The responsibility for the collapse of the emergency bailout for U.S. automakers should be shared by both U.S. Senate Republicans who would not budge and union leaders who were more determined to protect wages than save jobs.
The plan that was scuttled by Senate Republicans Thursday night would have offered $14-billion in emergency loans to General Motors and Chrysler (Ford has said it doesn't need bridge loans at the present). In exchange, a car czar — appointed by President Bush — would oversee the loans. The czar would have the power to call in the loans if automakers did not come up with a plan by March 31 for restructuring and future viability. All stakeholders, including creditors, dealers, the United Auto Workers and shareholders, would have to offer meaningful concessions.
Senate Republicans wanted more assurances that union workers would have their wages and benefits cut as a condition of the loans. They sought to reduce worker compensation next year to the level of nonunion workers employed by foreign automakers operating in the United States. It was a nonstarter for officials at the UAW who said they would consider wage concessions in 2011 when union contracts are due. By that time, it may be too late to make any difference.
The union's position, as its members' jobs hang in the balance, is shortsighted. Most workers would agree a wage cut is better than a lost job. And while Senate Republicans may have sought too deep a wage cut, UAW president Ron Gettelfinger should have offered some level of faster wage concessions, in addition to the union's promise to consider ending a jobs bank program that pays laid-off workers nearly full salary.
Right now, workers at the Big Three make about $40 per hour in compensation, including wages, overtime and vacation pay, plus $15 per hour in benefits, for a total of $55 per hour. (The $73 per hour figure that has been reported is misleading since it includes costs for retirees.) Workers making cars for Toyota and Honda in the United States make a total of about $45 per hour in wages and benefits.
But Senate Republicans should also remember that forcing the union into wage concessions and automakers into bankruptcy is no solution. No pay cuts or bankruptcy judges will make the Big Three viable if their products aren't appealing to consumers.