Auto bailout

[ciphergoth]

Auto industry: labour costs 10% or $1.7B, must cut worker salaries to receive $17B bailout.
Financial industry: labour costs 90% or $490B, can have $700B bailout no strings attached.

Bush Loans $17 Billion to the Auto Industry

President Bush brought down the wrath of a large piece of the Republican Party on himself for giving the big three car manufacturers a $17 billion stopgap loan. The loan has a condition in it that members of the United Auto Workers union give back wage and benefits that bring them into line with what the Japanese companies pay at their plants in the South. The Republicans objection is that this condition is not written into law and Barack Obama could easily eliminate it after January 20th.

It is increasingly clear that what southern Republicans really want is to break the back of the UAW (which habitually supports the Democratic Party). Thus while demanding lower wages and benefits as part of the $17 billion loan to the auto industry (where labor costs are 10% of total expenditures) is crucial to them, they didn't make a peep about lowering salaries as part of the $700 billion bailout of the banking industry (where labor costs are 70% of the total). In other words, the $1.7 billion worth of labor costs in the (unionized) auto industry is a big deal but the $490 billion worth of labor costs in the (nonunionized) financial industry is a nonissue.

-- Andrew Tanenbaum

Comments

[palmer1984.livejournal.com]

*anger*

[lizw.livejournal.com]

That's depressing :-(

[incy.livejournal.com]

of course the financial industry is shedding jobs left right and centre, where the auto industry bailout is to save all the jobs.

AAPL vs ORNG

[aidan-skinner.livejournal.com]

There are several crucial differences here:

1. The Auto bailout is in the form of short term loans, the financial bailout is largely in the form of the government taking equity in the companies.

2. The financial firms proportional labour costs are clearly not taking into account the cost of the capital required to operate.

3. The financial firms losses are not due to the high cost of labour in subset A compared to subset B.

4. The financial industry has already begun a process of laying off huge numbers of people, and is ruthless and competitive enough that the necessary restructuring is already occurring. In many ways, the current problems facing companies in obtaining loans commercially are a direct result of this restructuring. The TARP is being used to slow this down.

Both the Republicans who were blocking the deal and the Democrats who were pushing it are doing so for their own political interests. Neither is really helping to do much about the fundamental problem with the big 3: they make cars that too few people want at a unit cost that is too high.

Comparing it to it to the partial nationalisation of the financial services industry is just plain wrong headed. The issue is much more complicated than Republican Financiers Bad, Democrat Car Manufacturers Good.

On a different note, the UAW is a horrible example of unionisation gone wrong. It functions as a labour cartel, often in it's own interests and against those of it's workers. This is common across many American unions.

At least British union nutters like Bob Crow have a political ideology behind them. ;)

[ajva.livejournal.com]

I'm completely against the auto industry bailout - but then I was completely against the financial industry bailout too, so at least I'm consistent.

[jhg.livejournal.com]

Oh brilliant.

Do you think if I start up a business, take out loads of debt, and run it into the ground, the government will reward my idiocy with a massive payment?