Analyzing the Automaker Bailout

Unless you're completely sheltered from all news media, you've probably heard a little something about the proposed bailout Chrysler, GM and Ford have asked Congress to give them. Management from the companies known as the Big 3 and the president of the union have done the unlikely thing and teamed up to present a united front before Congress since the hearings began in mid November. They asked the lawmakers to grant them $25 billion to prevent their companies from going under which went up to $34 billion only to be reduced to $14 billion before being killed in the Senate.

As a part of the original stipulations, the lawmakers asked automakers to give concessions such as lower worker pay and benefits as a condition of the bailout. Understandably, the union rep is arguing that they've already taken as deep of a cut as they can afford in their last negotiations that resulted in a brief strike in late 2007. Those concessions are due to take effect in 2010.

The American Automaker Industry has been unfavorably compared to both the European and Asian Automakers with the main criticism being that our workers are paid much higher rates with greater benefits than their foreign counterparts which has caused vehicles made in America to be sold at much higher prices.

But is it really a good idea to slash worker health care benefits to simply cut costs and survive? My first instinct is no. Autoworkers do grueling, repetitive work day in and day out. No matter how good your safety standards are, someone is likely to get hurt. Getting rid of their benefits so they can't get care is beyond a bad idea. I know in this case, there are worker's comp benefits, but those don't cover quite the same things that regular health benefits would. And it also leaves the worker who gets cancer or is in a car accident to or from work out in the cold. So no. Health care needs to be accessible.

Other people argue that they should get rid of the unions because they take more than their fair share of the pie and do very little in return. I'm nowhere near anti union, but I have to admit that I'm appalled they actually have mandates on how much work can be done in a day. If workers finish early, then they are done for the day. Perhaps in these cases, workers should be paid by the part assembled instead of by the hour. This rule kills productivity and does nothing to award overachievers. In fact, it encourages mediocrity. This mediocrity carries over into other areas of life. Where is the challenge in this? If you allow people to only do the bare minimum to get by then you really can't expect quality from them.

Still, it's not a good idea to get rid of the unions completely. Our history has shown that people in the top echelons of a corporation can easily be blinded by the bottom line and forget that the people who are working for them are indeed people. The unions are needed to bring the higher ups a reality check when they get a little too big for their britches.

However, the problem comes in when the unions get too big for their britches and forget who they're supposed to be protecting. And that's what they're supposed to do. Protect their members. Not get more and more concessions from the management so they look better. Not take short views on demanding the moon and stars now with no thought to the future.

So bankruptcy or bailout? Which is better? The one that keeps the most people employed with as many health benefits intact as possible is the best. The only way to do this is cut management and union leadership back down to size so the companies cease being so top heavy that they're going to topple over at any minute. Or perhaps, the management and union leaders should team up again and take on the health care industry. If those costs were lowered the Big 3 could safely cut the cost of the benefits they offer without negatively impacting their workers. Just a thought.

Resources:

http://www.state.nj.us/treasury/pensions/epbam/finance/workcomp.htm

http://abcnews.go.com/Business/Economy/story?id=6274941&page=1

http://blog.washingtonpost.com/behind-the-numbers/?hpid=topnews&hpid=topnews

http://www.msnbc.msn.com/id/28166218/