Terence Jeffrey / December 17, 2008

Parity for Autoworkers

The problem with the auto-industry bailout bill that President Bush and Democratic congressional leaders tried to push through last week is not that it would use taxpayer money to save U.S. automakers, but that it would use taxpayer money and not save U.S. automakers.

In the process, it would set a precedent for vastly increased government intervention in the economy that would make America less prosperous and less free for our children and our grandchildren, while only slightly delaying the ultimate day of reckoning for the automakers that it was ostensibly designed to save.

The strategic goal of the Democratic congressional leadership in bailing out the auto industry is not to save the auto industry per se. It is to save an auto industry that maintains fat union contracts while accepting new mandates from Washington to manufacture the sort of “environmentally friendly” cars liberal politicians would like to force Americans to buy.

In enumerating its “purposes,” the auto-industry bailout bill passed by the House put environmentalism almost at the top of the list, workers’ jobs and retirees’ benefits after that, and increased “manufacturing and sales” of U.S.-made automobiles last.

After listing restoring “liquidity and stability to the domestic automobile industry” as the first purpose of the bill, the text of the legislation goes on to specify that the second purpose is to do this “in a manner that – (A) results in a viable and competitive domestic automobile industry that minimizes adverse effects on the environment” and “(B) enhances the ability and the capacity of the domestic automobile industry to pursue timely and aggressive production of energy-efficient advanced technology vehicles. …”

The bill included no requirement that the United Autoworkers make concessions on their wages and benefits.

To accomplish its purposes, the bill directed the president to name a “designee” – the “car czar” – and gave the auto companies until March 31 to come up with restructuring plans that would be subject to the approval of the car czar.

Among the things the car czar would have been instructed to consider in deciding whether to approve the auto-company restructuring plans is whether he believed they resulted in a “product mix and cost structure that is competitive in the United States.”

In other words, the judgment of the government car czar was supposed to anticipate the judgment of the marketplace. And the car czar was supposed to do this while also keeping in mind Congress’ goals of minimizing “adverse effects on the environment” and “aggressive production of energy-efficient advanced technology vehicles.”

But what if American consumers did not want to buy the “energy-efficient advanced technology vehicles” Congress wants American automakers to make?

Perhaps we would then need a federal car-buyers’ czar to tell auto purchasers what they could purchase.

In a still-free market, the auto companies need to do three things: 1) Make cars people want to buy, 2) sell them at a price people want to pay and 3) keep overhead low enough to make a profit when they actually accomplish 1 and 2.

The bailout bill not only would have created a car czar who would advise the auto companies on what cars to make, but it also might have frozen in place some of the companies’ heaviest overhead: their labor costs.

When the bill that passed the House arrived in the Senate, Republican Sen. Bob Corker of Tennessee presented an alternative that would have dramatically reduced the automakers’ overhead and put them in position to compete again with foreign automakers. Two of its main components were: 1) getting the automakers’ creditors to reduce the automakers’ debt by two-thirds, and 2) getting the UAW to agree to accept wage and benefit “parity” with American workers employed by foreign automakers who manufacture cars here in the United States.

In the end, the UAW refused.

UAW members are not the only Americans at risk of losing their jobs today. But if the auto-industry bailout envisioned by the UAW comes to pass, Americans who make less money than UAW members do, or who take pay cuts to save their own jobs, or who later on lose their jobs in businesses Congress does not bailout, will be forced to temporarily subsidize inflated wages and benefits for members of a union that is sealing the doom of a great American industry.


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