Wednesday, November 12, 2008

GM and Ford Should Be Allowed to go Bankrupt

There’s a lot of talk around that the feds should bail out GM and Ford. I’m dead set against that. They should be allowed to go bankrupt.

The biggest reason these companies should be allowed to go bankrupt is their worker compensation is irrational and not sustainable. An UAW auto worker gets paid around $70 an hour! Toyota and Honda auto workers get paid around $45 an hour. How can GM and Ford compete with that disparity? Bailing out and propping up such an operation would be pouring money down a rat hole.

Bankruptcy, if done right, can rationalize now irrational worker compensation. A bail out will just perpetuate it.

Now some say that Obama and the Democrats are pushing a bail out of GM and Ford in order to pay off their union supporters. Surely not!

2 comments:

Mike said...

Mark,

All new UAW workers are being paid a lower wage -- many at the magic $14.00 per hour.
http://www.autoblog.com/2008/04/05/that-was-easy-uaw-and-gm-agree-on-lower-wages-after-six-months/

There is a two-tier pay system that bring UAW workers pay down. Benefits are also being reduced.

If the three US automotive companies are allowed to go bankrupt, 3 million people will be out of work.

As a salaried employee, my wages have not kept up with inflation, my benefits are greatly reduced and my pension has been frozen. There is now talk of pay cuts...

GM is asking for loans, not giveaways because customers cannot afford to buy vehicles since the credit freeze that is occurring around the world.

Mark said...

Thanks, Mike.

But where do you get the 3 million figure from? In Chap 11 bankruptcy, a company (and usually most of its jobs) continue on. The company is reorganized and employment contracts are often redone.

Yes, it's no cakewalk. But in these cases it's much much better than a govt bail-out that perpetuates the problems that have brought GM and Ford down in the first place.

wannabe