Car Wreck
The auto industry bailout is inevitable. As distasteful as it might be to many, there is a potential, albeit unlikely silver lining.
It is quite obvious that Obama is a close ally of organized labor. It is equally obvious that the disparity in labor costs between U.S. and foreign manufactures (along with egregiously poor design decisions) is what has led the Big Three to the brink of insolvency. Even though more friendly UAW contracts were negotiated (effective in 2010), they simply do not go far enough to allow GM, Ford, and Chrysler to be competitive. Setting aside the very relevant issue of terrible management by the Big Three, how can they compete when the cost of one of their vehicles is roughly $2,000 more than one also made in the U.S. with American labor, but by a foreign-owned competitor (e.g. Toyota, Honda, etc.). The all in labor costs of a Big Three auto worker is in the neighborhood of $30+ per hour more than a U.S. auto worker employed by a foreign competitor. That's a $60,000+ per year per worker cost disadvantage. Ouch!
Here's the opportunity. Any rational-thinking person recognizes that the government should not hand over tens of billions of dollars in bailout money to support a failed business model. Unfortunately, the realities of politics often trump what is rational. Imagine the favorable reaction of the market and the general electorate if Obama were to come down strongly in favor of tying Big Three bailout funds to a more competitive labor cost structure. The response would be explosively positive. It would signal a leader who is interested in doing what's right, not what's politically expedient. Consumer and business confidence would instantly skyrocket. What greater validation of the campaign mantra, "Change we can count on?"
Do I think it's going to happen? Nope. But a guy, can dream, can't he.
It is quite obvious that Obama is a close ally of organized labor. It is equally obvious that the disparity in labor costs between U.S. and foreign manufactures (along with egregiously poor design decisions) is what has led the Big Three to the brink of insolvency. Even though more friendly UAW contracts were negotiated (effective in 2010), they simply do not go far enough to allow GM, Ford, and Chrysler to be competitive. Setting aside the very relevant issue of terrible management by the Big Three, how can they compete when the cost of one of their vehicles is roughly $2,000 more than one also made in the U.S. with American labor, but by a foreign-owned competitor (e.g. Toyota, Honda, etc.). The all in labor costs of a Big Three auto worker is in the neighborhood of $30+ per hour more than a U.S. auto worker employed by a foreign competitor. That's a $60,000+ per year per worker cost disadvantage. Ouch!
Here's the opportunity. Any rational-thinking person recognizes that the government should not hand over tens of billions of dollars in bailout money to support a failed business model. Unfortunately, the realities of politics often trump what is rational. Imagine the favorable reaction of the market and the general electorate if Obama were to come down strongly in favor of tying Big Three bailout funds to a more competitive labor cost structure. The response would be explosively positive. It would signal a leader who is interested in doing what's right, not what's politically expedient. Consumer and business confidence would instantly skyrocket. What greater validation of the campaign mantra, "Change we can count on?"
Do I think it's going to happen? Nope. But a guy, can dream, can't he.
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