12-19-08 by dugan
Do I have this right? A giant financial/insurance company, AIG, gets two taxpayer bailouts
totaling $150 billion, no strings attached, which does zero to help
distressed homeowners or the frozen credit markets. Then today, the
White House grudgingly agrees to an auto industry bailout of barely
over one-tenth what AIG got (and that it could have announced weeks
ago), bristling with conditions,
big sticks and union-busting pay, benefit and job cuts. Better this
bailout than no bailout, and the auto CEOS didn’t help themselves by
originally acting so entitled before Congress. But the grudging comments today
by President Bush make it clear that he didn’t care about a few hundred
thousand auto industry jobs–only the larger effect of an industry
collapse on the economy.
From the L.A. Times story:
"There is too great a risk that bankruptcy now would
lead to a disorderly collapse of the auto companies," Bush said. "My
economic advisors believe that would deal an unacceptably painful blow
to hardworking Americans far beyond the auto industry . . . and send
our suffering economy into a deeper and longer recession."The plan announced by the White House is similar to one
crafted with Congressional Democratic leaders but blocked largely by
strong opposition by Republican lawmakers who argued that bankruptcy
was the only way to force the U.S. auto companies to make major
changes."In an ordinary economic circumstances, I would say this
is the price failed companies must pay and I would not favor
intervening to prevent the automakers from going out of business," Bush
said. "But these are not ordinary circumstances. In the midst of a
financial crisis and a recession, allowing the U.S. auto industry to
collapse is not a responsible course of action."
The Wall Street Journal’s analysis (subscription) lays out the breadth of worker givebacks:
Included in the targets are wage changes and other concessions the United Auto Workers union has fought against.
The agreement calls for union wages and so-called work rules identical
to those offered to the U.S. workers of foreign-based auto makers such
as Toyota Motor Corp. The UAW has argued that, in accepting a two-tier
wage structure as part of last year’s labor deal, its wages already are
consistent with Toyota’s. Work rules — which govern vacation time,
break time, job classifications and the conditions under which a
company can bring non-union contract workers into plans for
non-automotive work — remain a discrepancy between Detroit’s auto
makers and their non-unionized rivals.In another blow to the UAW, the aid package calls for
accepting half of the companies’ payments into a massive retiree trust
fund in the form of stock rather than cash. The UAW didn’t want the
risk of stock payments to fund medical benefits for hundreds of
thousands of retirees.
The story doesn’t note that the trust fund itself was a previous concession by the UAW
to take the burden of spiraling retiree benefits off the books of the
industry itself and have the union and retirees shoulder more risk. Or
that the government, including Congress and the White House,
enabled the U.S. industry to keep depending on bloated SUV and truck
profits by spurning higher mileage requirements for a decade. Or that the oil industry lobbied as hard as the auto industry to keep gas-guzzlers pouring onto the road.
From the Christian Science Monitor in a December 2007 story about battles over mileage standards in the latest federal energy bill:
Oil industry officials said the impact of the House bill would have harmed energy supplies.
"Our country’s energy focus should be on securing American energy
supply, not discouraging future American energy production," said Barry
Russell, president of the Independent Petroleum Association of America,
in a statement. "Unfortunately the House energy bill sends the wrong –
and potentially harmful – message."
Everybody gets some blame in this debacle, but the nose-holding
reluctance of the White House to make a bailout deal, after years of
helping block any new curbs on gas mileage, deserves special scorn.