GM + UAW: Not a winning combination

Brilliant:

Big Three Bailout? Not So Fast, Declan McCullagh Says A Better Solution Is To Let The Automakers Declare Bankruptcy – CBS News
One of the best reasons why Detroit automakers should not receive a bailout can be found in a General Motors “Jobs Bank” program that, bizarrely, pays employees not to work.

A beneficiary of that program was someone named Jerry Mellon, who worked for GM until his division merged with another in 2000 and he was no longer needed. Except for a brief period in 2001, Mellon received his full salary for not working, which reached $64,500 a year by 2006. Include benefits, and the annual cost to GM exceeds $100,000.

To earn his pay, Mellon was given the formidable task of showing up in a windowless shed, sitting at a table, and doing nothing for eight hours a day for six years, according to a profile in the Wall Street Journal. Jobs Bank employees have the option of attending classes teaching such important manufacturing skills as dealing blackjack and poker. Mellon spent part of his time reading Reader’s Digest, learning how to play Trivial Pursuit, napping on a makeshift bed of chairs pushed together, or simply staring at the wall for hours at a time.

We can’t afford to have companies like GM around, or unions like the UAW.

15 thoughts on “GM + UAW: Not a winning combination”

  1. I happen to come from a Rust Belt auto worker town, and this story doesn’t surprise me. Some of my friend’s father’s made $32 dollars an hour, while doing very little for it (they even brag about this). They talk of “the good old days” when one guy would punch-in his buddies 3 hours early, while they would punch him out 3 hours late.

    All the auto worker people think that “greed” is the reason for “good” manufacturing jobs going over-seas. I try to explain to them that 50 years ago, America was the only world manufacturer, due to the allies gutting Germany’s capaities, or just lack of development in Asia. THios allowed US labor unions to demand whatever they wanted. They of course know better, and accuse me of stupidity, lack of Patriotism, or being brainwashed by “communist” college professors (ironically, its the communist professors who are most likely to not support free trade, but at this point I just keep my mouth shut). Anyway, its common to see news stories in my local newspaper featuring auto workers sitting at a bar staring at their drinks with the caption “What do we do now?” under the photo.

    More on this later…….

  2. Now they’re pushing $50 billion and – wait for it – a Czar! [1]

    I’m sure this will end well. I mean, we’ve had a drug czar for while, and we’re winning that war on drugs, right?

    In any case, I hope they’re a bit more proactive WRT oversight on the GM bailout then they were with the financial market bailout. [2]

    [1] http://news.yahoo.com/s/bloomberg/ablcucxr33jw;_ylt=AkcKepwtJY23Tla3Eq0mPe6s0NUE

    [2] http://www.washingtonpost.com/wp-dyn/content/article/2008/11/12/AR2008111202846.html?hpid=topnews

  3. An oversight Czar?

    Hahaha.

    Can you imagine, those kids who believed that Obama was something different.

    He’s just another establishment Democrat — on some issues that’s fine, on other’s its laughably out of date.

    I guess a “War on Inefficient Auto Industry Practices” is next!

  4. Take $25 billion of that and give it to the FDIC to clean up the banking world’s mess and stop the foreclosure crisis.
    Take $10 billion of that and revive the construction industry by paying for efficient energy upgrades in federal, state and municipal buildings (while shutting down older ones and moving those offices into foreclosed houses in neighborhoods with low to middle foreclosure rates (i.e. those neighborhoods that will survive).
    Take the last $15 billion and help states pay for the increase in unemployment filings when Detroit lays off tens of thousands, with the remainder going towards community colleges to help enroll laid off workers in new degree programs from logistics to IT.
    We do this latter part in NC quite successfully. The community colleges offer some really great degree programs and people whose jobs are outsourced (i.e. textile and furniture employees) are able to go to school at a reduced rate to learn a new field like biotech or a trade like plumbing or auto repair. I’ve met some of these people, they generally seem grateful for the second chance and have gotten over being bitter about their jobs.

    I would love to see at least a few divisions of Detroit survive (i.e. Saturn, Chevrolet (whose Malibu beat out the Camry and others last year) and Ford) as smaller independent companies.

  5. I would tell GM they are going to agree to the following terms or face bankruptcy:

    Take the $50 billion.

    Put together a panel of experts in economics and business – Buffet, Sumners, Bill Gates, Steve Jobs, Larry Page, ect.

    Announce that a competition will commence in 30 days and last for three months. During that time any ideas to restructure GM (into any kind of business – they can make cars/airplanes or widgets) will be accepted from those who meet a certain criteria (i.e. the applicant must have been owner or operator or of a company with over 75 employees or must be able to put up x millions in capital – this keep the kooks out).

    The ideas will be submited to the panel and the panel will select which idea is most feasable. If a non-U.S. resident submits a winning plan they will recieve an automatic long term visa. Preference should be given to any plan that already has the backing of private investors.

    The $50 billion will be made available to GM’s new “Czar” as a low interest loan. The “czar” (it could be a partnership or small group) will have complete power to impliment their plan as they see fit. Congress will get out their way to do as they will with the UAW and federal, state and local regulatory agencies must agree to fast track any proposals that require zoning changes (building/retrofiting/removing factories, for example) for the next 24 months.

    That would be my plan. Unfortunately, I think it would be too hard for the various governing bodies (state and federal legislators, regulators, ect) to cede power to a tyranical CEO.

  6. I am listening on iPod to an EconTalk Podcast [1] on GM the and the Volt electric car that is interesting:

    Jonathan Rauch, of the Brookings Institution and the Atlantic Monthly, talks with EconTalk host Russ Roberts about the evolution of the Chevy Volt, GM’s planned electric car. Due to the transparency of GM’s effort, Rauch was able to spend a great deal of time on site at GM writing a piece for the Atlantic Monthly on GM’s plans and hopes. Rauch discusses the huge risks, GM’s past failures, and GM’s hopes that the Volt might change the company’s culture. The conversation closes with a discussion of competitors and the implications for energy policy.

    [1] http://www.econtalk.org/archives/2008/09/rauch_on_the_vo.html

  7. New York Times has an interesting piece, which seems to call for some form of de-facto managed bankruptcy… [1]

    This goes beyond firing top management, forbidding the payment of dividends to stockholders and putting limits on executive pay — all necessary steps. The government should insist on a complete restructuring of any company it pours billions of public funds into….

    The companies also are struggling under a mountain of debt. And any restructuring would mean that creditors would have to swallow a loss or accept equity — as under a regular bankruptcy filing. Restructuring would likely require more plant closures and layoffs.

    Rescued car companies would almost certainly have to re-open labor agreements on pay and benefits. These steps would be painful for many workers. But they also are necessary.

    Whatever one thinks of the Times take, its “constructive engagement” on the issue is quite a bit different from pro-labor old left Democrats, such as Chris Matthew.

    The idea of 1.5 million+ 500 mpgg cars surely is interesting to some on the left [2].. too bad so few talk about it.

    [1] http://www.nytimes.com/2008/11/15/opinion/15sat1.html?ref=opinion
    [2] http://www.tdaxp.com/archive/2008/11/15/how-much-does-the-25000000000-bailout-of-detroit-cost.html

  8. There is a pretty good take on this at Megan McArdle’s blog. The article is good and the comments are better.

    http://meganmcardle.theatlantic.com/archives/2008/11/right_to_work.php

    My favorite proposed solution is for the government to buy all the outstanding shares of GM for ~$6 billion (way cheaper than the various proposed bailouts), give the shares to the UAW and wish them good luck. The workers then own the means of production. Since all the UAW fans seem to hate GM management, they can fire them all down to the floor supervisor level. Then when the UAW tries to run the company, they can decide if they want to keep the work rules that make any change nearly impossible.

    For myself, I’m still pissed off about my old 1978 Chevy Malibu and want to see GM join Studebaker, the Soviet Union and Pets.com on the ash heap of history.

  9. Mark in Texas,

    It would be interesting what UAW would have had to give up back in the day in exchange for a setup that would give them majority ownership by now. The jobs bank that pays people not to work? Some other nonsensical benefit?

    Buying the company will not help GM avoid bankruptcy. [1] And at this point, I am opposed to any UAW bailout.

    All through — remember Bush’s condition linking a bailout to an FTA with Colombia? [2] The New York Times does, too. [3]

    [1] http://www.halfsigma.com/2008/11/let-them-file-for-bankruptcy.html
    [2] http://www.alternet.org/columnists/story/107008/bush_playing_chicken_with_detroit_in_last-gasp_effort_to_demoralize_the_dems/
    [3] http://www.nytimes.com/2008/11/18/opinion/18tue1.html?_r=2&ref=opinion

  10. how can you fools give aig an all those finanial bailout an when it come to the big thee it,s like get the hell out of here you BUMS.WELL I WORKED FOR GM 35 GOOD YEARS. OH YES WE WORKED WE DID NOT CLOCK EACH OTHER IN/OUT.I FEEL SORRY FOR ANY FOOL OUT THER HATEING ON US.WE BUILT THE NOVA EVERY YOUNG BOY DREAM OF HAVING=1967 =AT WILLOW RUN ASSEMBLY==I WAS NEVER IN A JOB BANK I WORKED HARD FOR MY PAY=IT,S NOT A HAND OUT IT,S A LOAN.I,LL GIVE UP SOME OF MY PENSION.===IT,S ABOUT AMERICA==PRIDE==WE SHOULD STAND FOR SOMETHING==RETIRED UAW MEMBER.

  11. all the people that worked at the big three that retired paid TAX .so why in god’s name is every jonnie come late so hard on us=those folks setting behind a desk does not produce anything. this country was built on hard work==the AUTO MAKERS at the end of the day have cars to trying SELL.WHAT THE HELL THOSE SENATORS HAVE TO SELL WITH OUR MONEY? THOSE HATERS NEVER WORK A HARD DAY IN THERE LIVES.THE ONE’S FROM ALABAMA IS PURE SORRY==BECAUSE OF PEOPLE LIKE THAT ALL THE YOUNG FOLKS BACK IN THE 60’S HAD LEAVE HOME TO FIND WORK.SHAME ON YOU BAMA==NOW YOU WOULD LIKE TO TAKE EVERTHING AWAY.==RETIRED UAW EARL BUTLER NASHVILLE TN.

  12. Earle Butler,

    Thank you for your comment. Your ‘in the trenches’ take is the sort of real-world perspective we need more of. For all the talking heads on television, there are not enough people like you describing the immediate consequences of these policy choices.

    If I understand your posts directly, you have two concerns: (a) that the TARP financial bailout money is being poorly spent and (b) that a valid sentimental reason exists to protect union jobs. (a) might well be true. I was against the bailout bill [1]. Your second point is harder for me to understand. UAW workers gambled that they can do better for themselves by hitching their pensions and benefits to the continued survival of GM, Ford, and Chrysler, whiel engaging in strenuous negotiation tactics [2]. This approach gave UAW workers a good lifestyle while those companies were able to pay the high work-fees demanded by the UAW. Obviously, such a plan fails when the Big 3 themselves fail.

    If the UAW had been more concerned about the industry’s survival, it could have either taken less benefits, taken some benefits in the form of stock (so that the Big 3 would be increasingly run, reducing the attractiveness of strikes for everyone), or some other approach.

    [1] http://www.tdaxp.com/archive/2008/09/26/the-bush-pelosi-bailout.html
    [2] http://www.npr.org/templates/story/story.php?storyId=14682552

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