Capitol Hill Blue Forums Political Issues Finance, the economy & Economics Bailing out the auto industry - yes or no?

The basic question is whether politicians on Capitol Hill are the best ones to nurse the industry to health or should they leave the task to some sort of bankruptcy process, either a Chapter 11 proceeding or a novel type of prebankruptcy proceeding with a "restructuring trustee" who has the powers to butt heads and make difficult decisions.

The choices are indeed a Gordian knot. Either bankruptcy or a trustee-run redirection would result in massive job losses and make car buyers wary of the Big Three's products. The United Auto Workers might need to accept workplace arrangements like those in foreign-run auto plants, with wages, benefits, and rules more competitive in a global market.

Congress, however, which has been beholden in the past to union and Big Three pressures, might be too timid to demand radical reform. Similar difficult decisions will be necessary if Congress tries to boost "clean energy" or other job-creating businesses such as biotechnology.

I'm pretty sure we just went over this.......Actual wages run something like $26-$28 an hour for autoworkers and the two tier wage system is taking on all new hires at greatly reduced wages.
Less in fact than meatcutters are making.

The expansion of this "other" auto industry – one that's foreign-owned, nonunion, and based largely in the South – stands in stark contrast to this week's dire reports from America's own Big Three, whose CEOs laid out plans for a dramatic downsizing before traveling to Washington to plead for $34 billion in federal aid.

Two-thirds of "foreign imports" are, in fact, built in the United States in nonunion shops, where it costs at least $2,000 less in labor to build each vehicle.

Critics charge that the Japanese, Korean, and German auto companies are taking advantage of desperate communities and a longstanding distrust of unions in the South. But among people in West Point, Ga., the vision of a foreign-owned Southern car industry standing on its own two feet while Detroit teeters comes down to this: the worth of a day's work, and the role – or nonrole – of unions like the United Auto Workers (UAW).

While the Big Three have shed more than 600,000 jobs since 1980, foreign automakers have created about 35,000 jobs in the same period.

The gap between union and nonunion compensation is big: Total benefits put union workers at $36.34 per hour compared with $25.65 per hour. The Big Three's "legacy costs," some economists say, push UAW members' total compensation much higher.
. . . .
the Southern autoworkers are fairly young, meaning few qualify for pensions. General Motors, for instance, supports 400,000 retirees; Toyota supports 700.
. . . .
But there are troubling implications, too. Like some of the old textile-mill magnates, a Honda plant in Alabama threatened workers with closure if they unionized, says Mr. Randle. Last year, Toyota in Georgetown, Ky, fired two workers for releasing an internal document that discussed lowering wages.

Issodhos I thought I was very clear in referring to "American cars" as such but I was in fact referring to American Owned Auto Manufacturers or specifically the "BIG3" (which is a possible misnomer) I very specifically did not refer to Toyotas as "Foreign" cars but for clarification will in the future refer to them as Foreign Owned Auto Manufacturers Who Use American Labor for Final Assembly.

Here's a question, though: Are they competing fairly?

DETROIT (AFP) - A financial collapse of the US auto industry could have a major impact on Nissan operations in North America, officials from the Japanese automaker said.

Robert Sump, Nissan North America vice president of components engineering, told AFP Nissan would face shortages of some critical parts if the American auto industry's troubles crippled suppliers.

"We made the decision a long time ago to source components with local (American) suppliers to ease impact from fluctuations in the value of the yen," he said.

"To the degree suppliers' cash flow is impacted by what happens at GM (NYSE: GM - news) or Chrylser, we would be affected," added Sump, who noted a company like Nissan might not know until the last minute about potential shortages.

Alan Buddendeck, Nissan vice president of communication, said "everyone is watching what happens in Washington," where top executives from Chrysler, Ford and General Motors are going before Congress Thursday and Friday to plead for a 34-billion-dollar federal bailout to help their companies avert collapse.

"Clearly we have an interest in seeing a healthy auto industry in the US," Buddendeck said after a press conference that unveiled prototypes for commercial vehicles Nissan hopes to sell in the United States.

I would have to ask . . .

The gap between union and nonunion compensation is big: Total benefits put union workers at $36.34 per hour compared with $25.65 per hour. The Big Three's "legacy costs," some economists say, push UAW members' total compensation much higher. That gap, moreover, figures into Southern residents' views on Detroit's worthiness to be rescued from the brink of bankruptcy.

"If you're making $60 or $70 an hour, I can see how you don't want to work for $20," says West Point barber Dewey Rayley, who reports that most of his customers look unfavorably on a federal bailout for the American auto companies. "But that's the thing: What makes you think it's worth so much just to build a car?"