Out of Control Policy Blog

UAW Cuts Pay for Laid Off Workers

The next round of Senate hearings for the Big Three are today. They have submitted plans showing how they will use "loans" from the government to become prosperous again. They are driving to the meetings instead of flying. They come in humility, satin hat in hand.

The UAW announced Wednesday that they would allow GM, Chrysler, and Ford to delay pension payments and would cut payment for laid off workers all together. Those are good steps, and are intended to be good faith gestures that might encourage the Congress to pass an auto bailout.

However, they are not enough.

The simple fact is that the U.S. taxpayer should not have to bailout the auto industry. Bankruptcy is the best option, it will clear the leadership and allow the companies to realign themselves without the pressure of creditors and come out on the other side more competitive companies that have used the system properly.

These bailouts would keep the current leadership in place. GM's VP said on MSNBC's show "1600 Pennsylvania Avenue" Wednesday night that GM's executives were "a great team" that has "worked hard." They are also the team that led GM into their current mess, neglecting market trends, and ignoring what other companies like Toyota and Honda figured out years ago.

If Congress does choose to bailout the auto firms it would be wise to consider the following conditions: first, that the leadership teams at all firms are transitioned out; two, that they provide a plan for the money (which they have done); and, three, that all union contracts are renegotiated (which the UAW has shown a willingness to do).

The Big Three should also jettison their PR firms because to be competitive again they will have to overcome a national perception that their cars are bad (which they are not) and the negatives of begging for money (they should do this even if they wind up having to use Chapter 11 bankruptcy). Their PR and ad services have been dismal, culminating in the lack of preparedness the CEOs had to answer why they flew their corporate jets to DC (which should have been easy to answer, just say, "Senator, given our companies struggles, we felt flying would maximize our time so that we could commit our full resources to restructuring our firms." Done. Instead they were like dear in the headlights of one of their own cars).

Congress should not require certain efficiency standards or force them to develop certain green technologies they do not have the capacity for. If those are necessary to be competitive again then the car giants will have to do them anyway, and the government doesn't want to create a minimum standard. If those are necessary to compete again and GM, Ford, and Chrysler don't do them then they will fail. Either way, setting production standards arbitrarily from Congress will only cause problems.

The UAW actions should not be overlooked. Finally, they made an unpolitical move. To-date, millions have been paid to laid-off workers in ridiculous union contracts, that the union is willing to let that go is a good sign, but hopefully it is not intended to be their one area of compromise. Much more renegotiation is needed.

Anthony Randazzo is Director of Economic Research


« FDIC Head: Have a Fiscal… | Main | Good cheer and libation on… »




Out of Control Policy Archives