December 3, 2008

"'Concessions, I used to cringe at that word. But now, why hide it? That’s what we did.'"

"At a news conference in Detroit, the U.A.W.’s president, Ron Gettelfinger, said that his members were willing to sacrifice job security provisions and financing for retiree health care to keep the two most troubled car companies of the Big Three, General Motors and Chrysler, out of bankruptcy."

Meanwhile, in the Senate, the votes aren't there to help.

43 comments:

John Stodder said...

Pretty tragic. If the UAW had looked at the math 10 years ago, things would be very different. Now, I think it's too late. The public has thoroughly rejected the idea of a subsidy.

Dust Bunny Queen said...

Ah...the fickle finger of fate.

I agree with John. The UAW could have been more realistic in their demands in the past, and the situation would not be as bad as it is now. However, greed trumped common sense.

I don't want to see the auto industry in the US go down, but if it does we know that most of the blame will lie on the shoulders of the union bosses. The rest goes to the stupidity of the US Congress in legislating CAFE standards that were ball busters and the ineptitude and greed of management.

hdhouse said...

of course i disagree. and auto management played no role in this?

did anyone ever stop to consider that too few employees paying into an ever increasing retirement group cannot sustain it? that is management 101 yet it was an "easy give".

the same brains that gave us the suv "because we wanted it - not because they produced it and sold it with tax break help" now let's the work force that kept the ship aflot go bottoms up.

least we forget bailouts that are 20 times the amount with a 3 page business plan.....

AJ Lynch said...

What do votes have to do with it?

Hell Bernanke and Paulson are just sitting in their offices writing big old checks! Last week, they added what $700 Billion more and Conress was not in session?

BTW- I favor trying to save the Big 3 one last time. We can't risk more ginormous economic disruptions at this time. That is the issue.

Look at the big picture people!

AJ Lynch said...

Stodder:

I rarely disagree with you but unions anymore only look at short term gains only. Just like big business looks at the next quarter's results.

Unions have not had visionary leaders for decades.

Hdhouse- SUV have very little to do with Detroit problems. Americans love their big SAFE cars. Can you blame them? Have you ridden on a large highway lately? Big frigging trucks all over- I don't want my family driving a Yugo piece of shit!

Simon said...

Perhaps I don't understand bankrupcy law. If the big 3 are forced into bankruptcy, I had thought that they would be freed from virtually all their obligations vis-a-vis UAW. So why accept liberation from a subset of their obligations?

Ron said...

did anyone ever stop to consider that too few employees paying into an ever increasing retirement group cannot sustain it? that is management 101 yet it was an "easy give".

Huh! Thank goodness there won't be any such problems with Social Security! Yessir!

If Detroit gets flushed it won't be the only turd in that bowl!

John Stodder said...

hd you raise an interesting forensic question. What's the history of each of the unsustainable labor contracts the UAW won? The retiree benefits -- when were those agreed to, were they always so ample? Did anyone, internally or externally, predict where this would inevitably lead?

It's not like competition from Toyota, Honda and Nissan is anything new. I'm 52 and one of my friends drove a Datsun in high school. It was an inexpensive, high-MPG vehicle. They remained popular despite the 80s tariffs. Did that jump out at anyone.

I'm hardly any kind of business analyst, but I don't think the big 3's disaster has surprised anyone who was paying attention. Seems to me the case for the status quo relied almost completely on magical thinking -- or perhaps misplaced confidence that a bailout was always an real option.

William said...

Greed always trumps common sense. This is the basis of a buoyant stock market. Then fear trumps common sense. ....Keynes said in the long run we are all dead. Several generations of car workers and their families have lived comfortable lives under UAW contracts. I suppose this will end badly but not everyone left the table as a loser....People had money to buy Detroit's overpriced products because they were overpaid.

Verso said...

Funny how all those banks collapsed and they didn't have unions. They must have had phantom unions. Because it's impossible that unions are just a convenient scapegoat for conservatives eager to make millions suffer.

Meanwhile, if only those dumb autoworkers could get it through their skulls that the solution to all of our problems is reducing our standard of living to compete with 3rd world labor.

I don't know why it's not obvious to everyone: In the post-Clinton era of Free Trade, the American worker simply cannot expect to enjoy a higher standard of living than peasants in Haiti or Mexico.

But now, thankfully, we're seeing the end of the arrogance of the American middle class, with their outrageous expectations of having money to buy homes and send their kids to college. Those fools will get their comeupance and learn fast that poverty is their proper place. No health care, no jobs, no security, no college, no cars, no homes for the middle class! Damn slackers! Fuck 'em all!!!

I cannot WAIT until the entire economy swirls down the drain, dragged by the dead weight of an auto industry we will let sink to the bottom of the ocean, dragging dozens, if not hundreds, of other healthy corporations with it.

Like Dow Chemical, also located in Michigan, and a healthy company. But tied in important ways to the auto industry.

Millions of unemployed! Oh, the joy! Finally, all these stupid working people will get what they deserve!

I'll tell ya, folks. It's going to be grrrreat! when we no longer have to outsource jobs because we've transformed the United States into a 3rd world hell hole.

Cleverly timed to occur on the Democrats' watch!

Darcy said...

It really will be interesting to see what the Democrats do. I don't see how they can decline a bailout and blame it on Republicans.

AJ Lynch said...

Verso I don't blame it on union leaders. I assume they negotiated the best contracts they could get.

However,a visionary union leader would have made the deals profitable enough for the automakers. Then new workers in other states would have been more likely to vote to join the union too. This would have grown the union membership and influence. Instead, the unions just bled the Big Three golden goose to death.

And the state and local govt workers unions are doing this too. They are bankrupting municipal and state govts. Althouse will be lucky to get 50 cents on the dollar when she goes to collect her pension.

knox said...

Meanwhile, if only those dumb autoworkers could get it through their skulls that the solution to all of our problems is reducing our standard of living to compete with 3rd world labor.

Verso, plenty of foreign car companies are doing just fine, using American workers who are perfectly happy with their employers, and are not unionized.

You don't need a union to have happy workers and a successful business. Unions--and partisans who know how much $$$ the democrat party gets from unions-- would like us to think otherwise. We're not buying it.

John Stodder said...

But Verso, don't you get it? A bailout only postpones the scenario you describe -- at massive expense. Bankruptcy actually averts it.

The bank bailouts were also a bad idea. But they are very different cases with respect to the perceived public interest. The concept was, what do we have to do to restore liquidity so people -- all over the world -- can borrow money? There is no similar urgency associated with bailing out three companies -- or, to be specific, with helping two of those companies avoid bankruptcy. No question, there will be tragic effects, but the balancing has to be between the negative effects of doing nothing and the negative effects of doing something very expensive that won't really solve anything, just postpones the pain.

Ron said...

John it is far, far from clear that a bailout will necessarily lead to the scenario you describe. What if they do get their costs down, as they have been in the process of doing?

The banks problems had been building for years, and when they went to Congress it was a fait accompli; we need money, and we need it now! No thinking, just write the damn $700 billion check, will ya! Until we also come back again to Congress to "restore liquidity." Which they have! Are they done? Beats the hell outta me, I don't think they know either! Could we get the banks to say, "We promise not to ask for any more money for say, a year"? Doubtful, at best! "Please give us carte blanche for whatever we want until we tell you otherwise" seems to be their "business plan."

Again, all with dollar amounts that make the big 3 look like the neighborhood pizza joint...

John Stodder said...

John it is far, far from clear that a bailout will necessarily lead to the scenario you describe. What if they do get their costs down, as they have been in the process of doing?

Obviously, there is uncertainty down either road. But the banking bailout is demonstrating something we already knew: If you remove the urgency for change, you won't see much change.

From my perspective, the cost-cutting required for GM and Chrysler to survive is so profound and disruptive to existing arrangements with labor and dealers, they simply cannot happen in a scenario where the management is given discretion. A bankruptcy judge has authority to do things the executives can't promise to do themselves. A judge also doesn't have any political or legacy ties weighing on him/her, little imploring voices saying "hey, don't cut me."

We're getting a real education on the idea of "moral hazard" in this country right now. It is bad luck for the Big 3 execs that we've had so much experience with the concept lately.

Duscany said...

GM always made big cars and trucks because they made more money off them. When an oil shortage came along, sales would drop and everyone would talk about fuel efficient cars for a while but then the shortage would ease, gasoline would become cheap again, people would start buying GM's big cars and trucks and they would make plenty of money.

I wouldn't be surprised, now that the price of regular is down below $2/gallon, probably the lowest it's been when adjusted for inflation for the last 40 years, all of a sudden sales of big cars and pickup trucks will once again rise. GM will start making money again. And all these new little electric and fuel efficient cars will be marketed in boutique auto dealerships.

Ron said...

Obviously, there is uncertainty down either road. But the banking bailout is demonstrating something we already knew: If you remove the urgency for change, you won't see much change.

The banking crisis has preceded the auto company one by a few months now; how much "change" talk has turned into anything like a substantive plan? Any kind of plan! With specifics! John, you may be right about the urgency; but, hey, they got their check from the Feds, so why hurry the banks along?


From my perspective, the cost-cutting required for GM and Chrysler to survive is so profound and disruptive to existing arrangements with labor and dealers, they simply cannot happen in a scenario where the management is given discretion. Frankly, I doubt that many of the commenters here know enough about the specifics of the auto companies to know if that is true or not. Perhaps it is; in any case, the behavior of the financial sector requires at the very least the same degree of hammering.



A bankruptcy judge has authority to do things the executives can't promise to do themselves.
If Citibank gets $45 billion just for itself, it, too, can endure bankruptcy.

A judge also doesn't have any political or legacy ties weighing on him/her, little imploring voices saying "hey, don't cut me."

Please don't think politics will be removed from these decisions. The what and the how are the questions.

The Drill SGT said...

As I said on another post, read what little they gave up:

- suspend the featherbed Job bank. that's 500,000,000. minor
- no change in salary
- no change in benefits
- suspend payments into the retiree health trust. All this does is lower cash flow, and ultimately doesn't save a dime, just shifts the payment sched. In fact, since ultimately GM will go belly up, it shifts costs to the taxpayer (PBGC)

save_the_rustbelt said...

There are two sets of problems here.

The long-term problems, self-inflicted by the Big 3 and the UAW. Some gradual progress has been made on fixing these, and these problems are survivable.

(There are major concessions being phased in from the 2007 contracts.)

The current problem, the financing and market crash created by Wall Street. These problems cannot be survived.

I think the Big 3 should all announce a 6 week shut down for inventory adjustment, and let several hundred thousand workers hit the unemployment offices just before Christmas.

Might educate the politicians.


Drill Sgt. - the health car trust costs cannot be shifted to the PBCG, not covered as far as I know.

MadisonMan said...

I think it's a little odd to blame the short-sighted UAW for the problems. Were they all alone at the bargaining table?

Management at the Big 3 did a piss-poor job of educating both Union members and The public (who would have to bear the brunt of any strike) about the long-term foolishness of the UAW contracts.

knox said...

Management at the Big 3 did a piss-poor job of educating both Union members and The public (who would have to bear the brunt of any strike) about the long-term foolishness of the UAW contracts.

Madisonman, I'm not sure what you mean... it has been an accepted truth that the UAW became a monkey on the back of the auto industry decades ago. It's not exactly a secret?

I don't think the management at the Big 3 had the ability to turn down UAW's demands. That's kind of the point of the immense power of the UAW. The ability,to get as much as they can from the system--even if it bankrupts the system.

This has been happening with Social Security for decades now. We all know it. Guess what? Reform is consistently blocked and resisted.

Maguro said...

There's plenty of blame to go around - management, the UAW, the dealers and federal government all played their parts in bringing this about. But a federal handout only postpones the day of reckoning. Regardless of whose fault it is, these companies have been making vehicles Americans don't want to buy for 30 years and a bailout won't change that.

Widmerpool said...

Ron,

I responded to a similarly ridiculous point you made on a previous thread. What drugs are you on? Are you not paying attention? There is profound, widespread and irreversible change (ie permanent job loss) going on throughout the financial services sector. Dwarfs the baby steps the Big Three are proposing. You really lose all credibility when you bring this up. You have drunk deeply the union Kool-Aid.

save_the_rustbelt said...

"these companies have been making vehicles Americans don't want to buy for 30 years and a bailout won't change that."

The Big 3 sold about 7 million vehicles, of many different sizes and types, to Americans last year.

So, huh?

Widmerpool said...

Rustbelt,

And that number keeps declining year after year. That's the real point.

Maguro said...

The Big 3 sold about 7 million vehicles, of many different sizes and types, to Americans last year.

So, huh?


Yes, and how much money did they lose selling those 7 million vehicles?

They lose money on each sale but make it up with VOLUME, VOLUME, VOLUME.

Ron said...

Widmerpool -- I am not necessarily in favor of the buyout, and am not a fan of the UAW, either.

As for the profound changes in the financial sector versus the autos, if they're shedding these jobs and still need massive federal help, what does that say about their management? And they achieved this with, what, massive union interference?

Detroit is half the size it once was, so spare me the "downsizing" talk about financial services!

Sofa King said...

The difference with the bank bailouts is that the banks were threatened by a liquidity shortfall. Without this inherently temporary squeeze, there is no particular reason almost all of these banks can't be profitable and pay that money back.

The problem with the auto industry is structural, though. There's no path to long-term profitability even with the bailout. There's no plausible plan for how to pay that money back.

Darcy said...

MadisonMan said:...I think it's a little odd to blame the short-sighted UAW for the problems. Were they all alone at the bargaining table?

No, of course they weren't alone. But you'd have to live here to understand the enormous pressure the auto companies came under every time there were contract talks. No question they made bad decisions, but they did face an uphill battle trying to educate the public and union employees on this. They were portrayed as the evil corporations here, not wanting to pay a fair price for labor.

Sad. Management's portion of the blame can't be overlooked, but as someone who has watched this nightmare unfold locally, I am glad that the union is finally under scrutiny. That's good. Too late (thanks media and Dems!), but good.

laura said...

Management and the UAW both dropped the ball on any ignoring any long term planning for products or members. Both were looking out for their own short term interests, though I think management is the winner of the biggest Bonehead Sweepstakes, in that it's their company. Responsibility ultimately rests with them.

Bob said...

Management and UAW both share blame here. But the automaking in US will do just fine. It just won't be based out of Detroit. And if the Big 3 go thru bankruptcy they could be good merger candidates with foreign company. Automaking is global and spreading the design & engineering costs across big volume drives the unit costs down.

For management & labor the lessons are to build in flexibility. Both in manufacturing designs and in labor contracts. The flexible can make quick moves to adapt to market changes. The other lesson is both the union and companies pissed away a lot of goodwill with their arrogance over the years and when they wanted help the cupboard was bare.

I still bet Nancy gets them a bailout, just under Obama.

Roger J. said...

I am with Maguro--too late to point fingers and enough blame to go around. This is a structural issue, and the "big three" and their unions are going down. Sad. But they have only themselves to blame.

The Drill SGT said...

I think the Big 3 should all announce a 6 week shut down for inventory adjustment, and let several hundred thousand workers hit the unemployment offices just before Christmas.

Drill Sgt. - the health car trust costs cannot be shifted to the PBCG, not covered as far as I know.


1. The point is that those UAW ciontracts don't allow firing and currently are designed so the the companies have to eat those costs of retooling each cycle. no impact on unemployment lines

2. Retiree heatlh care isnt part of their defined benefit plans that would flow to the PBGC upon shedding the plans at bankruptcy? It certainly may be that the PBGC won't pay full value.

MM: I agree with you, but the absence of a fourth chair occupied by the UAW at those hearings, implies they aren't part of the problem or solution, and we both know that is far from accurate.

Original Mike said...

No question they made bad decisions, but they did face an uphill battle trying to educate the public and union employees on this. They were portrayed as the evil corporations here, not wanting to pay a fair price for labor.

Has anybody heard from Michael Moore lately?

Darcy said...

Ohhhh...good question, Original Mike! ;-)

knox said...

Regardless of whose fault it is, these companies have been making vehicles Americans don't want to buy for 30 years and a bailout won't change that.

Well, that's hard to say. I don't know that it's so much what people "don't want" as it is that they can buy something comparable from a foreign automaker for a couple thousand less--without the legacy of poor quality that US automakers have had.

(I don't think the quality issue is as relevant as it used to be, but it certainly was a big problem for a long time. All of the 70s and into the 90s, no?)

veni vidi vici said...

"Management at the Big 3 did a piss-poor job of educating both Union members and The public (who would have to bear the brunt of any strike) about the long-term foolishness of the UAW contracts."

I grew up in Windsor and Detroit, MM and believe me, the management (as incompetent as each successive wave since at least the late 60's has been) has always been up front about consequences and likely outcomes of onerous UAW contracts. You are incorrect.

Darcy's post sums it up nicely, to which I'd add this:

If you are out there wondering where management has been while the UAW has been getting these terrific concessions (all the while threatening strikes under an impressive regime of strike rules and apparently endlessly-rich strike funds), look no further for an analogue than what happened when President Bush merely tried to convene some discussion and debate about how to reform Social Security a few years ago.

Coming off the recommendations of the Moynihan commission, he said to Congress, "let's talk". They were up in arms. Then it was "hell, everything's on the table - let's hear all ideas and find some common ground here", and rather than dealing with a shared (bipartisan) problem, the opposition went into St. Vitus' dance mode and weak-kneed members of the President's own party followed along with them shortly after the tune was struck.

End result? President never spoke of SS reform again. Kick the can.

This is the story of Detroit's auto industry seeking to resolve "legacy costs" issues since at least the 1980s. I was there, and it's never been pretty.

Any lineworker in Detroit that's not sending resume's to the foreign plants down south by now is an idiot. If not now, give it 5 years and the industry will look completely different. There will be a whole lot more "brownfields" in Michigan.

John Stodder said...

Actually, Mike and Darcy, Michael Moore's been all over the place lately -- on Larry King after the first CEO hearings, and on Keith Olbermann more recently. I saw part of the King interview and Moore was incoherent. I gather he's against any bailout that doesn't go directly to the workers and affected communities. Or something. It was hard to tell.

Moore was part of the pressure on the execs to maintain unsustainable labor and manufacturing policies, defining the needed reforms as inhumane. I don't feel sorry for the CEOs, who should've been a lot less concerned about being loved, but citing Moore reminds us that they would've been battling a strong political wind if they'd leaned on the unions too much.

Darcy said...

Thank you for your posts on this subject, veni vidi vici, and John Stodder.

You too, AJ Lynch.

Original Mike said...

King, Olbermann. No wonder I missed it. Thanks, John, for watching so the rest of us don't have to. ;-)

Duscany said...

Did the auto workers president mention anything about giving up his salary for the duration?

Duscany said...

Actually, for the first time in his life perhaps, Michael Moore made a lot of sense. He wasn't incoherent at all. He said that when Wall Street went to Capital Hill hat in hand, they were treated like old friends. He said there were so many people smoking cigars in the hearing room he thought Cigar Aficionado magazine was about to start taking photographs.

But when the midwestern auto execs showed up they were treated like pariahs and, as a fellow midwesterner, he resented that. (In retrospect, I wonder if he was claiming that Jewish financiers got a better welcome than gentile midwesterners?)

In the end though he ripped the auto execs a new one, saying as a condition of getting money they all had to go.