GM: First Disillusionment Of The Obama Era

For the next few weeks the latest applicant for Big Bailout cash, the auto industry will be the central front in America’s perennial ideological war.

On the Left side of the war are collectivist ideas, backed by labor unions and Democratic politicians, and the public education establishment.  On the right side are the ideas that informed the founding of America, and made us the most successful, prosperous society in human history: liberty, individual responsibility, free enterprise, limited government.

The American auto companies of Detroit, General Motors, Ford and Chrysler, were once  known as The Big Three, because they manufactured almost all (90%) of the cars sold in America.    In The fifties and sixties General Motors’ market share hovered just below 50%, and “The General” was under constant threat of government attack as a monopoly.

Those were the good old days.  Today, we should call GM, Ford and Chrysler The Desperate Three.  This year, the three of them combined will produce about 40% the cars Americans buy.  It now seems certain that General Motors, and maybe Ford as well, will be forced into Chapter 11 bankruptcy/reorganization within weeks if Congress doesn’t come through with bailout cash.

The political big gorilla in the room is, of course, the union, The United Auto Workers (UAW).   The Desperate Three employ 239,000 people in North America.  But the cost of current workers is only the beginning of the UAW’s tab.  Long term union contracts have increased the burden on The Desperate Three over several decades, to the point where they  now support 775,000 retirees and surviving spouses with monthly pension and medical benefits, AND provide health insurance to an additional 985 thousand Americans!

To the Political Left these numbers are as they should be.  In their doctrine “a good job” is an entitlement and it should be a program of total economic security for the employee and his family.  The Desperate Three’s union contracted high wages, strict work rules, generous benefits and fabulous retirement programs have been the standard by which The Left seeks to measure all jobs.

The unions and the Leftist establishment had hoped their new President Obama combined with the Democratic Party’s increased majority in Congress would harness the power of government with new, pro-union laws and regulations to reverse the three decade decline in union membership and usher in a new era of union expansion and dominance.  But, non-union workers will be even less interested in tying their futures to the union movement if the Desperate Three are forced into chapter 11 bankruptcy/reoganization, resulting in major wage and benefit concessions ordered by the court.

The UAW has been a pillar of Democratic Party financial support for eight decades and now demands a hefty return on it’s investment.  Congressional Democrats are under immense pressure to come up with something to preserve the myth that unionization can milk endless benefits out of an employer with no downside consequences.

On the Liberty/Free enterprise side is the argument that Chapter 11 is the appropriate solution to this problem, with all stakeholders, including the union, making concessions to restructure General Motors into a healthy, competitive enterprise.

GM is selling several high quality products, has a world class engineering shop and a network of thousands of dealerships.   Without the burden of excessive debt and 775,000 retirees to support GM would instantly be transformed into a vibrant, profitable company.  The bankruptcy court is one of the few government services mandated by the US Constitution, and it has the means and authority to help GM turn around.

Of course there will be pain.  Any court ordered restructuring will surely force union employees and retirees to accept substantial reductions.  This is the unavoidable consequence of so many years of meeting excessive union demands.

A cash bailout from Congress, without major concessions from the union, will only delay the inevetable demise of GM.  In a few months we’ll be right back here again.  And again, the impulse from the Democrats in Congress will be to find some way to keep alive the fiction that this company can survive without the UAW accepting major cuts in wages and especially in benefits and retiree payements.

The case of Detroit’s Desperate Three Auto Makers leaves no doubt:  The Left’s economic ideas are immoral and unworkable.

1 Comment so far

  1. aaa again on November 18th, 2008

    The Big 3 model is, in essence, the Obama model.

    How’s that working out.

    Wait ’till you see health care……