The death of a bailout

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I am in receipt of an email yesterday, asking that conservatives and libertarians recognize that the unions have, indeed, made concessions in order to make the bailout work.  Sadly, I had not had time to write a post about this before the UAW tanked the Senate bailout.

The concessions that the UAW has made, as far as I am aware, are to accept some equity instead of cash for VEBA, the fund set aside to pay retiree costs.  Since if a bankruptcy occurs, those same workers are going to get told by a bankruptcy judge to get some damn Medicare like everyone else, or get in line with the other creditors, color me less than impressed.

I do think that liberals are right to point out that labor is far from Detroit's only problem.  The dealer network, for example, is a creaking dead weight around the industry's neck, protected by cozy state laws written by legistlators who like the prospect of extracting value for their own state from Michigan.  They have management problems.  They have bad engineering.  They have a crippling debt problem.

I think it's entirely fair to fire Rick Wagoner, but firing Rick Wagoner is a symbolic gesture; it is not going to make GM either more or less profitable unless you know where we can get some fantastic auto management talent that wants to lash itself to the mast of a sinking ship.  And all the other stakeholders have agreed to take massive hits.  The shareholders are taking cramdowns, the bondholders are taking a 2/3 haircut, and so forth.

What are the auto workers being asked to do?  Set a date for accepting wages comparable to those paid at other auto plants in America.  Now, we can argue about how much of a role labor costs play in the Big Three's problems.  But I think most people should be able to agree that a company on the verge of bankruptcy, which is losing a ton of money on every car it makes, cannot afford to pay its workers substantially more than the competition*, particularly when there is no indication that this labor is any more productive than the competition.

Gettlefinger, predictibly, is decrying this as "union busting".  But I don't really think there's anything particularly unreasonable about asking the UAW to accept a competitive wage while the company gets back on its feet.  No one's asking them to accept minimum wage here; the average compensation for a non-union auto worker in America is well north of $40 per hour.  And I think that there is, in fact, something particularly unreasonable in auto workers demanding that Americans, most of whom make less than either UAW workers or non-union auto workers, give up their hard-earned dollars to subsidize his members' wages.

I understand that it's his job to demand this.  But if it's his job to scuttle a very generous bailout that most Americans don't want in order to avoid making any concession at all on hourly wages, then as far as I'm concerned, it's his job to preside over the gutting of his contracts by a bankruptcy judge as America tells him and his workers to go to hell.


I know, there is some argument over how much more US auto workers actually get paid.  But if the wage differential is small, then the auto workers aren't really being asked to give up much, are they?

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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