These are not good times for conservatives whose faith lies in the unfettered marketplace. With President Bush, Congress and President-elect Obama all supporting the $700 billion federal bailout plan, the government has committed to playing lifeguard, even if it means rescuing those who decided to go swimming in a hurricane.
The latest in the “too big to fail” list is the U.S. auto industry. While a decision on the auto industry bailout will have to be made soon, the new administration should look ahead to playing a more sustaining role for businesses of all sizes. Rather than merely throwing lifelines, the Obama administration can hand out life preservers to all businesses, large and small, by boldly addressing the high cost of health insurance. That cost is eroding business profits more and more each year.
In September, Congress agreed to loan $25 billion to the Big Three automakers to help them retool to build vehicles that burn less gas, or rely on alternative fuels.
But in recent days, General Motors, Ford and Chrysler are seeking more funds from the $700 billion federal bailout package to just survive into next year. There is precedent, of course. In 1979, the Carter administration agreed to give Chrysler almost $1 billion to prop it up. That company limped into the 1980s, but then enjoyed prosperity when its CEO, Lee Iacocca, helped create the popular minivan.
But a look even further back in history reveals that the Big Three’s biggest problem came not through a lack of market savvy, but by insisting — yes, insisting — that each company provide health insurance to its workers and pensioners. According to a piece in the Aug. 28, 2006 New Yorker, in the late 1940s then-GM president Charles E. Wilson offered the United Auto Workers union, for the first time, health care benefits and a pension. The UAW initially balked, favoring instead a portable pension plan whose costs would have been borne by the entire auto industry, including small auto-parts manufacturers, plastics shops and electrical component makers. Every company would have paid 10 cents per worker hour into a central fund to cover the benefits.
Today, about $1,500 of the cost of each new Ford or GM vehicle goes to paying for health insurance for current workers or those drawing a pension. That puts American vehicle manufacturers at a serious disadvantage with their European and Asian competitors.
Though Mr. Obama does not favor a single-payer health insurance system, perhaps a federal bail-out of the U.S. auto industry could be tied to a group health insurance plan that includes manufacturers and their related businesses, much like that proposed in the late 1940s. If both unions and corporate boards of directors accept such a deal, it could serve as a demonstration to other sectors of the economy of the efficiency of broadening the burden for health care.
On 11/14/08 at 10:22 AM,
Saltoria wrote:
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Let them fail. They made business mistakes and want the tax payers to bail them out! They need to take a lesson from the Japanese companies. Make cars that people want to buy, and get rid of the UNIONS!
On 11/14/08 at 1:03 PM,
David889327 wrote:
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We should not bail out the auto manufacturers. Otherwise, where does it stop?
On 11/14/08 at 2:33 PM,
looseleaf wrote:
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http://www.youtube.com/watch?v=Wsj1MicUei0
(click "watch in high quality" at bottom right of video)
On 11/14/08 at 4:54 PM,
dccrane1952 wrote:
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Right-on Saltoria! When TWA wanted a bailout, along comes a new carrier (Southwest) who does it cheaper and better. Oh, the beauty of capitalism at work. Another car maker will come along and build better cars (learn from the Japanese) and less expensive because unions will be busted!
dccrane1952
On 11/14/08 at 5:18 PM,
Amanda1982 wrote:
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Are you kidding me? Made mistakes? Its because NOONE is buying vehicles right now! I sell cars, which my products are Chrysler, Dodge, Jeep, Mercury, and Ford. Im facing losing my home because the industry has taken such a turn. Its not just the vehicle line I sell either, ALL manafacturers are facing huge declines in business. I mean honestly, sit back and look at yourselves, are you in a position to go buy a car right now? Probably not...and so goes for the rest of the country. For people making quick jumps to not back this take a look at the long run..no we are not a freakin airline totally different business. People take flights EVERY SINGLE DAY, of course not as much as before, but come on look at all the numbers for the auto industry! Think about all the people who work for them, who have families, who have bills too...WHO WORK SOLELY ON COMMISSION! Yeah I've looked into other possible job opportunites BUT...a lot of places are not hiring right now due to the economy. Plus I really like my job, I can say I am not your "typical car salesman"... For one I try my hardest to make sure my customers are getting the best deal, even if it is going up against management, and secondly after the customer buys the vehicle I make sure they know Im here to help them the hole way. You build a customer base in this industry and to just up and quit would be risking losing all my clients to some other salesman who could care less...then when the economy picks up and you all are looking at buying a vehicle WHY BUY FROM OVERSEAS?? WHEN ALL THE JOBS ARE GOING OVERSEAS? Do you not realize this is a double edged sword? Please try and think beyond yourselves and your "tax dollars" because if we lose all the "somewhat" American made products then think about all the job loses...so yet again more jobs can go to those who dont live in the USA...
On 11/14/08 at 5:33 PM,
Bandbox wrote:
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The problems with GM and the other Detroit manufacturers are overcapacity, mismanagement, poor products, and the long term willingness of management and labor to unfairly benefit themselves at the expense of consumers. In other words, GM is a grossly mismanaged company that manufactures too much overpriced junk. In a sensible world, it would be allowed to fail or restructure through a bankruptcy/reorganization proceeding, and the taxpayers would not be forced to reward GM's failure by bailing it out. But these are not normal times, and the politicians will not allow GM to fail. You can bet that the incoming Democratic Administration and Congress will knuckle under to big labor and squander many billions of our dollars trying to save the company. It's going to happen. Labor wants it.
On 11/14/08 at 5:43 PM,
Amanda1982 wrote:
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Ok so great let all the Americans lose their jobs right? Lets let all the foreigns reign in ALL OUR HARD EARNED MONEY. If noone has done ANY research Ford rates highest in reliability over Toyota! Its just not reported in the media as much. SO COME ON LOOK AT WHAT YOUR SAYING!
On 11/14/08 at 5:43 PM,
Amanda1982 wrote:
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Ok so great let all the Americans lose their jobs right? Lets let all the foreigns reign in ALL OUR HARD EARNED MONEY. If noone has done ANY research Ford rates highest in reliability over Toyota! Its just not reported in the media as much. SO COME ON LOOK AT WHAT YOUR SAYING!
On 11/14/08 at 5:50 PM,
David889327 wrote:
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$70/hour on the assembly line doesn't appear sustainable. If we bail them out now, we are just perpetuating a situation that cannot compete in the global marketplace. The U.S. needs to allow these sick industries to die to make way for the new. Change can be good.
On 11/14/08 at 6:45 PM,
Bandbox wrote:
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Well, Amanda, Ford better than Toyota? I don't think so, and I can tell you for sure, first hand from direct knowledge, that my piece of junk Ford isn't any better than a Toyota and that I'll never every buy another Ford or GM product. They're junk. Anyway, don't worry about it. It's all moot. Like I said, the Democrats are going to knuckle under and give GM and the labor unions what they want.
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