already explained the problematical economics and ethics of a federal bailout
for the Big Three (see "A Bailout for Detroit"). The demise of
the pillar of metro Detroit’s economy saddens me—I’m
from there; in fact, I was once a janitor for Chrysler. If there can be any
profit from this pending tragedy, it will be if we learn what caused it and
avoid repeating those fatal mistakes in the future. With that objective, I’ll
present my two cents on where the responsibility lies, and then I’ll offer an
outside-the-box alternative to a taxpayer-funded bailout.
The Big Three are terminal because their labor
costs are too high. Toyota, Honda, or Volkswagen can manufacture automobiles
profitably in the United States because their labor costs are lower. The
difference is 100 percent due to the United Auto Workers union and the
above-market compensation packages that its monopoly bargaining power has
extracted from the Big Three for years.
I don’t buy the endlessly repeated refrain of
condescending know-it-alls that the Big Three’s troubles were caused by stupid
and irresponsible management choosing to produce high-priced gas guzzlers
instead of low-priced, fuel-efficient vehicles. If management is “stupid,” then
why have GM and Ford consistently earned profits in their foreign operations?
In “green” theology, SUVs are a cardinal sin, but from an economic standpoint,
if you want to know why the Big Three has produced them, put yourself in
management’s shoes for a moment; First, a lot of Americans preferred to buy gas
guzzlers when the economy was booming and gas prices were low, and it has never
been considered poor management to provide what customers want. Second,
confronted with a $2,000 per-unit disadvantage against their competitors—due to
labor and legacy costs imposed on them by UAW—the Big Three have been
noncompetitive in low-price, low-markup cars, and their only hope of earning a
profit domestically has been to build larger, high-markup vehicles. UAW is the
culprit here, having painted the Big Three into a dangerous corner than has
Let me emphasize that my gripe is not with the
rank-and-file laborer, but with the union brass. When I worked at Chrysler, I
developed a great fondness for many of my co-workers. They were decent,
upright, salt-of-the-earth, true-blue Americans. Sadly, the rank-and-file
autoworkers have been betrayed by their own union bosses. In recent decades,
the union has destroyed hundreds of thousands of UAW jobs by pricing them out
of the market. Aren’t unions supposed to help workers? How are they helping
their members if they kill off their jobs? Such cannibalism puts the lie to
hollow rhetoric about the “solidarity of labor” and reveals the stone-cold
heart of unionism, its utter selfishness and destructiveness.
We see that same ruthless selfishness now in
UAW’s refusal to make any concessions, even as they warn that “millions” of
jobs that depend on the Big Three will be lost if the companies aren’t saved.
This smells of blackmail. UAW is playing a giant game of chicken with Uncle Sam—“We
(UAW) refuse to accept less compensation (see "Too Little Too Late?"),
so if you (Uncle Sam) don’t bail us out, you will cause an economic disaster in
Michigan.” Huh? If UAW really cared about its home communities, it has long had
it in its power to preserve the economic viability of the Big Three by
accepting wages comparable to those paid to Americans who make Hondas and
Toyotas in the States. Instead, it refuses to help save its own communities.
This is the bitter reality of unionism.
That having been said, it’s time for a “hail
Mary” pass in a last-ditch effort to rescue the Detroit auto industry, and here
I’m going to flip-flop and sound pro-union. I propose that ownership of the Big
Three be transferred to UAW. The current shareholders are already largely wiped
out. Compensate them by giving them warrants that they can cash in if the Big
Three return to profitability under UAW ownership.
It’s time for UAW to do the heavy lifting. Let
it decide what is a “fair” wage for its members. If the union members set their
own wages, that would end the poisonous adversary relationship that currently
exists between management and labor, and that has culminated in UAW throttling
the Big Three—the geese that have laid the autoworkers’ golden eggs. The union
can quit wasting energy hating management for denying them “what they deserve,”
and could pay themselves whatever they want. Let them run the show. That would
be most illuminating and educational for other workers, unionized or not.
Maybe, just maybe, a crash course in economic reality would impart the lesson
that a worker is better off working 40 hours per week at $40 per hour
compensation than zero hours per week at $70 per hour.
If the Big Three want to be saved, let them save
themselves instead of asking us (the taxpayers) to subsidize their current
compensation structure. If they try to save themselves, I truly hope they