Auto Industry Meltdown

With High School football over for the year, OSU's football team in bowl prep for another 18 days, and Daytona nearly 2 months away I'm without my typical post topics. That's not to suggest nothing is going on that gets me fired up, but not the things I typically write about.

This week we've watched as Congress wrestled with the decision to "rescue" the big 3 automakers or not. A previous post should give you a solid idea where I'm at on this. I want to reiterate, I don't want any of the hundreds of thousands of people whose livelihood is tied to these three companies and their subsidiaries, affiliates, and vendors to lose their job.

The key on this deal is the role that unionized labor will play. At present, the UAW is refusing to rework their contract in any meaningful way. Let me be clear. Without a massive reduction (probably 30-40%) in what the US automakers pay their unionized workers, they cannot succeed long term. Their business model is insolvent and will fail until this massively out-of-balance element is adjusted to a reasonable level. What this means is that to give them money now may avoid a liquidation or chapter 11 filing, but won't fix the underlying problem and we'll face this same issue again.

Ultimately, whether it's Congress (the opposite of progress as the lame joke says) or the Treasury or the Bush Administration someone is going to keep these three companies from going bankrupt. And when they do, organized labor wins again.

I'll come right out and say it, labor unions - the ones that operate like the UAW - are parasitic in nature. They feed off other entities and will ultimately destroy that other entity if not destroyed themselves first. When will we have enough collective spine to break the unions and start fixing problems?

I also want to address one thing I keep hearing. Some people are upset that the automakers are being forced to come up with a plan to get back on track before getting funding, but the financial institutions weren't forced to do this. Two things: 1. You're right, the financial institutions should have been forced to this too (or just allowed to fail). 2. But here's the difference, the financial institutions have the ability to be financially viable long-term if they can correct the current issues. As explained above, the auto industry does not. Any money we give to Detroit might as well have been put in a barrel and burned.