Bust the union or the Midwest goes bust

By Fester:

The initial round of the car industry bridge financing and non-bankruptcy lending bail-out has failed.  It failed despite passing the House, despite having the support of both the current President and the next President, and despite having a majority in the Senate.  It failed because a determined minority wants to either bust the UAW on principal or bust the Midwest as a temper tantrum. 

From the AP:

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Bringing wages down to Southern levels won't do much for the car companies.  The best initial estimate is that busting the UAW contract which is already on track to bring union wages down to transplant wage levels by the end of the contract is that it would save less than $400 per car.  Legacy costs are where the action is on the labor side of the equation, but this is not a whole lot of money there either (another $400 to $600 per car).  And those legacy costs are in the short term fixed obligations for the Big-2.5. 

The big problem for the car industry right now is that it needs to sell about 40% more cars than it is currently selling to breakeven and cover its massive capital outlays.  Every mass market car maker has taken a massive kick in the sales junk that is widely distributed.  November sales crashed by 36% and the losses were spread among all brands and almost all makes.  Something systemic is happening and that is a crash in lending and credit availability and not a few hundred dollar per vehicle differential in direct wages or another few hundred dollars per vehicle in legacy costs/social wages of building a middle class. 

But the current negoatiting position of the Senate GOP is that the UAW either has to be busted OR the Midwest goes bust with 20% localized unemployment and significant social system disruption.  Fuck them, they did not vote Republican anyways.

Comments

[OldONE]

Let's bring in Non US Citizens on NB1 visa for CONGRESS an SENATE, This way they can be paid 85% cheaper wages and the tax payers be happier.

[Silver Owl]

Republicans had best figure out how they are going to make up for lost revenue by decreasing wages and elimnating pensions or their friends and contributors are going to out of business too.

[empty]

While your statement that the bailout had "the support of both the current President and the next President" is technically correct it is slightly misleading. Obama right now has enormous capital and if he had cared to vigorously campaign for this bailout I think it would have passed. He did not.