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Detroit Bailout Roadblocks

Friday, December 12, 2008

Jeff Green, Detroit bureau chief for Bloomberg News, looks at the breakdown in the Detroit bailout negotiations.

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Jeff Green

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Comments [34]

granitejersey.com from Paterson NJ

dude, maybe its because the janiotrs make $50 an hour to sweep the floors in detriot. All in all the product turned out (american cars) will take decades to fix their tarnished reputation as pieces of junk.

Dec. 13 2008 05:31 PM
Voter from Brooklyn

Looks like we have a little something in common MC, my love was the early Barracuda… an offshoot of the Plymouth Valiant, cousin to the Dart.

Dec. 12 2008 02:27 PM
mc from Brooklyn

@ #20 Part II:
Re: Fiduciary responsibility, I agree that it is not a good idea to invest a pension fund to heavily in one area. I am a fiduciary -- I sit on a board of trustees on a Taft-Hartley fund that is divided equally between labor and management trustees. We have always invested mostly in bonds with no more than 25% in equities. Now we are completely divested of equities because we needed more liquidity and less risk. Whoever is taking care of the fund needs to have the interests of the fund at heart. If it is only being done by management there is a built in conflict of interest.

Dec. 12 2008 01:55 PM
mc from Brooklyn

Voter #20 way back when,
I agree that the American cars used to be good. My favorite was the Dodge Dart. I grew up with Ford Fairlanes one of which my brother drove back and forth from OH to Mexico and back several times after it had over 100,000 miles on it. He wore a hole in the floor; you could see the road underneath and still it ran. Now they are junk.

I see your point about the unions' deals, however, if someone is still able to have a defined benefit pension in this climate, I will rally behind him or her, not oppose the benefit. The unions are not innocent -- they are partially responsible for our health care crisis because they opposed what they called "socialized medicine" as recently as the 70's.

Dec. 12 2008 01:51 PM
Voter from Brooklyn

KC,
You feel Detroit is in breach of contract, or fulfilled their contractual duties in bad faith. I understand. Maybe they are just as bad at negotiating contracts as they are at making reliable cars. I don’t think the Big Three would have originated half the ideas in some of these contracts if workers didn’t want them. Tell me this… is it your contention that a contract is a contract is a contract and that, regardless of content, anything less than honoring it fully victimizes the UAW and its members?

Dec. 12 2008 01:19 PM
Voter from Brooklyn

KC,
I don’t disagree with your assessment of the Big Three at all. There’s nothing defensible about it. And guess what… Capitalism sucks sometimes and there are ALWAYS winners and losers in the game. It’s not pretty and good people get hurt. But you’re coddling these workers like they’re fresh out of Victorian era steel and textile mills.
Here’s more ammo for you… Wages have practically been flat since the ‘70s, healthcare and education continue to outpace inflation, top executive pay has skyrocketed from being tens to hundreds time the pay of the average worker, and people’s health and wellbeing has been tied to where they draw their paycheck. You act like the UAW didn’t know any of this. You act like the UAW didn’t make demands and stop working when demands weren’t met. You act like the UAW didn’t lobby for contractual agreements that were bad for business (even if they were good for labor). You act like the UAW was inherently owed something more than a honest day’s pay for an honest day’s work. (I believe in a greater good and social welfare, but that responsibility falls on governments shoulders and their abilities of regulation and taxation, not private industry) No one forced any of these people to go work for Chrysler, Ford, or GM. If Gettelfinger knows so much about how an international car company should be run, why hasn’t he formed his own? Why isn’t he the CEO of GM? I want to agree with you fully, but I can’t buy into this victimization.

Dec. 12 2008 01:09 PM
Kevin Sawyer from New Jersey

The Republican Senators blocking help to the automakers, at least on the surface, pretend to be blaming Detroit's woes on costs. Many I people I know do not buy American cars; however, it is not a price issue. It is usually a "quality" issue. What makes these guys believe that prices and worker wages have anything to do with declining sales?

Dec. 12 2008 12:42 PM
KC from NYC

"Do you think private corporations should be charged with insuring comfort in the post production lives of their workers?"

Um...if they signed legal documents guaranteeing they would do that, I'm going to say "yes."

Dec. 12 2008 12:41 PM
KC from NYC

Voter:

You got me. I give up. Those blue-collar jerks trying to carve decent lives from their companies' gigantic largesse deserve to have their retirements squandered. As you point out, they probably wouldn't have made good returns on that money themselves; probably would have just thrown it away in savings accounts or something--maybe beer; I've heard those neanderthals enjoy drinking beer.

Would it have occurred to them to buy Saab, a company with no strategic value to GM--covering a market they more or less already covered--and drive it into the ground? I think not! No more than it would have occurred to them to form a dummy corporation to buy up and destroy trolley lines in cities across America. To do stuff like that, you've got to be smart, and workers clearly aren't. Thank God they had the benevolent hand of upper management to set them straight. Tell me more about this little thing we call capitalism--how's that working out?

Dec. 12 2008 12:38 PM
Voter from Brooklyn

Maybe I did misread you KC, but what’s your point? Do you think private corporations should be charged with insuring comfort in the post production lives of their workers? Isn’t this the same proposition (along with healthcare) that has made the Big Three uncompetitive with the foreign makers located in the US (only in regards to labor… not their lousy product lines)?

Dec. 12 2008 12:28 PM
Voter from Brooklyn

Here’s a thought KC, I’d like your input. Is it possible the workers were asking for more than they were actually worth? That worker demands were unreasonable? Hmmm? $14/hour to push a broom all day hardly sounds like salve wages to me. Paying people to sit around all day and do nothing in some sort of twisted entitled legacy scheme? Contending that employers work for the employee and not vice versa? That some in labor felt they were entitled to retire in their mid to late 50’s, be taken care of for life, pay next to nothing for healthcare, be paid a wage allowing them a single family dwelling, two cars in the drive, and a boat on the lake for the weekends as their birthright is a bit galling. Make no mistake, the executives at all three in Detroit have failed their companies. That said, these people were in it for the companies… for the money… the glory… not the workers. It’s a little thing we call capitalism. This failure is not the workers fault, but workers we not blind to the risk of the system. The UAW is not a victim. They played the game, and they did it teeth and claws blaring.
(A concession is a concession only when something is lost, BTW, not when pie in the sky ideals are negotiated down to an alternate end.)

Dec. 12 2008 12:23 PM
KC from NYC

Voter:

"(KC, Detroit has absolutely nothing to do with US security)"

What are you talking about? When I wrote about privatizing Social Security, did you misread that as "National Security"?

You need to read a little more carefully before you try to respond.

Dec. 12 2008 12:14 PM
Voter from Brooklyn

No no no Mark Brown.
Yes, I agree it is sensible to take over the big three and sell them piecemeal to the highest bidders and recoup taxpayer dollars (maybe even profit from good ole Uncle Sam’s benevolence). However, it is not a good idea to try and transform Detroit into the businesses they destroyed in the ’40-‘50s. We have rail mills, we have train car manufactures, we have defense contractors, we have aerospace. (KC, Detroit has absolutely nothing to do with US security) We don’t need Detroit. All Detroit has done is waste money making cars no one wanted and defeating environmental legislation everyone needed. All parties involved (politicians, executive, and workers reaped inordinate profits ) thinking the party would never end. Now everyone is reaping what they’ve sewn. You’re proposing moving the mountain to Mohammed here. Workers will have to go to where these jobs are. Other than being a turn of the 19th century port, there isn’t anything so special about Detroit that we need to waste dollars trying to keep jobs there.

Dec. 12 2008 12:09 PM
KC from NYC

But the agreement was that the money would be invested responsibly. If they wielded that kind of power in negotiations, wouldn't they have just negotiated for higher salaries? It was a CONCESSION.

The UAW went in wanting higher salaries. They negotiated this deal, because the CEOs were not willing to give them those salaries. The UAW kept up their end of the bargain, and the CEOs didn't keep their end. How in the world is that the workers' fault?

Dec. 12 2008 12:00 PM
Voter from Brooklyn

MC, I agree with virtually everything you’ve said… I’ve never owned an American car--I’ve never owned a car--but my all-time favorite car is the one I grew up in; a 1960’s Plymouth that was built like a tank. Anyone with eyes can see that now American cars are pure crap. All sizzle and no steak.
Yes, the UAW did agree to painful concessions; however, I don’t really feel too much sympathy when unions with sweetheart deals start to realize how untenable those deals are in the current environment.
One could argue whether deals that allow someone to labor for 20-30 years then be taken care of for life (potentially another 20-40 years) were ever a good idea or whether social welfare was private industry’s direct responsibility to begin with.
My last post’s comment about Social Security was if you want any entity to have a fiduciary responsibility for investing worker dollars, it should be one with a public interest, not a private one. The big three may have been fools for thinking they’d make 9% a year, but workers were also fools for believing it. If they didn’t believe it, they would have kept what you’re calling their money and invested it on their own. I doubt more than a handful of employees would have outperformed the companies if in charge of their pensions individually.
In short... Their cars are crap, there execs are overpaid, the govt. was in their pocket, and all of this is coming to a head, but don’t you think victimizing the unions is a bit disingenuous? They had a very knowledgeable hand in this for at least the last 30 years.

Dec. 12 2008 11:41 AM
markBrown from sos-newdeal.blogspot.com and markbnj.blogspot.com

part 3

All together, the 11 points I first proposed almost two years ago, all interconnect, from the Education and job retraining (a USA only peace corp), to the living wages and full health care for everyone

See my blog

Dec. 12 2008 11:34 AM
KC from NYC

On the Social Security front, it was only a couple years ago that these very same CEOs were trying to privatize the ENTIRE THING. That's pretty damn mercenary; imagine if they had gotten away with it!

There's a pretty clear pattern here, and I don't see a point to defending people who are determined to undermine every American's most basic security.

Dec. 12 2008 11:32 AM
markBrown from sos-newdeal.blogspot.com and markbnj.blogspot.com


OK. (part2)
Rebuilding EVERY single Highway in the Eisenhower system with mass transit or light AND Heavy rail systems (similar to the way the train was shoehorned on the VanWyck)
Will allow us to rethink commuting in the future, and allow TRUCKS to just go ON the train at the highway, and get off train at end of their stop.

THIS will Require bIllions and billions more, however it will ALSO include millions of new jobs, and require a MAJOR job retraining program, as well as a LIVING wage, and other stuff.

specifically, see: here
http://sos-newdeal.blogspot.com/2008/11/next-prediction-save-car-companies.html

Dec. 12 2008 11:30 AM
markBrown from sos-newdeal.blogspot.com and markbnj.blogspot.com

OK. (part1)

Here's the deal. the US auto industy needs to be declared brain-dead. Just like a human who is brain dead, the bodies of the big 3 detroit can be harvested for parts.
We CANNOT let the major part of the usa's manufacturing capacity die. Therefore, we need to help retool, rethink, and DEMAND that GM/Ford/Chrysler become TRANSPORTATION companies.

They WILL be green. They WILL rebuid the nation's mass transit systems. IE, they will start to rebuild the light rail (and Heavy rail) systems they put out of business in the 1930's and 1940's.
See my blog at sos-newdeal.blogspot.com

Dec. 12 2008 11:28 AM
markBrown from sos-newdeal.blogspot.com and markbnj.blogspot.com

OK. (part1)

Here's the deal. the US auto industy needs to be declared brain-dead. Just like a human who is brain dead, the bodies of the big 3 detroit can be harvested for parts.
We CANNOT let the major part of the usa's manufacturing capacity die. Therefore, we need to help retool, rethink, and DEMAND that GM/Ford/Chrysler become TRANSPORTATION companies.

They WILL be green. They WILL rebuid the nation's mass transit systems. IE, they will start to rebuild the light rail (and Heavy rail) systems they put out of business in the 1930's and 1940's.
See my blog at sos-newdeal.blogspot.com

Dec. 12 2008 11:28 AM
mc from Brooklyn

Voter:
"Social Security" are you implying something or asking something?

I agree with much of what you way about the unions and the management being tangled up, but the pattern generally is that when things are going well, the management wants to keep the share that the workers get on a fairly even, maybe even flat curve. But when the going gets tough the first place they turn to for relief is the workers. If the mangement expects to get most of the windfall from profits, they should be willing to take most of the risk.

Dec. 12 2008 11:17 AM
KC from NYC

Yeah, I agree: management wanted their own little version of Social Security that they could use for their own means, without having to give that money to the government. What's your point?

No matter how they invested the workers' money, estimating a 9% return was clearly unrealistic. Surely they knew that return wasn't going to happen, and they wouldn't have the money to pay workers the amount they were owed (again, this was always the workers' money that was getting played with). Is that not bad faith at the very least, and more likely fraud?

Dec. 12 2008 11:16 AM
Voter from Brooklyn

Yes, promises we made KC, but look at it this way. Unions were formed, in part, because of flagrantly appalling worker abuse. (a wholesale lack of humanity) Once workers were treated something akin to human and not like pack animals, workers started asking why the bigwigs in their comfy chairs should be making all the money on the backs of the laborers in there getting their hands dirty. The labor force wanted in; they wanted to be taken care of (for life), they wanted a share of the profits, and they wanted a say in how the company was run. You say the execs invested worker dollars in the company to bolster value, others may say the CEOs invested worker dollars in the company to show their faith in the productivity of the work force carrying their ideas to fruition. Either way, the unions tangled up their future in the future of the company. United they stand, united they fall. As for responsible investing of payroll deductions…. Social Security?

Dec. 12 2008 11:05 AM
mc from Brooklyn

Voter:
I agree with your assessment of the Repubs using this as a way to weaken the unions. I think you are being a little unfair to the UAW. They did agree to a pay cut to the level of non-union workers at foreign car companies. They wanted to get tho that level by the time their contract expires in '11, the Repubs insisted on '09. As far as I know they are the only part of this deal agreeing to take a pay cut. There was a pretty good analysis of this in the NY Times on Tuesday I think it was, by David Leonhardt. Apparently, labor accounts for just 10% of the cost of making a vehicle. Much of the labor cost is benefits for retirees who, as KC pointed out above, agreed to concessions in exchange for the promise of these benefits. The big problem with these companies is that their products suck. I got burned by a Saturn (the one that was supposed to be different) that fell apart with 40,000 miles on it. I'll never buy another American-made car.

Dec. 12 2008 10:57 AM
KC from NYC

But management made a deal with the "drones," and now, since they defrauded them by NOT responsibly investing the portion of those paychecks which they were legally obliged to invest, they and the government who let it happen are attempting fraud on a massive scale. I agree that this desire to keep bad cars on the road out of some misguided pseudo-patriotism is pointless and counter to the very capitalistic principles that these CEOs used to love. But still: fraud is fraud.

Dec. 12 2008 10:42 AM
Voter from Brooklyn

Well, Leslie, no one is forcing the UAW workers to take pay cuts. The (Republican driven) deal fell apart on timeline of parity and the UAW said no. They keep their salary. (The UAW chose having no job in the near future over having a job with a lower salary) As for upper management, all of this talk about top executives working for a dollar a year like they’re either wealthy politicians trying to prove they are above the influence of money or are working for a non-profit is just pure silly. If you want the top executives to work for a dollar, then every salaried and wage employee should as well. Everyone wouldn’t be working for self enrichment, but for the greater good of having American made vehicles on American streets. I support neither the UAW nor the big three, but you’re missing one fundamental here. These are corporations in a capitalistic society. Their only function is to enrich the owners and investors, not the drones or the public. Perhaps they should be forced to fail spectacularly, but not because of their failure to protect the little guy; that’s not their job and that’s not capitalism.

Dec. 12 2008 10:35 AM
Joe Corrao from Brooklyn

I believe all 3 ceos have taken the old dollar a yhear salary...but they may have bonus clauses that are seperate....but as Peter Schiff said at a dollar a year they are overpaid....

Dec. 12 2008 10:28 AM
leslie freudenheim from nyc

Why isn't Congress forcing the Management of the big three automakers to take huge salary cuts just as they are forcing the UAW workers to take cuts?

Salaries of managers of American automakers should be less than those paid by Toyota and Honda because American managers have driven their companies to bankruptcy by poor leadership, blocking legislation requiring more miles per gallon for cars, trying to stop CA from legislating for better cars, and producing poor cars that constantly need repair and get poor miles per gallon. This management should be forced out or at a minimum paid much less.

Dec. 12 2008 10:22 AM
KC from NYC

Beginning in the 1950s, the car companies made a deal with their workers: the workers would be paid less in exchange for having some of their wages withheld and invested until their retirement. That money belongs to those workers.

What actually happened, though, is that management invested that money in their own companies, thus driving up their "value" and allowing them to take over other companies that didn't use this creative bookkeeping (Saab, Volvo). The accountants at GM estimated returns of around 9% on those investments. This was a fantasy and a fraud, and the government looked the other way. Now they are trying to wash their hands of this crime by forcing these companies into bankruptcy, thereby allowing them to default on the money they owe their workers. Why is no one reporting this?

Dec. 12 2008 10:20 AM
Voter from Brooklyn

I’m no fan of the unions in their current state but am I the only one that sees Republican opposition to this plan and how the deal fell apart as a planned future vote grab and plot to weaken the unions?

Dec. 12 2008 10:19 AM
Joe Corrao from Brooklyn

We are just getting moving down the slippery slope people. When will it end? What is the next business that ask for a bailout that we pay with freshly printed fiat cash? It is the end of America. It is NO LONGER about hard work and earning your keep, we look to BIG government to help us out like spoiled children. We need to start (or go back to) taking responsiblity for out own lives...ain't no messiah elected or other wise gonna save us.

Dec. 12 2008 10:17 AM
O from Forest Hills

Why did we need to bailout banks and not the auto workers?

We shouldn't bail out either!

Dec. 12 2008 10:13 AM
O from Forest Hills

There is life after bankruptcy, especially for a business.

If you can't afford to pay a living wage, you have no business doing business in this country!

Dec. 12 2008 10:12 AM
Maggie from Brooklyn

Can someone please explain why bank workers weren't made to take a pay cut as part of their bailout?

Dec. 12 2008 10:11 AM

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