Rick Wagner Column December 04, 2008

Imagine auto companies with Reid and Pelosi as their CEOs

I’ve been giving some thought to this going into business with Nancy Pelosi and Harry Reid deal and I think that I’m going to need to see a business plan.  The way the new auto bailout package seems to be shaping up is that we taxpayers would be the financing piece with Harry and Nancy as the CEOs and the auto companies as subcontractors.

After all, these two are demanding a business plan that meets their approval before they give the auto companies any of our money. This wouldn’t be bad except that you need to substitute the term political agenda for business plan. This agenda has two main components, neither of which have anything to do with making money or returning taxpayer investment.

The first of these is to rescue a major source of Democrat support, which is the United Auto Workers. Taking away the secret vote from prospective union members, which should be on the congressional agenda by April, will not be enough to save these badly rusting examples of a bygone era — they’ve got to be saved from bankruptcy court.

Now, the union is not going bankrupt since it doesn’t actually produce anything and it collects cash, by siphoning money from workers paychecks. The money is then spent on overhead costs, e.g. Sen. Reid and Rep. Pelosi.

The fear about bankruptcy court is what will happen to union contracts if the Big Three automakers seek Chapter 11 protection and reorganization by the court and trustee. This is frightening to unions since there is scant chance any bankruptcy court could see a scenario where union contracts presently in place would allow these companies to survive, pay back debtors and successfully emerge from bankruptcy.

Many know that General Motors provides hourly workers with compensation of approximately $74 per hour, including actual wages, plus health and retirement benefits.

This means General Motors operates at about $30 per hour more than Japanese companies with plants assembling automobiles in the United States that are not under these union requirements. The so-called “legacy” costs of providing wildly generous pension and health care to prior employees further destroy the companies’ competitiveness.

It’s not that workers don’t deserve the best compensation that a company can afford. It’s that they don’t deserve contract negotiations that result in the companies ceasing operations, cost active workers jobs and eventually crash their own benefits. Auto workers deserve contracts that were negotiated not just for the best deal that day for the union, but enable the source of that income to survive. 

The goose that lays the golden egg may make a great meal, but it is pretty much done at that point as a producing asset.

The business model for these automakers needs to change, but pouring taxpayer money into these beasts as a conduit to political-support groups is bad policy.

This brings us to the second of Harry and Nancy’s reasons for wanting to bail out the automakers: to interject a bunch of loopy environmental schemes into the auto industry to appease another of their political constituencies.

They seek to force automakers to produce cars that run on moonbeams and butterfly wings in the hope that they will somehow be profitable. The Chevrolet Volt, for example, the much-touted electric car, gets 40 miles on a charge and will cost $40,000. The possible addition of a gas engine may make the range over 640 miles. There is apparently no plan for new power plants to produce all of this electricity.

How these complicated Murphy’s Law machines will hold up for resale and maintenance should be obvious to anyone. 

This is to say nothing about the energy it takes to produce the vehicle and the interesting chemicals and materials that go into manufacturing the batteries.

The simple way to determine if all this expense and meddling seem a good investment is to imagine if Harry and Nancy asked you to invest your life savings into a business idea they have created. 

There now — you have your answer.


Rick Wagner offers more thoughts on politics at his blog, The War on Wrong, which can be reached through the blogs entry at GJSentinel.com. 


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