Detroit’s Untenable Position
(Source and More info on the #’s behind this)
No matter what, if Detroit doesn’t hit the core issue head on, they’re done, it’s just a matter of time. Any entrepreneur worth his salt can tell you that people/employees are by far your largest expense. And if, because of unions, your largest expense costs you 50% more than your competitor per unit, you’re off the reservation if you think you can defend that long term. It’s only a matter of time. The unions and Detroit have both painted themselves into a corner. I’ll predict it here, unless they bust them up, or drastically renegotiate the commitments (READ: let them go bankrupt so that external process can MANDATE change to the unions), they will not survive. Might drag it out another 10 years, or 20 years, or even longer. But they’ll be done.
I love unions. Next business I do is going to be unionized labor or bust! 
PS - is anyone else bothered by the fact that people who operate computerized equipment (basically the 2008 version of a wrench) make so much damn money?
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Posted by Jeremy at 8:15 AM
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This is frightening. The guys who programmed and built the machines probably don’t make that much.
I couldn’t agree more. If the unions want the companies to go bankrupt, then that’s what needs to happen.
Bailing these guys out would be a huge mistake. Talk about moral hazard.
Unions are bad for everyone involved, including the union members (in the long run).
Perhaps it was a throw away comment. If not, please detail what you mean by ‘people who operate computerized equipment’. Are you referring to people who manage IT networks? Data entry? Programming?
And if programming is your comment lamenting why the process of creative problem solving isn’t more akin to an assembly line?
Last night, I watched a taped broadcast of an 11/18/08 Senate committee hearing involving the heads of the auto companies. The committee (Senate Committee on Banking, Housing and Urban Affairs) was asking the auto makers to justify why they need $25,000,000,000 in federal aid.
Go the following link and skip ahead to 1:49:40 in the recording and watch Senator Bob Corker (R. Tennessee) question the panel members (Alan Mulally, President and CEO of Ford Motor Company; Robert Nardelli, Chairman and CEO of Chrysler Corporation; Richard Wagoner, Chairman and CEO of General Motors; and Ron Gettelfinger, President of the UAW):
http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=282453-2&showVid=true
The Senator’s questions and commentary are particularly insightful right off the bat, and were frankly very surprising — and welcomed from my perspective — coming from a politician.
The audacity of corporate America is finally on display and available for the public to watch in its full glory.
At around 1:59:00 in the recording, Corker remarks on the existing contractual obligation automakers have to operate idle plants and continue paying workers even when there’s no work to be done. Corker points out that it’s “problematic” that these companies want $25B for a cause that ultimately pays 95% of salaries of people who essentially do no work (literally), and that no other industry operates in this way. At one point he becomes so frustrated with the response from panel members that he says, “You gotta be kidding me.”
Corker essentially points out that the $25 Billion figure is made up and that the auto executives are just going to come back asking for more (i.e., they have no real plan for improving their operations… watch the exchange that starts at the 2:04:00 mark in the recording for evidence of this).
Even more remarkable, further along in the recording, at the 2:07:31 mark, the Committee’s Chairman, Christopher Dodd (D. Connecticut) states:
“I can’t resist commenting on this idea of providing compensation to employees in an idle plant. I don’t think that’s outrageous at all! These are people we hope will be back at work at a facility that not working, and the idea that we take care of people — the assumption some how that just get rid of them without taking into consideration their needs… for my part, I don’t find that offensive at all. I think that’s taking good care of people who work darn hard for our country! …”
WTF… are you kidding me? The Chairman of the United States Senate Committee on Banking, Housing and Urban Affairs favors paying auto workers when they have no work because they “work damn hard for our country”?
People, it’s not just Detroit that’s unstable… the halls of Congress are on shaky ground as well. Christopher Dodd has some awfully strange views (but then again, what would you expect from a member of Congress who received a series of sweetheart loans from Countrywide as a part of the “Friends of Angelo” program… a program that afforded Dodd and other members of Congress rates far below what any of us can get when attempting to secure a 1st or 2nd mortgage loan).
Matthew - I was referring to people who stand on a line and click a big red button that hangs from the ceiling to make a robot move a panel and then run a power drill to hook it on the car. Not the people who program the equipment. Basically, it’s high tech wrenches and hammers and such, and takes probably just a bit more training to learn, but for sure no higher education. They run tools for peats sake, and they make that kind of money? Insane.
Thanks for the information, Mikel. There is no one that scares me more at the present time than Christopher Dodd. I do not remove the responsibility from people who were stupid and took sub-prime loans and lived beyond their means, but Senator Dodd is one of the major reasons that the economy is in it’s current situation. Why aren’t Senators held responsible for their actions?
Did anyone hear how the Big 3 executives traveled to the hearing? On private jets that cost $20,000 for a single trip! Did you know that the Big 3 have entire fleets of private jets? I don’t know how much a jet goes for but before they come asking for money, why don’t they try selling some of their planes?
The arrogance and audacity of these executives and the idiocy of congress to even give them an audience kills me.
Wade,
You are Dead On Balls Accurate, my long-lost connection! Congress has failed so many times at truly understanding major issues and situations, and those who testify before them seemingly get away with a host of missteps and non-answers.
Another great example… take a look at the following video (also from C-SPAN but related to federal regs on loan modifications). Jump ahead to the 2:33:05 mark and watch as Congressman Emanuel Cleaver (D. Missouri) attempts to get straight answers from a bunch of smug banking industry executives. At the end of his line of questioning (which lasts about 4 minutes total) he gives up and says, “Okay, I need somebody smarter [than me] to ask the question. I know you [the people he is questioning] are smart enough to answer it.”
He wraps up with this gem (through no fault of his own because the banking officials refuse to interpret what he’s asking by providing real answers, and he’s ill-equipped to ask the questions properly himself):
“Maybe in another lifetime he [one of Cleaver’s constituents] can get his house back.”
Utterly amazing that a member of Congress could not get a banking industry official to provide a straight, empathetic answer to some really important questions. Watch the recording for yourself (all four minutes of it that I recommend) and see if you do not agree.
We’re screwed!
Woops, forgot to include the video link for the comment immediately above this one (sorry about that). Here it is:
http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=282368-1&showVid=true
Mitt Romney chimes in with this great Op Ed:
http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=4&rss&oref=slogin