As in almost every commercial enterprise, personnel costs are the largest single component for the automakers, and it is union demands which have escalated total compensation to absurd levels that have made American companies noncompetitive compared to their foreign rivals:
It is this perverse transfer of wealth from consumer to unionized workers that is the main cause for an ailing domestic auto industry, and a bailout only would compound the problem by allowing subsidization of this inefficiency. Fortunately, this bonanza at consumers’ and shareholders’ expenses partially was reined in by some reforms in the past couple of years, but too late to stave off these financial troubles.
In fact, in the current crisis provides a perfect opportunity to correct these wrongs. By declaring bankruptcy, the Big Three (likely with some different management) would have far greater latitude to do so. (Don’t forget that in declaring bankruptcy, it’s not like they’ll stop producing immediately: they’ll continue to make cars, even if slightly fewer – after all, Japanese manufacturing in the U.S. with its far lower compensation continues without major difficulties.) A bailout would do nothing more than transfer wealth from taxpayers to a privileged set of workers and prop up an diseased industry that will make its day of reckoning even more painful unless compensation is pegged at a realistic, sustainable level.
But that’s the entire point, isn’t it? With a new regime determined to “spread the wealth” coming to Washington that’s more interested in redistributing wealth to its allies such as unions and Democrat-run Michigan than in its creation for all, no doubt this bailout will occur in the early months of 2009, and the usual scapegoats will be blamed – society’s most productive people, for example. Naturally, the only thing that would be spread by this action would not be wealth, but economic malaise. Regardless, politicians like Glover need to quit chasing for votes and do the right and sensible thing instead by refusing to go along in recreation of the problems that got us to this juncture in the first place.