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November 19, 2008

Rewarding Bad Behavior

Kevin E. Dayhoff

Instead of tooling down the highway in the fast lane, two months after General Motors celebrated its 100th Birthday on September 16, it found itself huddled over at an intersection with fate, harassing passers-by with a tin pan in hand.


William C. Durant formed General Motors (GM) as a holding company in 1908 for Buick. He subsequently took on overwhelming debt by purchasing the manufacturers of Oldsmobile, Cadillac, Elmore and Oakland. After a dramatic drop in automobile sales, Mr. Durant lost control of the company two years later to one of the many powerful bankers’ trusts of the time.


A hundred years later, the “Detroit Three,” – Ford, GM and Chrysler – have lost control of their companies to the United Auto Workers (UAW.)


After decades of being blackmailed with the threat of crippling union strikes, the Detroit Three finds themselves with uncompetitive work rules. It manufactures products which continue to languish with the perception that they lack the quality of their competitors. They offer numerous models, in which the American consumer has little or no interest. They make these automobiles with enormously uncompetitive salaries and benefits; and now the American taxpayers are being asked to bail them out.


According to a recent column by Cal Thomas, “the average wage, including benefits, for current GM workers had dropped to $78.21 an hour… Contrast this with non-union Toyota, whose total hourly U.S. labor costs, with benefits, are $48 per hour.


“While many in the Democratic Party have focused on ‘corporate greed’ and ‘fairness,’ … competition, not corporate greed, is the real problem facing labor unions. When unions negotiate raises for their members, companies pass those higher costs on to consumers. Americans used to tolerate those increases, but no more.”


The confetti was still on the floor from the victory celebrations of the national election a few short weeks ago when the UAW [United Auto Workers] came knocking at Democrat’s door asking for a handout. And not a meager handout, mind you, the Detroit Three and the UAW are demanding $50 billion in return for their support.


Remember, during the election campaign, the Democrats railed about the increase in the national debt, increased spending, and failed economic policies.


Yet, last week the clamor in Washington and Detroit was the call for huge increases in the national debt so that the Democrats may return a favor to arguably one of its key demographics that helped them win the presidency earlier in the month – unions, in particular the UAW.


Estimates vary as to how many millions of dollars the UAW raised for the Democratic Party’s presidential nominee, Illinois Sen. Barack Obama. Suffice it to say it was in the tens-of-millions of dollars.


The Detroit Three begging for a piece of the pie comes as our nation’s taxpayers are still reeling from the passage of the $700 billion Wall Street bailout in order to reward august financial leaders and conglomerates who behaved badly.


Recently, right after the news was revealed about a $343,000 American International Group (AIG) junket with misappropriated taxpayer bailout money, the federal government announced it was going to increase the company’s bailout by $27 billion to a total of $150 billion. Not a bad return for behaving badly.


As for the unions, 35 years ago when I worked briefly as a union carpenter, I was impressed with the preoccupation of the union leadership on working cooperatively with construction companies to ensure worker safety, good wages, and benefits. The leadership did this by supporting the efforts of the companies, who provided the jobs, to remain competitive and profitable.


In the last three decades the leadership of American unions has failed its membership and the country which once supported the labor movement.


The union leadership has failed us, just as our national political and corporate leaders have failed us.


The best remedy is for the corporate, union, and political leaders that caused the problems is for to suffer the consequences of their behavior – instead of rewarding it.


Absolutely no one in their right mind wants to see anyone lose their job. The stakes are high. According to a recent International Herald Tribune news account: “The big U.S. [automobile] companies employ about 240,000 workers, and their suppliers an additional 2.3 million, amounting to nearly 2 percent of the nation's work force.


“The outright failure of General Motors would eliminate the biggest auto employer and more than 100,000 manufacturing jobs. That is about the number of jobs already lost this year at U.S. automakers and their suppliers.


“But many industry experts say the big foreign makers are established enough to take control of the industry and its vast supplier network more quickly than is widely understood,” according to the newspaper.


Underreported in the last several weeks has been the fact that the auto manufacturers in right-to-work states in the south are not clamoring for a bailout.


According to Mr. Thomas, James Sherk, of The Heritage Foundation, reports that these Japanese car companies provide their employees with good jobs at good wages: “The typical hourly employee at a Toyota, Honda, or Nissan plant in America makes almost $100,000 a year in wages and benefits, before overtime.”


In the end, the $50 billion corporate welfare that Congress is asking the American taxpayer to reward the union and corporate leadership for decades of failed leadership would be better spent on providing support, training and educational benefits to be directed to the American workers affected by the reorganization of the Detroit Three.


The corporate and union leaders who caused this mess need to be the ones who go unemployed. The Detroit Three must undergo reorganization and its assets sold to new management. Worker contracts need to be renegotiated with an eye on that fine line of rewarding hard work and efficiency – and maintaining corporate competitiveness.


We, as a nation, simply must come to our senses and stop rewarding bad behavior. We need grown-ups to say “No.” Enough is enough.


Kevin Dayhoff writes from Westminster: E-mail him at:


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