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Another Reason for NOT Granting a Big Three Bailout

If you’re looking for another argument why the Big Three should not receive a bailout, it’s in today’s Wall Street Journal print edition article entitled “South could Gain as Detroit Struggles".

The article looks at how foreign car manufacturers (e.g. BMW, Honda, Toyota, Volkswagen and Kia) are locating their production facilities in the Southern US because the region’s labor is non-union. It then goes on to document a litany of disadvantages the Big Three union labor has vs. non-union labor.

Among the disadvantages Big Three labor is saddled with:
* Guaranteed jobs for workers
* Far more generous benefits and wages that surpass most other US manufacturing sectors
* Legacy costs for Big Three payrolls; for each active worker on a Big Three payroll, the Big Three must pay pensions for as many as three former workers and dependents.
* Big Three assembly lines can take up to weeks to switch over production to another model while some foreign manufacturers can switch over in a matter of minutes.

This is yet another great argument for not bailing out the Big Three. Any bailout of the Big Three would only serve to artificially prop up these outdated and non-competitive union labor practices.

I say provide “Incentive Money” (this is no longer a bailout in my mind) to the Big Three if, and only if, they agree to revise these outdated practices (among other mandatory changes). This incentive money would be provided in increments once the Big Three company has complied with certain performance improvements.

If the US Big Three are really interested in survival, then many aspects of these company, including labor unions, must agree to change their practices, and then have their changes documented and measured.

What do you think? Is this a good idea or a bust?

November 20, 2008 in Small Business Marketing | Permalink

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Comments

Unfortunately, when someone makes threats, you have to decide if they are credible. I agree that they are bloated, expensive companies. They are getting clobbered the way Kmart did by Wal-mart.

Here in Michigan they are reporting that GM could come back to profitability next year if they 'survive', mainly because the contraction is causing them to cut back significantly. I think that's why Ford is in a better position--they've been cutting way back the last couple years.

They also point out that GM's bankruptcy would shut-down suppliers--who also supply those southern plants you talk about. Suddenly no one could make cars.

Posted by: Dave | Nov 20, 2008 3:05:25 PM

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