There’s an old story about a man who comes home and finds his wife in bed with his best friend. He pulls out a gun and points it to his own head. His wife starts laughing and he says, “Don’t laugh. You’re next”
The point is when we’re upset we sometimes take actions that we don’t think out properly.Casino Capitalism has crashed and when the Lords of Detroit come to Uncle Sam (by private jet) asking for another $25 billion people are understandably outraged. The gut reaction is, “Not another bailout. Let the S.O.B.’s go under.”
The problem is if Big Three auto go under there will be millions unemployed, quickly. The Center for Automotive Research estimates that if the three companies shut down 3,000,000 jobs will be lost in the first year. Three million!
Now forget for a moment about the devastating impact to the people thrown out of work. If this was 1998 and auto went down, it would be a nasty shock but the economy would recover. But now we’ve been staggered by a terrific slump in housing, a worldwide credit freeze, and a worldwide recession. To add to that mix a US Midwest collapsed into an industrial black hole is a recipe for turning recession into a Depression.
Some say if the Big Three goes bankrupt those terrible “lavish” labor contracts can be redone to make the companies competitive.
Let’s take a look at the contracts.
In 2008 General Motors, paid its production workers an average of $28 an hour. That would be a base of about $56,000 a year, based on a 2,000-hour work year. That’s scarcely a princely sum. Add to that $12,000 a year in health care premiums (because the backward USA doesn’t have national health care). That brings the cost to GM up to $34 dollars an hour. Add money set aside for pension and GM’s cost goes up to a final total of $41 an hour. (A recent retiree made $30,000 a year in pension. Nothing fantastic there, probably what retired teachers average.)
GM’s biggest burden is “legacy” costs, pension and health-care payment for retirees. GM has 2.5 retirees for one active worker. As Kevin Zeese has reported, “GM spends $5 billion annually on health care for 1.2 million people – only 150,000 of whom work for the company.” On this the United Auto Workers can be criticized, not for getting these benefits, but for thinking the auto workers could enjoy these benefits in isolation. Instead of turning into “realistic” Democrats, they should have stayed union militants and spearheaded a determined fight for single-payer national health care and better Social Security.
This year GM forced a lousy contract down the throats of the UAW. New hires pay the price. They’re going to get $14 an hour in base pay and get reduced benefits. They’ll be second class workers, indefinitely. Plus health care for retirees is being done in a new way. Instead of GM paying for you health insurance, GM will fork over a one time payment of money and thereafter the union would pay for health care from this fund (from which they have to depend on the stock market to keep healthy!) With this drastic cost cutting at the end of the new contract worker costs could be no more and perhaps less than the Asian car companies in the US.