Instead of stepping up to the plate and throwing the auto industry at least a temporary lifeline, the majority of Senate Republicans, and a few dimwitted Democrats, decided to just bail out; bail out on the American economy, bail out on American workers, bail out on American families and bail out on their grave responsibility as senior representatives of the world's leading economic power in trying times.
What was going on in their heads as America, and indeed the entire world, is suffering the most serious and dangerous economic catastrophe since the Great Depression? How is it possible that it actually took the dumbest and the most lame lame-duck President of the modern era to finally do what they should have done? These senators went gunning for big labor and in their rabid obsession were apparently prepared to send the deteriorating economy off the next big cliff.
There are serious considerations to be honestly debated in the Big Three bailout discussion. For starters, do GM, Chrysler and Ford deserve to be bailed out? Based on their historical behavior they probably do not merit a great deal of sympathy. The continuous mistakes and missteps they have made over the past 30 years in design, quality and gas mileage have led to a dramatic and steady decline in market share and brand reputation. In 1979, the "Big Three" sold 90% of all cars in the US. One year ago their market share fell below 50%.
The presentations the Big Three CEOs made before Congress also didn't create much sympathy for their cause. And I am not even talking about their arrogance when they were called on the carpet for having flown in for the first set of hearings by corporate jets. I am also not talking about their totally inauthentic and transparent new-found enlightenment when they giddily drove to the second set of hearings in high mileage hybrid cars.
As I watched both days of testimony two weeks ago before the Senate and House committees I was struck, dumbfounded even, by the steady stream of stereotypical corporate transformation cliches and gung-ho business rhetoric coming out of the mouths of those CEOs. Having spent my career in advertising and consulting I can tell you that what we heard was shallow and meaningless consultant-speak. What do you want to hear? Surprise! That's what I am going to tell you. Buzz words flying through the air. The scent of roses everywhere.
Let's get serious. No company in the world that has driven itself to the brink of bankruptcy, after successive decades failing to understand its markets and suffering a surprising lack of organizational vision, can develop a serious and effective transformation plan and business plans in a period of two or three weeks. I don't care how many internal people and external consultants you throw against the challenge.
And more importantly, there is hardly a company in the world, certainly not of the size, scope and complexity of the Big Three, that can implement the incredibly deep, broad and far-reaching change that these guys were optimistically promising in a period of three months. Three years? Maybe. And even then, one must realize that according to all kinds of studies (and my own 25 years experience), the majority of major corporate change efforts fail to deliver anything close to the desired results.
Nope, the guys sitting at the hearing tables don't deserve a bailout. And frankly, they have about as much chance of delivering what they glowingly and confidently promised as a snowman has to survive in the fires of Dante's inferno.
But that's not really the point is it? Because that's not the reason those Republicans (and a few Dems) refused to consider a bailout of the Big Three. If it were, they could have easily demanded that the CEOs and much of their upper management step down and be replaced by anyone they would have more faith in.
Nor was it their ideological fervor for some pure survival-of-the-fittest capitalism or their loathing for government intervention in the free market. If that were the case we wouldn't be faced with a $7,000 billion tab (yeah, $7 trillion and growing!) for federal economic rescue money.
That's right. The combined programs of the Congress, the executive branch and the Federal Reserve so far have authorized $7,000 billion and spent $2,100 billion of those funds. A full 95% of that money is directed into the hands of the nitwits in the financial industry who got us into this mess in the first place. You can bet your bottom dollar (too late, they already have actually) that the executives in those financial companies are as competent or incompetent and have as much or little idea how to get out of their mess as the Big Three auto execs. But they got their bailout, for better and for worse, because to do otherwise would have been economic suicide.
The utter antipathy for the auto industry on the part of those who refused to allow the bailout plan to come to the Senate floor didn't come from their lack of faith in those hapless CEOs or from their free market convictions. We're 2,100 billion greenbacks and counting past that point as a credible argument.
So what's the real reason they weren't willing to direct the equivalent of a measly 0.4% to 1.4% of that astronomic amount of money to the American auto industry?Theses Senators refused to support the bailout plan because of their deep-seated antagonism towards organized labor in general and the UAW in particular. They were gunning for unionized Joe the Welder and Jane the Assembly Worker.
But wait, isn't it the UAW, with their 'exorbitant' non-competitive wages and benefits, that has crippled the American auto industry? Malicious mythology and urban legend. I won't bore you with all the numbers; this article lays it out in great clarity. But here's the bottom line:
"Imagine that a Congressional bailout effectively pays for $10 an hour of the retiree benefits. That's roughly the gap between the Big Three's retiree costs and those of the Japanese-owned plants in this country. Imagine, also, that the U.A.W. agrees to reduce pay and benefits for current workers to $45 an hour -- the same as at Honda and Toyota. Do you know how much that would reduce the cost of producing a Big Three vehicle? Only about $800.
"That's because labor costs, for all the attention they have been receiving, make up only about 10 percent of the cost of making a vehicle. An extra $800 per vehicle would certainly help Detroit, but the Big Three already often sell their cars for about $2,500 less than equivalent cars from Japanese companies, analysts at the International Motor Vehicle Program say. Even so, many Americans no longer want to own the cars being made by General Motors, Ford and Chrysler."
The Big Three have been losing money for many and variable reasons but the $800 'union premium' is not the primary one. This amount is far outstripped by the thousands of dollars more per auto in purchase incentives that the Big Three have historically had to offer, versus the foreign brand names, just to get their already lower priced cars off the lot. And still they have steadily lost market share.
The UAW is far from perfect. They have been slow to adjust to modern day business realities and often been too self-centered and short sighted. But the $800 'union premium' is not the primary source of the Big Three's problems.
These senators saw this moment as an excellent opportunity to break the back of the UAW with their terms to move the bailout through the Senate. And if the terms were rejected, there was the more than realistic prospect of hundreds of thousands of union men and women out of work. Either way, organized labor in America would be dealt a terrible blow.
Their determination to get the union was apparently far greater than the solemn responsibility they should have felt to protect an extremely fragile and still deteriorating economy against another serious body blow.
For these Senators, it didn't really matter. Another potentially disastrous economic tipping point with unpredictable consequences... bailout... no bailout... they had organized labor by the balls. And shamefully that's why it was so easy for them to run for the exit and just scream "Bail out!".