Tube City Almanac

November 16, 2008

To Hell With You, 'Cause I Got Mine

Category: Commentary/Editorial, Rants a.k.a. Commentary, The Blacktop Jungle || By

I've written before about my high school history teacher, the late, great John C. Mamajek, and his immortal summation of the modern American character:

"Hooray for me, and to hell with you. I got mine."

There's a lot of that going around these days. And nowhere is it more evident than in current discussions of the U.S. auto industry.

Listen to talk radio or read some blogs, and the message comes through loud and clear: "Let 'em go out of business. Good for them! Bunch of lazy, overpaid auto workers."

In other words: "Hooray for me, and to hell with you. I got mine."

. . .

The main problem faced by GM, Ford and Chrysler is that they're saddled with health care and pension benefit costs that foreign companies don't pay.

How do Toyota, Honda, VW, BMW, et al avoid paying those benefits? Do their workers not get sick? Do their workers not get pensions?

No. The Japanese and German governments pay for those benefits. That knocks an easy $1,500 off of the price of each car made overseas.

But just mention socialized medicine or government-funded pension plans in the United States, and you're labeled a communist or worse.

. . .

Look, there's no such thing as a free lunch. If you don't want the government to fund health care and old-age pensions through taxes, then you're saddling businesses with those obligations. So don't go complaining and whining when the businesses finally ask for help.

The alternative is to go back to the glory days of the Industrial Revolution, when workers died at their machines and companies didn't need to pay for health care and pensions.

Or those good ol' days of "traditional American values," when people who lost their jobs had to give their children away to orphanages and go to work on the "poor farm." (There used to be one in Homestead, which is why the borough has a street named "City Farm Lane."

. . .

Plenty of liberals and left-wingers also believe in the dictate, "Hooray for me, and to hell with you. I got mine."

They argue that American auto companies deserve to fail because they "weren't competitive" --- they produced poor quality cars and too many inefficient trucks and SUVs.

Wrong. First, GM and Ford are producing cars of equal or better quality than the Japanese and Germans.

The top 10 compact cars for "overall quality" by J.D. Power and Associates include a Chevy, a Ford and a Pontiac.

Of the top 10 "midsize cars," five of the top 10 in overall quality are U.S. makes, and the top-ranked car is the Chevy Malibu.

Yes, GM, Ford and Chrysler kept their profits high by producing trucks and SUVs. Why? Because, as noted last month, large vehicles have a bigger profit margin, which helped the "Big 3" subsidize production of small cars and fund the health care and retirement programs that everyone takes for granted, but nobody wants to pay for.

. . .

Finally, plenty of people on the left and right are saying "Let Detroit go down the tubes. I don't live in Michigan. Things are tough in the Mon Valley, too."

In other words, "Hooray for me, and to hell with you. I got mine."

What do you think they make at U.S. Steel's Irvin Works? Sheet steel for the auto industry. They get the slabs from Edgar Thomson Works in Braddock. Those plants get their fuel from Clairton Works, which makes the fuel from coal mined in Washington and Greene counties, which is shipped in trains, trucks and barges, whose workers buy clothes, food and other essential items in local stores, and ...

Well, you see where this is going. You got yours, and to hell with the auto industry, but when it hits the fan, it's going to splatter the Mon-Yough area (and the rest of the country) hard.

. . .

American automakers need to produce more fuel-efficient cars. (Ford, to its great credit, was moving in that direction long before the current recession.) But they have to last long enough to get to that point.

Yet Senate Republicans --- some of whom lost their bids for re-election this month --- and President Bush want to block aid to the U.S. automakers.

It's one last "F-you" to working men and women as they head out the door. It's also their way of punishing the United Auto Workers for campaigning hard for Democrats this year.

Luckily, they gave themselves nice, fat government-funded retirement and health care packages --- benefits that auto workers, apparently, don't deserve --- and they're thinking:
"Hooray for me, and to hell with you. I got mine."

The question is --- if the U.S. auto industry is allowed to fail, will the rest of us have ours for very much longer?






Your Comments are Welcome!

I don’t like the fact that the auto industry is another company looking for a hand out but I understand that it has to be done.

But the problem can definately be blamed on the auto industry and the auto unions. The problem goes back along way at least 20 years and I am sure in applies to all of the Big 3 but I will speak only about GM cause I had family that worked at Fisher Body.

When you had GM making the exact same cars in most of their lines the problem was only starting. When you had Buick, Pontiac, Oldsmobile, Chevrolet making the exact same car. The metal being stamped out in West Mifflin could be put on any car. The only difference in the cars was a different grill or tail lights. That should have some people that there going to be a problem down the road. If GM would have maybe mixed it up a bit back then they wouldn’t be in such a pickle now.

The problem also applies to the unions as well, they needed to have realized that when plants upgrade, some jobs are lost and that is what needs to happen to grow and move forward. But, what did they come up with? The Job Bank, I have included a link, (http://www.detnews.com/2005/autosinsider/0510/17/A01-351179.htm) This article was written back in 2005 so it is not something new, this has been going on for awhile.

I would like to tell these companies to lump it, but I know that can’t happen. But, if they get our tax money as a bailout then they need to change the way the currently operate because, obviously, it’s not working.
Chris - November 17, 2008



I believe that the proper comparison to made is American Honda, Totyota etc. workers vs. Big 3 workers, I doubt that the foreign governments are paying benefits for them. I’ll bet they get benefits and a decent wage, however most are not members of the Auto Workers Union.
The contracts agreed to in the past are just not sustainable and the I think average American, when learning of some of the details of those contracts, gets more angry than bitter. I’ll admit my bias, my father spent 40 years in the Steelworker’s Union. He used to complain about the AutoWorkers contracts all of time, never understood it myself till I got older. Good stuff, Jason, as always.
Bill Jackson - November 17, 2008



I cut this information out, Bill, because the piece was running long, but the average wage for a UAW employee at GM is $27.

Entry-level UAW autoworker wages are $14.20, and under the current contracts, the auto companies can classify up to 20 percent of their employees as “entry level.”

Honda pays an annual average wage of $49,000 to employees at its Alabama plant, which translates to $25 per hour, assuming a 37.5 hour work week: http://www.siteselection.com/ssinsider/bbdeal/bd020715.htm

Honda pays $14 to $25 per hour at its plant in Greensburg, Ind.:
http://www.indianaeconomicdigest.net/main.asp?SectionID=31&SubSectionID=70&ArticleID=43750

So the wages at U.S. owned companies seem well in line with Honda’s, to take one example.

Unfortunately, it’s not the current contracts. It’s the pensions and health care benefits that were bargained (in good faith) into the legacy contracts of 40 years ago.

But I don’t know why the current workers should be penalized for those. Nor does it seem like a good idea to allow an important industry to go down the tubes after it’s done most of the right things to get competitive.

And it’s too late now to tell 70-something retired auto workers that they should have had 401(k)s or IRAs, and that we’re now taking their pensions away.

Unfortunately, this is a crap sandwich that we, the taxpayers, have to eat.
Webmaster - November 17, 2008



You’re right, we will take in on the chin.
That average wage is much lower than I expected.
You’re right about the supporting industries that will be hurt, coming from Mckeesport and living thru similar circumstances when the steel industry slowly dies out, I can’t wish that sort of misery on anyone.
The government probably will do something – I just hope that the ‘big 3’ don’t just take a bail-out ‘loan’ to meet their obligations, then come back in 6 months looking for more.Maybe I’ll be pleasantly surprised and the ‘boost’ will be what they need to get rolling again.
Bill Jackson - November 17, 2008



It seems to me that what they need is something along the lines of the Railroad Retirement Board, to take over the legacy pension/benefit costs.

It would be very expensive to the taxpayer in the short term, but fortunately/unfortunately, the pool of people collecting those benefits would steadily decline to zero over 30 years.

The current UAW contracts put all pensions into a defined contribution plan managed by the union.
Webmaster - November 17, 2008



Right Jason, the legacy pensions/healthcare were moved off of the company’s books and to the union, but the company is supposed to capitalize those funds with payments in the billions of dollars (for some reason 4 billion or more is sounding about right). The problem of course is that the companies don’t have the cash right now to make that payment, and they can’t get the credit to do it either. GM has 48 billion in debt. 25 billion now to GM isn’t going to change that bottom line much a year from now. In my humble opinion, taxpayer funds should be used to fully fund the pension and healthcare benefits of retirees, since we either pay them that way or through government programs like pension guarantees and medicare. I wouldn’t let any of these companies touch the money…put it straight from the Federal Reserve into the union controlled fund. Then, let the companies file for Chapter 11. Sure, the pain will be sharp. I went to college in Michigan and have no joy in seeing people there and elsewhere suffer. But the auto industry in this country either dies by a thousand cuts or it dies quickly through Chapter 11, and uses the court system to retool and become competitive much more quickly. It’s nice that they’re making good cars finally, but that’s not enough if they’re not making money.
Dan - November 17, 2008



Dan, I tend to agree with you on all points.

Ford started making these painful cuts several years ago —- closing plants, slashing payroll —- so they’re arguably on their way already.

I’ve actually been buying Ford stock as a long-term bet. We’ll see if I’m right. (Frankly, with F selling for $2 a share, I won’t be out much money if they fail.)

But GM didn’t take those kinds of cuts, and they’re in desperate shape. They’re the ones who really need a temporary line of credit.

The problem with a GM Chapter 11 in this environment is the banks, which are signaling they don’t want to lend money for companies to reorganize.

If GM can’t pay its suppliers, the Chapter 11 will turn into Chapter 7 liquidation.

As for Chrysler, I don’t see any way out of Chapter 11. I would be against loaning them a red cent (especially since they’re now privately held). They have no product in the pipeline and no market niche. Being owned by Mercedes-Benz thoroughly ruined that company.
Webmaster - November 17, 2008



Wow, Jason, I’m going to frame the first sentence! Yeah, I hear you on the tight lending market now, it does make Chapter 11 more difficult. I don’t know if law allows it, but perhaps GM could file for Chapter 11 and the government could either guarantee a private loan or provide it directly while still going through the already well established bankruptcy process. I still think bankruptcy is quickest for a turnaround, but someone does need to guarantee funds to go through the process.
Dan - November 17, 2008



6 myths about the Detroit 3 From The Detroit Free Press

http://www.freep.com/article/20081117/COL14/811170379/1002
Bill - November 17, 2008



I think part of the issue, as was hinted at by Dan, is that the retirement and health care benefits aren’t included in the hourly wage rate. I heard recently that, if you add in all the bennies that the auto companies have to provide, the “real” hourly rate is around $70/hour. The Toyota and Hondas, I believe, don’t have anywhere near that kind of overhead, since they don’t have defined benefit pensions. It’s 401(k)‘s or some near equivalent that are the responsibility of the worker to contribute to. And I’m sure that the health care benefits are probably not equivalent to the UAW contracts either. The whole issue is the “rock and a hard place” problem—If it were a relatively normal economy, it might be OK to let them go into Chapter 11. They could still operate, and get credit to do so. The problem today is that with the credit markets nearly frozen, they may wind up in liquidation, which would in fact hit the steel workers, the coal miners, the independent suppliers, etc. Having the UAW say “No Way” to any concessions as a starting point doesn’t help them much, either.
ebtnut - November 17, 2008



Ebtnut, one really has to differentiate between benefits for existing workers versus retiree benefits. I have no problem with government ponying up some dough for the retirees. As I said, government can either pay one way or the other…and I think maybe the union knows their membership and how to serve them better than Uncle Sam does. It’s really irrelevant what the current UAW workers make. The companies they work for are not profitable. I firmly believe that the quickest most efficient way to solvency is through chapter 11. Ok, so the government has to guarantee the funds for them to operate during chapter 11, but the adjustments will happen much quicker, and they will be transparent because they will be handled by the courts. No back room deals.

I understand the pain it will cause…but as for me I’d rather die suddenly of a heart attack than have cancer and wither over 10 years. It’s time for Detroit to get blown up and start fresh…heck, maybe in the end they’ll employ even more people than they do now.
Dan - November 17, 2008



The sad part is that no industry is really safe in this country.

Twenty-five years ago, as the steel mills shut down, we were told to prepare for jobs in service or technical industries. Now, those jobs are going overseas, too. So are white-collar jobs (including technical writing jobs, like mine!).

Forty years ago, it was textiles and electronics. Then it was basic steel. Now it’s automobiles. Next, it will be chemicals and coatings, and software development.

I’m against protectionism and for free trade. But the barriers for us to enter certain markets —- China, for instance —- are so high that we’re not getting “trade.” We’re just an export market.

I understand that mature industries always decline in the face of cheaper, newer foreign competition, but we’re not developing anything to take the place of the industries that are dying. We’re just slitting our own throats.
Webmaster - November 17, 2008



I have always thought there was a fundamental tension between free market economics and what ends up being the social cost if certain big industries fail. For example, if a really big bank fails completely (like a Chase or a Citigroup), it would hurt a lot of (voting) people and send a message overseas that we don’t know what we are doing. I mean, sure, capitalism and all, but the banks are important. I guess you can add the car companies to that group as well. I’ll accept that the big three are doing better in cost containment for current employees, and that they are making better cars (although if the Pontiac Vibe is one of those better cars, we have to take into account that it is a Toyota design).. But I would still like to see someone pay some cost, whether the chairman of the board or the CEO. Maybe not even fire them, but cut their pay by a third or something. Some symbol that shows the car company(s) acknowledge they have been trying but bear some share of the blame, even if it is only for mistakes made in the past.
Ed Heath (URL) - November 18, 2008



I enjoyed today’s article and read the feedback. Great forum.
When I got out of college, my dad was on my back to get a job with benefits.
I landed one and in 2 years got laid off. I don’t have benefits now, but as a product of Catholic education, I was raised with the attitude you take care of yourself. I believe that’s the best policy.
Lise - November 18, 2008



Yeah, there may not be big industrial economies in this century like there were in the last. But there will always be opportunities for people who are willing to think and experiment. Educated workers who can tackle complex problems and communicate the solutions will always be needed. If you have children, like I do, don’t just teach them to learn, but teach them to think. Let them develop their own ideas on how to solve a problem…you might just get an answer you didn’t think of.

It’s clear to me that next great opportunity for our country will lie with energy. The global economy relies on moving things around the world rather quickly and efficiently. We use lots of fossil fuels, particularly oil, to move goods. We are running out of oil. It is a fact. There are only so many dead dinosaurs. Does anyone think that there isn’t opportunity in in taking a service that’s dependent on a scarce resource, and making it work with a more available, cheaper one? Some really smart people like these folks (http://www.kpcb.com) think so. All these guys did was invest in companies that changed the way we collect, process, and distribute information.

My point is that there is something out there that will provide opportunity, you can’t be afraid to look for it and look into the future. After all, if the engineers at IBM stopped working on the PC in the late 70’s and early 80’s, I’d be sitting at my Selectric typewriter right now, yelling at my secretary to make a bunch of copies of my words and mail them to all of you.
Dan - November 18, 2008



R.I.P., Pittgirl
Thee Dude - November 18, 2008



More followup on this issue from the Steven Pearlstein, business writer for The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2008/11/18/AR2008111803510.html
Dan - November 19, 2008



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