2008 at 9:54 pm
“With this economy whose buying cars? But they are surviving because they don’t hire union workers. Besides the fact people are buying more imports than US made cars, the truth is unions and their demands are sinking the automakers. Union workers make an average of $73/hr. Honda and Toyota pay about half at $47/hr. That means union workers at the Big three make an average of $150k/year, while their competitors make $90k/year. I don’t think the affordability of these type of manufactoring jobs sustainable”
I disagree with you, not on the bailout, but the bit about the unions. My hometown is located where there is a GM plant, that is closing next month. My hometown thrived because of the jobs that plant provided. Now, I do diagree that a highschool drop out working on an assembly line makes as much as me with a masters degree in nursing, and has better health insurance than me, but they do deserve decent wages, but perhaps not as much as they were making. Does that make sense? A decent salary, and benefits, but not to the point where it bankrupts the company. AND I think that the auto makers saw this coming YEARS ago and did NOTHING about it. I drive a Hyundai because I like the style of the car. The 3 big auto makers have done nothing to meet the demands of the US people, especially the fuel economy and style categories. Ford, GM, and Chrystler kept making huge gas guzzlers or ugly 4 door sedans. And the 2 sports cars that Ford and GM made weren’t affordable for most. And, the warranties suck….. I have great warranty on my Hyundai and it is stylish and sporty, so that is why I bought it, much to the dismay of my father, who makes me park it in the street because it isn’t an “American” car…..
9 Aaron // Nov 21, 2008 at 11:17 am
Other than the UAW and auto-worker executives, have you heard anybody saying this bailout makes sense? My dad works for Delphi and he doesn’t even agree with the bailout.
Hopefully this will crush the unions so those lazy pieces of garbage know their place in society. Nobody should ever be paid $45 an hour to do a job that a 12 year old could do.
10 Bruce // Nov 23, 2008 at 7:56 am
No mater when it happens, what ever pres that lets this happen is going to be the butt of it and ridiculed harshly.
Of course I am just mad that it isn’t being used in the manner it was supposed to be.
11 LAL // Nov 30, 2008 at 12:34 pm
I think the problem is that the homeowners did do stupid. But that was the last 5 years in the making. How long has the auto industry been in trouble?
How long has the unions known that they’ve had to give in to unreasonable demands? A long time. It has been prevalent that companies can no longer pay for health care and pensions.
Weekend Roundup: The Big Day Edition - Wealth Is Boring - Mar 20, 2009
Leave a Comment