In December, America’s three major automakers asked Congress a second time for a bailout, this time totaling a whopping $34 billion. COAST vigorously opposes this request. Here’s why:
· In essence, the big three automakers have for decades “made their own bed,” choosing not to serve customers or shareholders, but demands of over-paid and lazy executives, big unions and government.
· In failing to serve consumers, the automakers have for decades put out over-priced, poor quality cars that failed to meet consumer demand. The recent mistakes included continuing to make large SUVs and not move quickly to high-demand hybrid technology, as gas prices rose and Japanese competitors quickly fulfilled the new consumer demand.
· In failing to serve shareholders, the adjusted stock price of General Motors today is identical to what it was in 1969. That is, if you invested $100 in General Motors stock nearly 40 years ago, you would not have had one dollar of appreciation in value of that investment.
· Ultimately, the companies are losing money, and shareholder value is not increasing, because their expenses exceed their revenues. American automakers expenses are so high compared to competitors because since the 1970s they consistently have capitulated to union demands on wages, benefits and job rules. Foreign manufacturers – even those with substantial U.S. operations – have been more successful in driving down costs. Here are just a few facts and figures explaining their uncompetitive cost structure:
a) GM's health-care costs tack on $1,500 per vehicle.
b) GM has instituted a union “job bank,” which continues to pay workers whose jobs fell victim to technological progress or plant restructurings even though they aren’t actually working. The job bank, established in the mid-1980s, requires GM to pay displaced workers nearly their entire salary plus benefits and pension.
c) For every GM worker, there are about 10 dependants deriving benefits from General Motors, which are defined as retired workers and their families.
d) GM's per-hour labor rate for car assembly is about $75 per hour, compared to $40 to $45 for other car companies.
So what is really happening is that at the very moment the abysmal failure of decades of poor management is brought into full bloom, the Democrat Congress intends to use your tax dollars to shield them from the natural forces of the marketplace.
The reasons why America’s automakers, and their shareholders, should suffer the consequences of their bad management are legion and compelling. COAST opposes the bailout. Read also Mitt Romney’s excellent New York Times editorial on this topic here.
Ohio Senator George Voinovich has been one of the champions of the bailout.