Let Detroit Go Bankrupt | Hacker News Reader

Let Detroit Go Bankrupt

nytimes.com

158 pointschaostheory188 comments

The entire time I read this article I found myself nodding in an agreement. I found myself doing the exact opposite during Romney's campaign.

As a Detroit native - and this is hard to write - the car bailout should not happen. GM, Chrysler & Ford are currently nothing more than welfare vehicles. Lots of people will go bankrupt and lose their jobs (my Dad already has), firms will die and Detroit will be in absolutely awful shape. But right now they're just prolonging the inevitable and wasting taxpayer money.

Romney has a proven record of turning around sinking ships. Both the Bain Company and the 2002 Winter Olympics were in bad shape when he took the reins in 1990 and 1999 respectively. He fixed both of them and remade them into viable ventures. I'm quite apt to take his word when he says a managed bankruptcy is the best option for the US auto industry.

and one wonders why bankruptcy is suitable for any other company in america, including airlines that have gone in and out of bankruptcy numerous times over the years...yet this same option is not permissible for the big3?

this is exactly why ch.11 exists - to allow freedom to restructure

A big 3 bankruptcy will be bad for auto workers, since the bankruptcy judge will rewrite their contracts. Since they currently get way above market rate, the judge will probably give them a pay cut, and authorize the layoff of many (1).

Take a look at which politicians support the bailout. Then take a look at which politicians get UAW money:

http://www.opensecrets.org/orgs/summary.php?id=D000000070

Coincidence?

(1) Due to union contracts, the big3 are unable to lay off workers as a normal company would do.

A big 3 bankruptcy will be bad for auto workers

yes, i think that is understood. they're going to live in the real world one way or another

get them out of the big 3 and they can find work that the economy values. will they find it soon? no, but then again maybe trying to compete in the global economy with a high school education wasn't such a bright idea after all

this is just about a huge chunk of our economy that has been living in the 70s finally forced to join the rest of us

As I understand it, the big 3 are saying they _can't_ file for chapter 11 bankruptcy due to the current lending climate. They argue that since the financing climate is so harsh, no one will finance them while they restructure, thus forcing them into a chapter 7 bankruptcy-effectively causing a fire sale of the company and its assets.

Sounds like Romney is advocating a "managed bankruptcy" where the government would facilitate a chpt11 bailout of the Big 3. Republicans want to avoid supporting an all out bailout whereas Democrats want help "main street" by helping the Big 3 avoid big-bad-bankruptcy. Obviously there is a lot of word wrangling going on in politics but it seems like this would be a good solution if it is communicated well.

Technically, this is called debtor in possession financing. The DIP financing agent has a higher priority than existing debtors and bondholders when it comes to getting a payout after restructuring.

Airlines have other vehicles protecting them.

For example, Qantas (the Australian Airline) is one of the few airlines to have made a good profit consistently. This is mostly because they have the US/Australia route all to themselves. The US counterpart hasn't been highly functional for a while & no one else was allowed in.

If United had gotten back onto it's feet at some point, they would have only had to face Qantas, who had themselves gotten cushy.

The auto market will not save them their seats.

Romney has a proven record of turning around sinking ships.

Was that a deliberately mixed metaphor? Turn around a sinking ship and all you get is a wreck which faces in the other direction.

That's so funny I had to tell you. I'm sorry ;)

He must have been thinking of his business track record and his presidential campaign at the same time. :)

What does Romney stand to gain if the big three go into a "controlled bankruptcy"/government take over? If they fire all the executives at those companies as he suggests, will Bain Consulting make a lot of money guiding the automakers through a restructuring? I don't want to sound conspiratorial but it is convenient that he's publically expressing opinions like this while closely tied to a company that does business consulting.

"At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat."

Unions will not take management seriously until this happens.

However, I also don't understand how people who constantly argue that U.S. wages must continually fall for the sake of corporate competitiveness think that the U.S. won't collapse without some kind of middle class. And if this seems hyperbolic, please consider the effect of inflation, rotating asset bubbles, decreases in health care affordability, and rising unemployment. Without some kind of wage growth above inflation, I don't see how a real middle class can survive. Perhaps there are specifics in this case that warrant some reductions, but it seems to be the same argument any time an industry gets into some kind of management induced trauma.

Without some kind of wage growth above inflation

The key is keeping inflation down. Run a sound monetary policy and keep a constant stream of productivity improvements in all sectors, so that the purchasing power of a dollar continually improves.

And recently today the heads of GM and Ford both refused to take a one dollar annual salary as Lee Iacocca did when Chrysler was bailed out in the 80's. So I really don't see top management in either Ford or GM to do anything to symbolize sacrifice.

It is probably just that, though, a symbolic sacrifice, not a real sacrifice? I suppose they still get their stock options, boni and what not.

I think its more than a symbol. They would probably still get a lot money, but at least it would be mainly based on stock price/performance.

All that talk about unions misses one much more systemic point. It's that linking social benefits to individual employment relationships is a bad idea. It creates dependencies that make the system inflexible. It reduces worker mobility. It creates long term obligations that individual companies, not matter how large, can never garantee.

It's a paternalistic model that puts companies in the position of families or states that care for people based not on merit but on human needs and dignity. Both are important but mixing them creates a conflict of interest.

Money is flexible. Use money to pay people for work. Not health plans and pensions, not stock options, just money and people can go and buy all of the former. Keep things simple.

Yeah, this is one of the arguments for universal healthcare and government-managed retirement benefits.

Didn't notice that it was written by Mitt Romney. Interesting twist.

A great pitch to become the new car czar.

The last thing America needs is another federal "czar," especially for specific product sectors. The Soviets lost, remember?

But they won against the Czars.

Did they? How would you describe Putin?

I agree, the big three automakers should fail. They produce cars that people won't buy and are overpriced, and unlike the financial industry, they aren't too big to go bankrupt. I also don't see that they have a viable plan to turn the company around. In the recent congressional hearings, GM blamed their troubles on the financial crisis.

Policy? Check. Romney? Check. Politics.

http://voxeu.org/index.php?q=node/2574 is the best take on it that I've seen so far, though, if we really have to go there (we don't).

Great read - thanks for sharing. It's probably the best take I've read to date. The real question is: who can make it happen?

After getting robbed by a band of thieves you know what's really important to talk about? How you think the thieves should divide up your stuff.

The biggest problem with the detroit automakers is their high pension and medical cost burden. People are living far longer now than they were predicted to when the pension deals were struck in 1951. The Detroit automakers have an unbearable burden when compared to foreign car makers. This drives up their prices and effects all of the business decisions that they make.

The management at the big three auto companies hasn't been very brilliant or innovative, but I bet they've done just about as well as the management teams at comparably sized companies. Firing all of them would probably just cause a lot of chaos and waste decades of learning and experience.

This financial problems they are facing have more to do with the credit crisis than making the wrong kind of cars. There is this insinuation in that media that if Ford had just made more eco-friendly cars then everything would be ok. There is still plenty of demand for american cars and trucks (especially in the american south). It seems like they just need some time and money to re-negotiate things with the unions and this can be worked out.

Why didn't he talk like this on the campaign trail? If he'd done that instead of trying to fist bump every black guy he saw while yelling "who let the dogs out" he could have been the nominee.

He gave plenty of economically motivated speeches, both on the campaign trail and while he was governor. The media just covers the fist bumps.

Romney's father turned around a failing auto company. Romney has turned around a ton of failing companies. I think I would take his advice on this one!

http://www.npr.org/news/specials/gmvstoyota/ GM's problem is that it costs them money to make a car.

Profitability per Vehicle Source: 2005 Harbour Report GM: Loses $2,331 per vehicle Toyota: Makes $1,488 per vehicle

If GM continues to lose money on each vehicle sold, how wil a bailout help in any way?

That figure is meaningless, it is amortizing the total operational cost of GM over each vehicle sale, when the total operational cost of GM is not directly proportional to number of cars sold- not by a long shot. The article is falsely portraying that as the average sale price per unit minus marginal cost per car, which it is not.

One thing that isn't mentioned here is the begger-my-neigborness of all this.

These same companies lobby multiple governments for grants & incentives to operate locally via their local subsidiaries. Then when they get it they lobby another govenrment citing that they cannot be expected to compete at a disadvantage to their sister/paretn company.

I see that GM paid out a dividend of $0.25 per common share just a few months ago on 05/14/2008. The problems were well underway by then, yet they chose to piss away about $140MM in cash. That alone should disqualify them for a bailout, at least as long as the current management and board remains in place.

http://finance.yahoo.com/q/hp?s=GM&a=04&b=14&c=2...

At least Ford had the common sense to cut off dividends in 2006.

This coming from the NY Times... They better take a look in the mirror.

I don't follow- what do you mean?

Presumably, he mean that the NYT is a floundering company which has been devastated by a refusal to adapt to new business realities over the last decade.

5 years ago their stock was trading at $47. Now it is at $6.

http://finance.google.com/finance?q=NYSE:NYT

(For what it's worth, if they collapse I wouldn't bail them out, either.)

Exactly, you made that perfectly clear.

the difference is that there are known solutions for automakers (more efficient cars, using japaneese production systems etc.) whereas there isn't one for print media companies

the nytimes isn't asking the government to deliver their papers.

yet.

I think a more likely result is the dissolving of their print publication or converting to a once per week format. Could you imagine telling someone this fifteen years ago? Crazy.

The bottom line, if Detroit wants money it needs to justify why it's not just going to sink it into the same failed structure it currently has.

Mitt makes some excellent points, it's not that we shouldn't support this industry, we should just do it with consideration and some sensible caveats.

Personally this argument goes for Wall Street as well. Not that it's something Mr Paulson seems to understand.

One detail I don't remember seeing in the Op-Ed piece was health care differences between countries. In the countries our auto companies compete against, I believe all of them have health care at the national level. Right there, you have a major cost businesses in the US are absorbing.

In both Japan and Germany, health care is mandated by the government but paid for by the employer. See e.g. http://www.nchc.org/facts/Japan.pdf

Thanks for the link. I read the one on Germany as well.

It seems more like a combination of employer and employee payment with the governments being involved as a single payer system - in the case of Germany.

I think we should allow the car companies to form a union. They can collectively agree that unless every single auto worker accepts $10/hour and no benefits, they all fire everybody. It would be very interesting to see how this works out.

Who benefits from this scenario? Between the American people, car company execs, auto workers, and the government, this is a lose-lose-lose-lose plan.

Not if you are a professional negotiator or a lawyer. This would be full employment for lawyers.

Since workers don't have the right to perform secondary strikes, why should automakers?

If employee A has a grievance and employees B-Z strike, how's that any different?

Yeah, let them, if for anything the nonsense they pulled with this: http://en.wikipedia.org/wiki/Who_killed_the_electric_car

It baffles me that we'd blow 700 billion bailing out financial institutions that caused our economic problems. Money that's now going towards bonuses and acquisitions instead of buying "toxic assets" as originally intended. Toxic assets that were created by these same wall street companies.

As we save the companies that crippled the credit markets, we have no interest in spending a fraction of that same amount of money helping the companies most negatively effected by the condition of those same credit markets.

I'm sorry, but I don't see anyone buying a car from a manufacturer in bankruptcy. I think bankruptcy will be the end of the American auto manufacturers. The resulting damage will dwarf the 25 billion a bailout would cost.

are you trying to tell me that gm is simply a victim of the credit crisis???

why would a bank loan them money now?? aren't we all about responsible lending now?? lending money to gm is the corporate equivalent of a subprime loan. we don't want banks making subprime loans anymore.

Yes. How do people buy cars? On credit. Harder to get credit means fewer people capable of buying cars. A bad economy means fewer people buying cars. GM et al, did not create the credit crisis. They did not create the bad economic conditions.

But we want them, and more importantly, all the people working in that industry to suffer? Honestly, I can't imagine how letting them fail won't cause more than 25 billion in economic damage.

You think giving them $25 billion is going to be the end of it? They'll just be out of cash again in 6 months, asking for another bailout.

They build cars nobody wants anymore, credit or no credit.

GM is still #2 in sales worldwide.

Then why do they have a problem?

Financial wing GMAC got killed by subprime, the credit crunch, gas prices... all that on top of lagging sales. Sure, some of that perfect storm is their own fault. But, it's not as simple as "their cars suck" and "the workers make too much money".

If everyone pays for the things that are not their own fault, then the playing field is leveled. Then the things that are their own fault come into play, and those parties who were hit by the common problems AND their own problems will suffer more than those who didn't have their own problems (or had smaller self inflicted problems). Seems this is the way it should be.

Well if gas prices and credit crunch lead to people shunning big cars, then GM builds the wrong type of cars. I don't think you can blame the gas price on an evil conspiracy.

Then they are even LESS deserving of a bailout, no?

GM did create part of the credit crisis. DiTech.com. Its primary business was the variable-rate (aka "teaser rate") ARMs and home equity re-financing. In short, GM put a sizable amount of cash into the sub-prime loan market, and got burned just like everyone else.

David brooks explained the difference really well. The bailout of wall st. Was a bailout of the entire financial system. If it didn't happen comapnies would not be able to borrow any money. Forget who it's from. If we don't bail out the big three we will all still be able to buy tons of different kinds of cars. (Can't send link from iPhone)

Small businesses were affected by the financial crisis more than people realize. Businesses with long sales cycles (e.g. media companies, advertising companies) often use commercial paper to finance their short term recurring financial expenses (payroll expenses, rent, etc).

No bailout, no commercial paper, no paycheck.

I'd rather bailout GM and Ford, who are not just hurting because of bad business decisions but also because of the credit crunch and high gas prices then, say, Bear Stearns.

This might sound crass, but companies who knowingly and actively pay people to do nothing on a perpetual basis deserve to die:

http://www.detnews.com/2005/autosinsider/0510/17/A01-351179....

Ok, but how about the hundreds of small businesses and suppliers that depend on the Big 3 for work?

In short; they're in trouble. That's why you should never ever put all your eggs in one basket.

As I noted in this post:

http://news.ycombinator.com/item?id=369994

my family has already been hurt by this. My Dad was laid off, my Grandpa was forced in to retirement. My other Grandpa lost his job. One of my Uncles who did supplies sales was laid off. Only one of the above actually worked at one of the US car companies - the rest were part of the supplies/small businesses.

smart businesses (especially small ones) change and adapt. if not they fail. why subsidize bad practices and decisions?

The aim of government is not to support businesses but to support the citizenry. The relevant question is not whether businesses will be better off, it's whether people will be better off.

They'll be better off in the long run. Let GM, etc fail, and get rid of the crippling unions. Then come back with normal hiring practices and they'll buy from suppliers again.

What about the hundreds of small businesses and startups that are paying the taxes to subsidize the Detroit Three's failure?

forgot to mention this but most of the Big 3's parts aren't even American:

http://www.cato-at-liberty.org/2008/11/18/what-is-an-america...

Not to mention:

"Cars.com found only four cars and six light trucks with a domestic content (meaning US or Canadian) above 75%. That list includes the Toyota Tundra and Sienna and the Honda Odyssey. Other Honda’s have a 60-70% domestic content, barely missing the cut"

We can probably all agree that's it's silly to require that workers play dress-up and come to a non-existent job every morning.

But, assuming that requirement were dropped, you haven't exactly explained why it was wrong of the workers to ask for a piece of the (extraordinarily high [0]) earnings the company enjoyed at that time, or why it was wrong of the company to pay it.

Am I wrong to assume that the company thought it to be the best terms they could negotiate at that time? What should the union have done? Accept less than they could negotiate for? What should the company have done? Insist on more favorable terms even if the cost of a protracted labor dispute were actually more expensive?

I keep hearing people refer to outcomes that appear to be the natural result of difficult negotiations in strictly moral terms. This seems silly. Help me understand why I'm wrong.

[0] http://www.mlive.com/business/index.ssf/2008/09/a_brief_hist...

That's a strawman; I never said it was wrong to ask.

Anyways...

The company should have invested more of their marketing budget in R&D and produced quality cars. Empirically (consumer reports, Car & Driver, et al) U.S. cars have been subpar compared to their foreign counterparts for many years. Though some of my friends & family insist they're rapidly catching up nowadays. In the present, I don't know one way or the other.

In the States' current system, the company doesn't have any obligation to share high earnings with their employees. They have an obligation to deliver profits to shareholders - that's it. If the employees don't like it, they can get another job that pays them market wages or treats them better. In short, that's the best part & worst part of the system. Paying employees above market wages is not sustainable.

In the short term, companies can unfortunately deliver profits to their shareholders with shady tactics, breaking the law, gray area revenue recognition, poor employee treatment and "earnings management". In the long-term, that doesn't work and is stupid. And many times it's against the law.

It's not a coincidence that the companies that treat their employees the best outperform the market. [1]

[1] http://www.greatplacetowork.com/great/graphs.php

"The company doesn't have any obligation to share high earnings with their employee. "

I never suggested that they do. In fact, I think I rather explicitly argued that they paid those wages because it was the best deal they could negotiate at the time. If they could have negotiated a better deal, they would have.

More generally, if I agree to do a certain amount of work for a certain pay, it does not imply that I deserve that pay (whatever that means). But surely it means that the person paying me thinks that wage (considering the alternatives) to be in their best interest.

"If they don't like it, they can get another job that pays them market wages or treats them better."

Or collectively negotiate better wages?

Right, but you asked why they didn't. If they collectively negotiate above market wages the company will die in the long term.

It's not a coincidence, indeed, it is a logical inevitability: it is far easier to treat your employees well if your company is successful.

But it's also true that happy workers are more productive, healthier, less likely to quit, and thus will make the company more successful.

What should the union have done? Accept less than they could negotiate for?

Sometimes it makes sense to accept less than you can negotiate for: (a) you don't want to kill the goose laying the golden eggs and (b) that overly hard negotiation can mean you're walking around with an "Outsource Me" target on your back. Get what you want when you can get it, but remain aware of the consequences.

Can we just buy Honda out and give them GM?

They just canceled the bailout vote, so it looks like Bush will make the decision now.

This seems like some common sense...

cant they just get some magic beans instead?

one must ask why a waitress at denny's who makes minimum wage and has no healthcare must bail out union workers at gm who make 8x the wages, do less work, have ZERO DEDUCTABLE healthcare (do you? i doubt it), and full pensions.

or why should a succesful worker at honda in ohio subsidize not only a failed competitor, but in essence have his own taxation used to undermine his own hard work?

as for saving jobs and investment...most of the suppliers are already on death's door if they only rely on orders from detroit. investors have already lost 95% of their money on avg...nothing can reverse these losses

in the end the govt cannot give the big three their reputations back. lost reputation is why people do not choose these cars even though they are now comparable in quality. barak obama cannot force me to buy a buick

This post smacks of jealousy. What is wrong with zero deductible healthcare? I don't fault someone for trying to climb society's ladder. I want everyone in America to be able to earn a living wage.

Being in a union doesn't make one lazy or overpaid. How do you over pay someone anyway? Who deems what a job is worth to society?

It is very unfortunate that the big three made the agreements they did, but they made them. They should be allowed to fail. All this talk of a bailout just furthers the crisis. When things start to look more desperate, the UAW will renegotiate. If they don't, the organization will cease to exist.

What I worry about are all those retirees who depend on the pensions they were promised.

Person A, a waitress at Dennys, making about $8-10/hour with high deductible health care.

Person B, an auto worker at GM, making $30-40/hour with zero deductible health care.

[edit: see response to this post, auto worker gets $73/hour.]

The bailout: tax person A in order to help person B, with 3 large corporations taking a cut of the proceeds. Does this make any sense?

Incidentally, the original poster did not describe union workers as either lazy or overpaid.

[edit: forgot to mention, it's actually very likely that the waitress does not pay taxes at all. So more realistically, the waitress should be replaced by someone in the $20/hour neighborhood.]

The problem is that person A doesn't pay any taxes. You're certainly taxing some people to pay for it, but it's not person A.

Also, the idea behind bailouts like this is that they are a loan. Ideally the government is profiting from this sort of thing, especially when you consider the overall economic impact of laying off thousands of GM employees, or allowing thousands of pensions to swirl down the drain.

I'm against the bailout, but it's overly simplistic and entirely useless (not to mention just plain incorrect) to say that it's morally wrong because someone at Denny's doesn't have health care.

Heh, I noticed that (and edited my post to reflect it), apparently while you were writing your post.

However, there are plenty of people who make less money than auto workers who do pay taxes. One reason the bailout is morally wrong is that it is a regressive tax. It takes from the (relatively) poor and gives to the (relatively) rich.

Well, a very high % of taxes come from either businesses or people who make more than the average GM worker. Plus a $25 billion dollar loan to GM isn't the same thing, from the taxpayers perspective, as giving them $25 billion. Presumably it will be paid back with interest. Of course, it won't get as much interest as people could earn investing their own money in the private sector, or they'd all be buying GM bonds already, but the actual loss is orders of magnitude less than $25 billion.

I don't think there's a lot of moral hazard there in terms of taking from the poor and giving to GM workers. The real issue is whether it's better for everyone involved than just allowing them to restructure in bankruptcy. I can't see how the answer to that could be yes.

Why do you think GM will survive long enough to pay us back?

I don't unless the loan comes with conditions ensuring that, which is why I'm against it. I'm just pointing out that the issue isn't as simple as its being made to sound.

Are you saying that it is morally wrong to take money from relatively rich people to give to relatively poor, but not the other way around? I think any (Government) wealth redistribution is morally wrong, but that's just my 2 cents!

Government cannot exist without redistributing wealth. You've been listening to too many Palin rallies.

Every time a government changes tax rates, wealth gets redistributed. Every time it builds a school or a road, wealth is redistributed. Every economic policy redistributes wealth.

I hope the I just redistributed your 2 cents :)

I think that he means explicit wealth redistribution. If government uses your tax money to to finance the police system, sure it is moving wealth around, but a healthy police is necessary for a free society and functioning economy, so in the end, everyone benefits. This is different from just taking from one group and giving to another.

Well, if the government takes some tax money and uses that to prop up an industry that directly or indirectly employs 6 million people, that too helps everyone. Those people while employed buy things, pay taxes, don't create an oversupply of workers that lowers wages for everyone, etc.

It's not as cut and dry as some Robinhoodesque vision of taking taxes from some and giving to another, which McCain and Palin wanted you to believe. It's quite possible that the $25 billion loaned will not only return the taxpayers more than $25 billion directly, but also create a net positive economic impact of more than that.

that too helps everyone - no it doesn't; not in the long run.

I honestly don't know what McCain & Palin have been saying about this (nor do I care) but corporate welfare undermines accountability at the corporate level. Accountability is absolutely essential to functioning of the market and handouts such as these have been undermining the US auto industry since the fifties. This is a very large part of the reason that they are in trouble today. If we are concerned about the employees, we should just give them the money directly, but giving the money to the corporate execs is essentially rewarding bad behavior and staving off the inevitable. Corporate handouts are like stimulants for the economy; they provide a short-term high, but they will be followed by a corresponding low and the longer you prolong treatment, the longer and more powerful the low.

BTW a labor surplus isn't necessarily so bad a thing; employment for the sake of employment is almost as bad an economic policy as corporate welfare (It's one of the more obvious failures of the New Deal.) and if the big three are no longer profitable, that is what this bailout amounts to.

The government could just print the money that they need to operate, thus there would be no redistribution! But that probably isn't a great idea!

I meant the explicit redistribution where the government takes money from one group, and then gives it to another, versus the government taxing in a fair a simple way (See the Fair Tax) and then spends the money the way the Constitution intended.

In other words, they spend money on 1) Paying Debts of the United States, 2) Provide for the Common Defense, 3) Promote the General Welfare (General meaning that it does not promote the welfare of individuals, or corporations, but promotes the welfare of the entire nation; also notice the word, 'promote', not 'provide') Article 1, Section 8.

As Jefferson said, it is "...the most sacred of the duties of a government, to do equal and impartial justice to all its citizens. To this a single observation shall yet be added. To take from one because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others who (or whose fathers) have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, 'the guarantee to every one of a free exercise of his industry, and the fruits acquired by it." (Note in Political Economy , p. 464-66)

I'd say that it's less wrong, to redistribute in this fashion as it is at least under the guise of charity.

Actually the average UAW salary is around $73 an hour. But the executives are far worse and totally undeserving of any taxpayer help:

"While Uncle Sam debates a $25 billion rescue for the country's automakers, some 9,000 GM managers continue to enjoy one of the industry's best perks - a new car every six months for $250 a month, with repairs and insurance included. And they can write off gas on their expenses."

http://www.nypost.com/seven/11182008/news/politics/gm_honcho...

Can you site that $73/hour wage? A cursory glance around the internet indicated something around $30/hr as of last year. The only places I saw $73 were other forums, but maybe they all have a common, legit source.

I believe that $73/hour number includes all executive pay and obviously is an average chosen to misrepresent information. The average assembly line worker wage (and the median wage) is closer to $30.

I have seen the $73/hr number cited as non-executive compensation. That's total compensation, not just wages, which covers the cost of benefits and the like.

edit: This has some links:

http://mjperry.blogspot.com/2008/11/should-we-really-bail-ou...

I cannot say what the previous person was referencing, but NPR has a great comparison of GM and Toyota at http://www.npr.org/news/specials/gmvstoyota/

If you read the list, it looks like you're both (partially) correct. The average hourly salary for non-skilled assembly-line workers is a little over $31. However, GM's labor cost per hour exceeds $73/hour for those workers.

So, in terms of GM's costs, it's over $73/hour. I'm guessing the UAW has structured it in a way that benefits the employees, but I can't imagine what benefits would be worth more than my salary. Seems to me like more in salary and less in benefits would appeal to me more.

Well, the reason employer-sponsored health care took off was that WWII wage controls were still around for years of the post-war economy. Growing employers, auto manufacturers in particular, could not offer higher wages to attract workers. So they offered employer-sponsored health programs and attractive pensions. In the 1970s, when Nixon brought back wage controls, they improved their low-deductible health care plans to no-deductible plans.

Here's the scenario. From its boom era, Detroit ended up saddled with lots of pensions, expensive health care, and a special interest which fights cutbacks fiercely. It was basically building up an deficit that, when combined with horrible mismanagement, sent it into tremendous debt and would hobble it when it hit bad economic times and lost access to the capital markets.

Does that scenario look familiar? That's about what's happening to the United States. Hey wait, did a presidential hopeful write this op-ed? Hmm.

No, see, people have the figure wrong. It costs GM $73/hour for labor because GM is still supporting retirees (that retire early, at age 50) with health care and a 70% salary pension. To cover those costs, for some reason, they cover it as "labor costs",

This makes the union look bad, while simultaneously ignoring the fact that GM made tons of crap vehicles nobody wanted and has never tried to innovate.

http://www.prospect.org/csnc/blogs/beat_the_press_archive?mo...

$73 is labor cost, this includes many things on top of the $30 per hour. This is higher than their competitors but not by as much as it seems.

i love how people can't stand the guy who works on the line. This guy or gal works to make a car for you. The customer. This person puts up with all the same bs that you have to put up with on your daily job. He/she was smart to get into the automotive and have a great job. One because they can support their family put their kids through college so their child has more of an education then they do. (that helps out America) and their children can succeed in America and not rely on the automotive to support them. Second,because this person turns around and puts that money they made, right back into their fellow communities. Spending money so others can benefit off of their hard earn money.Thirdly, they can give to charities help out others and do good for their communities. So, why does everyone bug the guy on the line....becasue he makes good money and has no education, so what!!!??

What about the endless managers that leave the office and go golfing on company time that are educated? Or the endless lunches that they never return from that the company has to pay for? Or how they can micro manage everything and make it twice as worse then when they started it. Or the guy who works out of his house and only puts in 3 hours of work in a day. Please give me a break!!! this is not only automotive but it is with every corporation in America! When will the educated people quite ripping off the corporation's so that the people that can't get an education can make a decent living and survive in America and enjoy the American dream!! So please quit wasting your time to find out of much the average line guy makes and start looking into your own company and start making changes!! Why do you have to have a degree to flip hamburgers?? because that is what is happening to us. Quit pointing the fingers and start seeing what every manager and salary person is doing with the company money. Maybe its time to start working different in America, start working for the right reasons.

what about person C - a nonunion honda plant employee. he has beaten the competition fair and square, and now he must subsidize them. perversely, the harder he works, the more money he can potentially contribute to a government underwriting his competition.

Person A might very well pay taxes, if they are a single individual with no children. They don't pay a lot of income tax, but they likely do pay some.

The education person A's kids get along with the disproportionate share of SS/medicare benefits they get already mean they net gain from the tax system. So it is hardly fair to say:

>The bailout: tax person A in order to help person B

At least pick a person A who is net-net being taxed.

Interesting question: who deems what a job is worth to society?

Many things: First, we all do. As a simplistic example, would you hire me at $50/hour to patrol the front of your house for squirrels? No. No matter how diligent or hard-working I was, that function is not worth $50/hr to you. In fact, it may be worth nothing at all. A little less simplistic: would you keep me on fulltime staff to clean your apartment or house at $100,000 per year? Probably not. If I charged $1,000 per year, you probably would. A clean apartment/home is a good thing (by most people's standards). It has value. How much value? Well, that depends on how much people are willing to part with for it. Maybe you would rather waste your time cleaning. Maybe I would be idle most of the time because your place isn't that big and therefore it doesn't justify fulltime staffing.

Second, alternatives. I touched on this already a little with your substituting your labor for mine, but it goes even further. Can the process be mechanized? In the era before computers, there were still things like directories and it must have been a damn tedious process alphabetizing all those names. The person was, no doubt, hardworking, but as computers came along and could do the job quicker and more accurately, well, that person no longer had function. Yes, the value of sorted data didn't change, but the cost to acquire sorted data did change while that person didn't (or maybe they did and became a valuable computer technician or something).

Third, output. What is its intrinsic value. A car has intrinsic value, but it also varies by person - a car is worth more to the President than it is to me. He's busier, I can take the subway without fear of assassination, etc. The more expensive a car is, the fewer people will have it. For the most part, producers don't get to price discriminate - if Bill Gates goes to the Mazda dealership he'll get a similar price that I get even if the car is worth a lot more to him.

Forth, competition. Are there other people that are willing to do the job for less? I'm guessing beer tasters don't get paid well, but I'd also wager that breweries don't have trouble finding people for the job. Likewise, if competitors are more efficient (either companies or other workers), it makes your labor less valuable. If your company produces 1 car for every 50 hours of labor and another company produces 1 car for every 25 hours of labor, your labor isn't worth as much. If I can automate processes that save time, my labor becomes worth more and yours less.

Fifth, other goods. Economics is about allocating scarcity. Many try and argue that we're not an economy of scarcity anymore and that we have enough for everyone and that it's just a corrupt capitalist system that prevents that from happening. Then they create cost of living calculations for a living wage that consider someone without cable to be in dire poverty. Face it, we like things. If we could all live without things (from TVs to medicines), we'd be fine. So, the question is: on a per dollar basis, how has the automobile fared against other things we can spend our money on? For me, on a per dollar spent basis, my computer is much more valuable. Are people moving a certain percent that they used to spend on cars toward CDs or TVs or computers or cranial piercings? I have no idea, but we all allocate our budgets in ways that we hope will increase our happiness. People's tastes change, society's tastes change. Portable radios do positively affect your happiness and are cheap (say, $20), but people seem to have widely pronounced that MP3 players (at 5-10x the cost) positively affect their happiness at a rate greater than that 5-10x increase. Or they're just idiots that don't know what to do with money.

I could go on, but I think you get the point. It's a truly fascinating topic. In the GM case, there are some neat applications to see.

1. When GM, Ford, and Chrysler were pretty much the only auto makers, the amount of competition was less which meant that consumers would pay more and fewer units would be shipped. If you want to calculate how this works, look up the cournot/nash equilibrium. As the car companies were selling at higher margins and ignoring the poorer people, labor could demand more money since the car companies were making more money per unit of labor used.

2. Other firms with lower labor costs also became more efficient. Toyota makes cars faster combined with a lower cost per hour. That means GM's labor is worth less money.

3. The value of output might be fluctuating. Here is where I'm spouting complete BS. As gas prices rise, the intrinsic value of a vehicle declines. Americans also seem to be having a shift in their perception of public transit and as their view of it becomes more favorable, the value of a car decreases. However, as most people are suburban, a car can still be a lifeline.

It's late. I'm done. Hopefully that was interesting. It wasn't meant to have any view pro or con in it, just more of a view into how prices get set and how we value things.

"If your company produces 1 car for every 50 hours of labor and another company produces 1 car for every 25 hours of labor, your labor isn't worth as much. If I can automate processes that save time, my labor becomes worth more and yours less."

If you automate a process, your labor is worth less. That's the point of automating a manual process--it's necessary to produce competitive advantage. Simultaneously, it allows a manufacturer to produce more goods, while replacing skilled workers who were necessary to produce the commodity manually, with less skilled or unskilled workers.

I should have been more clear: If I can automate a process that saves time, my labor becomes worth more with me as the automator.

Let's say you work at a University in Residence Life. Each year, 5,000 students all pick where they want to live by coming up in person to you and 4 other people who have to coordinate room availability, write everything down, etc. It takes a long time and requires 5 people. The next year, you write an awesome Web 2.0 app that students can log into and just deal with it in an automated fashion. The labor of the 5 of you hand-doing that process declines. However, you're now doing new labor: that web 2.0 app! That Web 2.0 app does the work of 5 people and only requires YOU! That means that your labor on the automation process makes your labor more valuable (roughly 5x more valuable) while the labor of those who don't automate the process becomes less valuable.

Likewise, let's say we both work at investment firms and we're told to get standard investing data on 10,000 stocks each off Google Finance. If I go through an manually type it in and write it down, that will take a long time. If you write a script that does it in minutes, your labor is more valuable than mine. Therefore, if you can automate a process, your labor becomes worth more since you're getting an inanimate object to do your work for you and being more productive because of it.

To start, the first example is moot, as a university is not a competitive entity like a manufacturer. Whether they decide to automate depends on a need to save money where possible, not survive in a marketplace.

Second, you just reaffirmed my point. You are confusing productivity with labor value. By writing a script, you've revolutionized the production of obtaining standard investing data. As such, it requires even less labor. In fact, it now requires no labor, since a machine without any human intervention (save for negligible maintenance costs) can do the job! Why should anyone be paid to--according to what you described above--to do nothing. It's all automated. Now, if investment firm B (my firm) wants to compete, it will have to do the same, since it is spending $X amount to collect the data, while your firm spends $0. This is a pointless cost. As such, it will be forced to do the same to stay in business. Now, firm B no longer requires a warm body to perform the aforementioned task, i.e. it no longer employs someone to enter data. How does not employing someone generate wages for them?

By writing your own script, you cancel out your own employment. While true, that the writing of the "awesome" Web 2.0 app (I love yc news, it's full of this stuff) will absorb a fixed amount of labor, thus keeping you employed for the duration of writing it. Once it is completed though, you will be made obsolete. You essentially, wrote your own death sentence. Now don't this is a misguided Luddite speaking, I am a programmer too, and I can sympathize.

I want to keep up this discussion.

You mean envy, not jealousy:

Ordinary language tends to conflate envy and jealousy. The philosophical consensus is that these are distinct emotions.[2] While it is linguistically acceptable to say that one is jealous upon hearing about another's vacation, say, it has been plausibly argued that one is feeling envy, if either, in such a case. Both envy and jealousy are three-place relations; but this superficial similarity conceals an important difference. Jealousy involves three parties, the subject, the rival, and the beloved; and the jealous person's real locus of concern is the beloved—the person whose affection he is losing or fears losing—not his rival. Whereas envy is a two party relation, with a third relatum that is a good (albeit a good that could be a particular person's affections); and the envious person's locus of concern is the rival.

http://plato.stanford.edu/entries/envy/

I like that definition, but dictionaries often make a less clear distinction, and put envy as a more powerful emotion.

(try dictionary.com, for instance, but my print ones also concur)

Detroit fills Democratic Party campaign coffers.

And before anyone says its a non-partisan thing, look at where opposition to this bailout and the previous one came from. That's right: the guys we just voted out for being war-mongers and Big Brother supporters.

Ain't democracy grand?

40% of Democrats opposed the original bailout package, compared to 66% of Republicans. That's a difference to be sure, but the vote was obviously not down party lines. Furthermore, Bush was a strong supporter of both packages, and was vocal in his disappointment when the first failed to pass.

Facts exist independently of your opinion; you don't get to make them up to fit your argument. Please try to remember that.

In a congress that passes bills by majority, a clear majority of one party supported it and a clear majority of the other opposed it. House Republicans are consistently the most conservative caucus in Congress, and deserve praise for when they do the right thing as much as they deserve the opposite when they are wrong.

That doesn't parse. You're treating two different types of majorities as the same thing.

It's fairly common that bills will be voted on down party lines, which means all Republicans vote one way, and all Democrats vote another. The standard deviation from this is generally pretty small, which is why the small majority held by the Democrats in both houses is such a big deal.

Two-thirds of Republicans repudiated the pressure coming from the Bush administration and voted against the bailout. Democrats were only able to muster a simple majority in support of the bailout. That's as close to non-partisan behavior as you're likely to see in our government.

It's true, that Republicans are more likely to uphold free-market principles than Democrats are, and this vote does demonstrate that, but it also demonstrates that that R next your representatives name is no guarantee that he is fiscally conservative. I prefer to vote based on personality and not on party and would prefer that both parties were destroyed and sent back to the abyss where they belong.

FWIW, a large part of this problem has already been solved. You may not have noticed it, but a while back the UAW made a deal with the big three that in exchange for a large cash payout they would take over retiree pension and post-retirement healthcare obligations.

...and, if I understand correctly, because Detroit made that payout, they are now in a poor cash position, which means that the credit crunch is putting a very big strain on them.

I basically agree with you, but it's worth noting that your hypothetical Denny's waitress would pay no federal income tax (though she would pay the payroll tax), and would probably qualify for the Earned Income Tax Credit. It's really the professional wage earners (doctors, lawyers, etc.) pulling in a few hundred grand who get the shaft.

$8/hour = $16k per year (roughly). Since this is greater than the standard deduction you will not be avoiding federal income tax at this level.

The tax on $16k per year is miniscule, if any.

Payroll taxes suck, especially at this level. Sure you get them back in a refund, but there's an opportunity cost.

SS works out to ~15.3% add Medicare etc, and they are at ~20% the absolute top tax rate is 35% assuming zero deductions but capital gains is only 15%. With 16k * .2 we get 3,200$ in tax.

Earned income tax credit = $428 with no qualifying children wow that helps.

An employee's share of SS tax is 6.4%, not 15.3%. (The full amount is twice that, or 12.4%, so I'm not sure where 15.3% comes from.) Add Medicare tax (1.45%, not 5%, and the employer pays a matching amount). You get 6.4% + 1.45% = 7.85%, not 20%. That's ~$1250. Add a 15% tax rate for a $2,000 federal tax, not 20%. We both arrive at $3,200 but I think my numbers are more accurate. Where you working backwards from a known number?

I was working back from ~20% which I had worked out before but I dropped an import etc so the numbers looked off. Anyway, we could argue about the numbers game, but self employed people pay the same effective rate so it's all BS IMO. You are correct about Medicare but wrong about SS.

For 2008, your employer withholds Social Security at the rate of 7.65% of your first $102,200 of income. For Medicare, the withholding rate is 1.45% of your income, regardless of how much you earn. (http://www.walletpop.com/taxes/article/_a/bbdp/withholding-y...)

7.65 * 2 = 15.3% but it's 15.3% of 100 not (100 + 7.65 + 1.45) = 109.1. Anyway, adding state income tax or it's equivalent's and the numbers start to go up but 20% seems like a reasonable number for federal.

If your income is low enough you do get government services which offset your cost of living, but your effective tax rate on you next dollar of earnings is still fairly high.

PS: I built a little Javascript calculator to work this out I should probably post this somewhere.

For low-income folks, SS is an okay investment in their retirement. Given that, why are we counting it as a tax?

For upper-income folks, SS is a really crappy investment. (The difference is because benefits are not proportional to pay-in.) The cap keeps them from caring, much.

If you move to the US at 55 work for 10 years and then retire SS is an great return on investment but it's still a tax. What you pay in and what you get out are somewhat related, but there is no advantage to working from 18 - 67 at minimum wage and paying into SS over investing that money in the same time period. They just look at your 30 highest income years which is great for people who don't enter the job market till mid 20's but it sucks for those who skip collage and work till retirement age. They have almost 50 years to save and invest and SS still does not fully replace their salary.

Because if the Big Three go under, a very large number of workers (folks working for the Big Three and for their suppliers) will suddenly be collecting unemployment insurance instead of paying taxes; given the current state of the economy, they may be collecting it for quite a while. So it would be cheaper for the government to keep those employers afloat.

The obvious counterargument to that is that the auto companies could take their $25 billion and still go under.

The counter-counterargument is that even if that happens, it would be better for everyone if they went under a few years from now, when hopefully the rest of the economy will be in better shape.

Because if the Big Three go under, a very large number of workers (folks working for the Big Three and for their suppliers) will suddenly be collecting unemployment insurance instead of paying taxes

and they will also paid in taxes if bailed. so GM is going to become a giant money laundering operation for the IRS?

cut out the middleman and put them on unemployment...then they can actually find PRODUCTIVE work

The unemployment would cost the government more than the bailout.

One could argue that it would still be better off in the long term for the government to bite the bullet and pay that unemployment money than to keep the US auto industry afloat; I am partial to that argument myself. But I'm responding to the "why should a waitress at Denny's..." question.

Unemployment costs $362/week + administrative overhead.

The wage of an auto worker costs from $1200/week to $2920/week (depending on whether you believe the $30/hour number or the $73/hour number floating around).

http://www.michigan.gov/documents/uia/EUC_Fact_Sheet_120_240...

Additionally, auto workers have an incentive to get off unemployment; it pays less than market rate. They have no incentive to stop working for GM, which pays above market rate.

The $31/hour is the wages paid to the employee. $73/hour is the cost to GM (healthcare, retirement, etc)

If the auto companies get a bailout, then they can continue to sell cars (GM's revenue is on the order of $150B) and that revenue can be used to continue to pay the workers, the suppliers, etc.

If they go under, then all the money to support laid-off auto workers has to come from the government.

Not sure why this has been modded down so much.

Assume all of the big three are liquidated. What would be the total cost be to the economy? First we'd lose income tax revenues from an estimated 3M people. Let's assume an average pre bankruptcy wage of 50k/yr (a little less than 30$/hr). And let's assume a conservative tax rate of 10%, or 5k/yr. That's 5k * 3M = 15B. Assuming each employee is unemployed (on average) for 6 months, we can assume 7.5B in lost income tax revenue alone. Add in 6 months of unemployment at 362/week = 8688/person * 3M = another 26B. That's 33.5B, and we haven't even factored in all sorts of intangible costs related to the massive unemployment and deflation that would result (crime, medicare, etc...)

There may be other factors I haven't counted, but on the face of it a 25B bailout is the cheaper option. I understand the argument that the same problem will just recur a year later or whatnot, and they'll need another bailout, but there are reasons to hope that at least some of these companies will have a better chance in the future: the Chevy Volt, the release of some of GM's pension obligations in 2010, Ford's 65mph diesel, etc...

I quite understand the "punish them for being stupid" sentiment (and share it), but I think it's somewhat reflexive and not always the most rational approach.

it really disgusts me that this comment has been upmodded so much. it reeks of overgeneralization, ignorance, and hyperbole. it's very easy to sit on your high horse and talk about hypothetical denny's waitresses, but a little harder when this actually effects you and your loved ones.

my father worked his ass off for GM for more than 25 years, not to mention driving 100 miles each way for the last 10 so his family didn't have to move. when he retired a few years ago he made $25/hr + the overtime which he always worked so i could go to college. $25/hr an hour is not 8x of your hypothetical denny's waitress, it's what we call a "living wage". maybe your denny's waitress worked harder than my father, but assumption that every UAW worker somehow is swimming in a money bin like in scrooge mcduck while the rest of the country is toiling in the coal mines is false.

i'm not defending the auto industry here, nor do have i decided whether it would benefit my country or my family to bail them out. i think management made some terrible decisions (see: suvs + $100/barrel oil), and i think UAW bargained for some deals that were unsustainable. heck, i'm not saying you should buy a buick... i'm sure as hell not. but why do you need to degrade the sacrifice of honest people to make your point?

You're talking like his job was an entitlement. Companies go bust and people lose jobs, it happens a lot.

The reason people are talking UAW workers that way, is not because they begrudge the individual worker like your father - they don't.

It's because the car companies were not allowed to fire or lay off people as they wished, which gives a very strong impression of entitlement and job guarantees amongst UAW workers that no one else in america has.

If you got rid of that, and allowed car companies to hire and fire and set wages as they desired, people wouldn't be so opposed to the bailout. Personally I would support the bailout only if the company became non-union. So long as they stay unionized they will never survive, and the bailout will be wasted money.

As a whole UAW was very destructive to the auto business - not allowing a company to fire people, or change wages, is a great way to destroy a company - and they succeeded.

100 miles each way? That's about 4 hours of driving each day, add in overtime, and there's nothing left to your day. Why not find a closer job?

"entitlement and job guarantees amongst UAW workers that no one else in america has"

Well about 10% of Americans work for the government in some respect. How often do they get fired, in spite of doing nothing?

(Disclaimer: I once worked for State Government. I'm not sure how much work UAW members did, but I can't see how anyone can get less done than Government Employees did. For every one that worked really hard, there were three that were simply showing up and waiting for retirement.)

I don't think 3/4 of teachers, police, and the military simply show up and are waiting for retirement. They might not put in 110% as it where but they still get a lot of stuff done. I think it's the Government office workers that don't really do much but most private sector office workers don't seem to get much done so I wonder how much less effective they really are. (Cue XKCD comic "it's time for science" or some such.)

3/4ths of teachers sounds about reasonable.

Yea, I was trying to show a trend. Plenty of teachers stopped caring a long time ago and there is also a lot of dead weight in the police and military but the less what they do is an "office job" the more effort they seem to put in. There is plenty of dead wood in the forest service, but smoke jumpers as a group put in a lot of hard work.

huh?? in the last 15 years gm has closed dozens of plants. yes, certainly the union fought to get the best deal collectively for their workers, but you have to have rocks in your head if you think people like my father felt entitled. they felt lucky to have a job.

as for finding another job... you highlight my point! it's pretty fucking difficult to find another job when after 20 years the only thing you're qualified to do is work in a general motors factory, particularly when your supporting a family. if my dad had the luxury of "finding another job", don't you think he would?

again, im not defending gm, the uaw, or any of the system as whole, i'm simply highlighting the fact that maybe the situation is a bit more nuanced than you understand.

You're right, it is difficult. But where your Dad is at (the same place my Dad was at) is nothing more than the product of their own decisions. Is it anyone's fault but your Dad's that he's only qualified to work in a factory? Is it anyone's fault but my Dad's that he didn't learn about computers even though he saw them appearing everywhere?

My Dad was able to learn some new skills and eventually land on his feet after being unemployed for quite some time. Hopefully your Dad is able to do the same.

sure, no one is entitled to a job. that's not my point at all. things change and jobs change. what I was trying to explain is why my dad would travel 100mi to get to work. yeah sure, he could have went to med school or something, but he had a family to support and nearing retirement that was his best option. i feel it's pretty arrogant to even make a statement, "why did he just find another job". sure he could have, but i think just as my dad did, most people make rational choices given their situation.

to clear things up also, this is past tense. my dad retired. the greatest concern to me is GM not living up to their commitment to him in retirement benefits.

Look, 25$/hour + Free heath care + Vacation + Retirement is way better than most Americans get today. I knew someone supporting a wife and 2 kids making 7.25$/hour + a lot of overtime working as a cook at Denny's and going to collage at the same time. That's America, sure he worked all the time and had no life but now he has a good job and if he was in a dieing industry he would do it again.

Unions have done great things to bring heath care and a living wage to most americans but they kept pushing and over time they have distroyed many companies. Management was doing the same thing and they shorted the pension program etc but these companies are dieing and assuming they are going to keep just as many people employed long term is stupid. Capitalism creates efficiency by destroying jobs, when one welder can do the work of 4 you lay off the redundant people and move on.

PS: Saying they pay 2k per car in pension benefits is silly, if they made twice as many cars their pension benefits don't go up. Yes, they have huge unfunded liabilities but if they made coffee they would still have that same costs. Fixing pension cost's is all about growth not cutting benefits.

I understand. But again the situation is just what he created for himself (and what my Dad created for himself). Everything - the wife, the kids, the car, the house (if applicable) - those were his decisions and my Dad's decisions.

People need to be accountable for their actions and realize that your current state is no one's fault (or achievement) but your own.

I'm in my mid-40s and in IT and have the same feeling. Good luck finding something in this economy no matter what industry.

"it's pretty fucking difficult to find another job when after 20 years the only thing you're qualified to do is work in a general motors factory"

I've always had a problem with this argument. If you work 40 hours a week, you've easily got time in 20 years to do anything you'd like to do -- including becoming a brain surgeon.

I'm honestly not trying to be cold about it, but the rest of us live in a world, especially in IT, where you have to keep learning new skills in order to survive. I'm very sad that people thought that GM would last forever and that they could simply get trained in one skill and have it last a lifetime. But those days are over. They've been over for a long, long time.

Lots of great comments here, but not this one: you cannot work 40 hrs/week, have a family, and become a brain surgeon in your spare time. I have 5 doctors in my immediate family and know a bunch more in medical school, and you have no idea what you're talking about.

That being said, I'm with you about needing to learn new skills. The days of the company man are over, and in our new world you need to have a set of skills and competencies that you can take where needed. But can you imagine how hard and scary it would be for someone who has worked in the same job for 40 years to try and do something new?

We're all free agents. It's a lot of fun.

I know someone who decided to became a Doctor at 30 (no kids or wife). He did not go to a top med school but he graduated without debt and works in the ER. Now he has a wife, but no kids and works part time so he could become a brain surgeon. It's cheep to live a lower middle class existence and working full time in the summer you can make a lot of money to live off of the rest of the year. The idea that you need to go to a top med school and then as soon as you become a doctor you start driving a BMW is why most of his coworkers are poor and he has a nice savings.

My brother was the first person (ever) to go an offshore med school and then do his residency at Mass General (the Harvard hospital). So yeah, definitely don't need a top med school. And doing that at 30 (or 25 or 40) is awesome.

But a family is the biggest commitment/obligation you can have - [almost] impossible to deal with wife/kids/work/med school concurrently.

Part of the problem is, that the higher you force the wage, the fewer employees a company can employ. So, when unions push wages (and pensions) too high, it prevents the companies from hiring as many employees. In the case of UAW and GM, it went so far that GM was forced to close down factories and many UAW workers lost their jobs as a result.

A better way to improve wages and income for workers is to improve their productivity, that is, their subjective worth in relation to the employer, as wages tend to naturally approach this value. Tis is best done by increasing the quantity and quality available to the workers. Effectively this means increasing innovation, which GM and Ford have not been able to provide for years. UAW is part of the problem here as well.

Not that unions are all bad, workers should have a negotiating body in order to prevent abuse by employers, but I think that in this case they are part of the problem.

Every contract has two sides, so I don't see why the UAW should be singled out for blame here. The management must have believed that their contract with the auto workers would still leave them enough cash to make a profit--otherwise they never would have signed the contract in the first place!

No, I'm quite sure they signed under duress - it was sign or a strike. Usually contracts made under duress are invalid, but not when it's a union.

What makes it worse is that even the employees were under duress - even if they wanted to work, and were not interested in a strike, they couldn't.

The threat of a strike is not duress. "Accept these terms or we won't work for you" is not that different from "accept these terms or we won't sell you steel".

Companies in other unionized industries have pushed unions to accept significant concessions. If the Big Three management had really believed that accepting the UAW's last offer was going to destroy their business, then they were irresponsible not to endure a strike in order to break the union.

I'm disgusted as well because this is yet another manifestation of elitist resentment against systems in place that assist the middle and lower classes.

Mythical "Welfare Queen," meet the mythical "UAW King."

It really disgusts me that this comment has been upmodded so much. it reeks of overgeneralization, ignorance, and hyperbole. it's very easy to sit on your high horse and talk about hypothetical denny's waitresses, but a little harder when this actually effects you and your loved ones.

Very true. The dangers many Americans face as a result of all this are real, as are the hardships that prompted folks to adopt these broken systems in the first place. However, that doesn't change the fact that there are very serious problems with the system and that the hardships could be made much worse if they are not addressed.

American hardships are nothing compared to third world countries' hardships.

That's why I donate my money to the real poor (the people who don't know if they're going to be alive on a day to day basis) not the American poor.

Yeah lots of people have tough lives here, but they're still in the top 5% of the world's population.

Yeah lots of people have tough lives here, but they're still in the top 5% of the world's population.

Or, we could say: "Yeah people here are in the top 5% of the world's population, but many people still do have tough lives."

You seem to have missed my point. This discussion is not about the rest of the world but about the situation regarding the 'Big 3,' the UAW, and the impending bailout for the American auto industry. When discussing such things, you deal with people who are effected by them. As far as I know, most of the third world will not be greatly affected by the auto bailout.

More to the point, I'm not advocating welfare. I'm merely intimating that I understand that others can experience hardship, but that it's not right to use that as an excuse to perpetuate bad policies.

The discussion (not between you and I) but on the rest of the thread reeks of self entitlement and a lack of accountability. My comment wasn't aimed just at your point, but rather the people who think they're entitled to things they haven't earned and who fail to keep things in perspective when facing challenges.

I agree that the current Mother Government system is completely fucked, however. The bailout, because of financial markets, microloans, commercial paper, free markets and trade will affect almost every one. Orders of magnitude will vary.

LOL, you live in America. Of course people feel entitled; they're educated that way. At least it's not Sweden.

Anyway, the bailout most directly affects the Us Auto Industry and it's workers, So I think it makes sense to consider their needs first.

Your words are like my mother telling me I should eat my toast because there are starving children in China. Sure I should be grateful to have food to eat, but what does this have to do with the Chinese? Is this their toast? Can we give it to them?

It's one thing to tell folks that they have it good and they should stop complaining; It's another to do so and then turn around and spend the money that they were demanding on a private jet or new summer home. Right or wrong, that's how auto-workers see it and unless you really are worse off than they are, you should at least show that you emphasize with their condition before telling them what to do. Otherwise, you'll just reinforce that sense of entitlement.

My point is this: "I understand, but you'll have to suck it up." goes further than "Suck it up."

My words would only be like that if you thought you were entitled to your toast every single day of your life. ;)

You know what disgusts me? Your complete blindness to how good your father had it. As a not-so-recent immigrant to the US, I've found it laughably easy to have a good life here. I am not talking about myself since I came at 25 and spoke enough English to get by. I am talking older relatives and their friends, people well into their 50's who did not speak a word of English. There is an absolute wealth of opportunities - classes at community colleges that you can take for near free, paying jobs where you have plenty of time for studying while taking care of the elderly for example, charitable organizations that assist you in everything from relocation to getting jobs, government programs that give you bridge money to get you on your feet, and so on.

If you think your father had a rough life, you are truly a spoiled brat. My father almost starved to death as a teenager during World War II, almost died from tuberculosis as a young man, shared a small one-bedroom apartment with 5 people as an adult, and was forced to abandon even that little due to ethnic conflict. Your father on the other hand, had it so easy that he could afford to put his kids through college and still retire after just 25 years of work. Oh, excuse me, I forgot. Your dad had to endure a 2-3 hour commute because it would be so traumatizing for his kids to switch schools once.

Your father and his buddies are who needs to get off the high horse, my friend. They've worked in a little bubble with their cushy guaranteed pay and benefits for too long. It's about time they ventured out on their own into the big bad world that the rest of us happily inhabit.

Best comment on the thread. Thanks for injecting some much needed perspective. I'd venture to say that 99% of the people that post on HN (this obviously includes me) live like relative Kings.

Hear, hear. I was going to post something like this because I have lived among people in third-world countries who actually have it hard (total understatement), but it's better that it came from someone with immediate family who lived it.

woah woah woah! i appreciate your zeal and your need to direct your anger somewhere, but your sending it the wrong way buddy. my original comment was not meant to express how hard mine or my family's life is/was, it was to clear up statements like this:

"union workers at gm who make 8x the wages, do less work"

It's simply not true, and it does disgust me that we feel the need to degrade a whole class of people to make the point that the system is fucked up. i'll be the first one to say that all of us who live in the country are extremely lucky and this goes often quite unappreciated. maybe not my father, but both my grandfathers have similar story's to your own. i thank god everyday for the opportunity afforded to me and my family.

"Your father on the other hand, had it so easy that he could afford to put his kids through college and still retire after just 25 years of work. Oh, excuse me, I forgot. Your dad had to endure a 2-3 hour commute because it would be so traumatizing for his kids to switch schools once."

listen man, i'm not getting into a pissing contest with you. your taking little tidbits of my words and making them into the story that you want. you don't know my story nor my families.

the point of my original comment was that for the most part auto-workers are honest, working people like the rest of us. there's plenty of room for rational argument on what should happen to the auto industry, i just can't agree with the constant barrage of comments insinuating that people like my father are lazy, unappreciative, and somehow got what's coming to them for just doing what anyone of us would do in their situation.

How am I taking tidbits of your words and making them into a story that I want? I simply called you out on exactly what you said, both your facts and your angry, self-righteous tone.

You said your father has put you through college and has retired after 25 years. Presuming he started working at 25, we have him retiring at what, 50? Who pays for their kids' college and retires at 50? Investment bankers and plastic surgeons, that's who. The rest of the country works well into old age (most without adequate health insurance) and has their kids taking on student loans.

You opened your comment with anger, talking about your disgust, accusing crabapple of over-generalization and ignorance, and essentially dismissing all of us as moneybags who use hypothetical Denny's waitresses to degrade your family or ignore your hardship. (Read: shut up and fork over the money - or, pardon me, you stated that you are as of yet undecided whether it would benefit your family, so I guess we'll just sit tight and wait for your decision.)

You accuse me of zeal and psycho-analyze my anger but I am just reacting to the broad-daylight robbery that is taking place. People like you think that if they make a lot of noise and talk about their dads working their asses of for x number of years, we'll all get misty eyed and just hand over our money.

You are now getting a dose of your own medicine. I take your dad's 2-hour commute and raise you mine's World War II. Ridiculous, isn't it. When auto workers and their families stop blanketing the internet with their sob stories, we'll stop commenting on them. Over.

no where did i say my dad only worked 25 years. i said he worked for gm over 25 years. does this mean it was his first job, no? as for student loans, i certainly do have them. it's unfortunate that in this country simply getting student loans will not pay for a four year school. again, i believe i said "benefit my country or my family". do i have to go on? seriously, this is the classic case of reading what you want to read to form the picture to fit your preconceived notions.

sure, "you raise me" wwII. wtf? i'm sorry for what your dad went through, but so did my grandparents who were born in eastern europe and escaped to america. i just don't get this idea that you can't feel any compassion if someone didn't escape genocide. there's a lot more complexity to people's stories than you may realize.

my simple point is not that you should cry for any autoworker or even give them a dime. i'm just sick of hearing statement like crabapple's which completely exaggerate the facts.

* 8x wages - no * no deductable healthcare - not for 10 years * work less - by my personal experience, no

it comes from this characature of what the reality is. the fact is AMERICANS ARE PRIVILEGED. i get it. i'm not asking anyone to cry for my family. what i am saying is that chances are most auto workers are hard working people like the rest of us. i know my father didn't escape ethnic conflict in europe in wwII, but he certainly did the best of his ability to provide for his family. i'm not saying that deserves your money, but i am saying that it doesn't deserve to be belittled.

hmmm... you know i just wrote this, and i'm realizing i'm just falling into this trap needless argument. looking back at my thread i think i approached crabapple's initial comment with way too much zeal myself. the thing that irked me the most about crabapple's comment was not the point (ie agreeing with mit romney's position), but the way in which he/she went about making it. by perpetuating this characature of the "uaw king", i feel like it belittles honest, working americans like my father. i realize that my father was lucky for being born in america after wwII, but he did the best he could with the hand he was dealt and my pride certainly show through.

http://www.prospect.org/csnc/blogs/beat_the_press_archive?mo...

You are claiming that they are making 10x as much as a Denny's worker, before their benefits? They make $28 an hour before benefits (about 3 or 4x a Denny's waitress after tips). Including benefits they are making $41 an hour. That is still no where near your crazy ass 10x number, especially considering that you can hardly claim their pensions are worth the full $7 as there is a significant chance these companies will go bankrupt and they won't ever see it. If the market could sell employees an annuity in exchange (assuming the bankrupcy risk for itself), it would probably only offer a few cents on the dollar.

I'm wondering where these GM employees with zero deductible healthcare are. My dad is a retiree, and the last time he had zero deductible healthcare was in 1998, when it was much cheaper for the company.

Nowdays he pays 100% of his office visits and has some yearly deductible for other things. It's still a good health plan, but it's not exactly gold-plated.

GM has done some incredibly stupid things, even my dad thinks the job bank was ridiculous, but they have made a lot of changes in the last 5-8 years, and were probably going to glide into something new and better had the market for cars not fallen apart.

Now I'm not saying I support a bailout, I still think Chapter 11 probably makes the most sense, even if it means my dad's pension might get cut. I'm just trying to point out that a lot of these things that people bring up when they talk about GM (job banks, super health insurance, high wages) are issues that are no longer the case. When my dad retired, they already had his plant converted to $14/hr non-union workers.

This is exactly my father's situation. Zero deductible health care, huh? Maybe 10 years ago, but certainly not now.

Demononizing honest people based on stereotypes that people cling onto to support their perceived notions does not solve the real problem.

It's not the waitress at denny's - there is a very good chance she pays no federal taxes.

No, it's the engineers, management and entrepreneurs of all the successful companies in the US that are going to pay for the bail out(s).

I agree let them go bankrupt or even a managed bankruptcy. They need to get those liabilities off the books.

barak obama cannot force me to buy a buick

This is how much of the world works, subsidize the local car companies and tax and tariff the foreign car companies. Currently the foreign car companies are essentially on the same playing field as foreign car companies in the US. Hopefully it will stay that way.

There are probably 100s of industries and sectors imploding in this depression (folks hitech is getting there) that don't have lobbying power like the Autos. Instead bailing out Autos or Wall Street, this money needs to bailing out the wave of people that are going to enviably lose there jobs no matter what plan is done. But we should get something for the useful and lasting for the money - build Nuclear Power Plants, build a 100Mbs internet like they have in Japan/Korea, etc.

Mitt Romney. I'm supposed to take anything this asshole says seriously? Why?

Next up, Sarah Palin on Russian Policy, or Bill Kristol's bedwetting?

Sarah Palin doesn't know anything about foreign policy. Mitt Romney on the other hand is a successful businessman. This means he knows what he is talking about here.

He's right.

They make shitty cars anyway.

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