As someone from Michigan, I’m upset by the plight of the ‘Big Three’ car manufacturers. However, it is not Congress that has dismayed me by not bailing them out, but rather the extraordinarily selfish refusal of the UAW (United Auto Workers) to accept pay cuts. GM currently pays workers over $70/hr (wages, plus pensions, and health care for workers, retirees, and spouses), while Toyota’s labour costs only $48/hr. The UAW have refused to guarantee to take a pay cut before their current contract ends in 2011, seemingly oblivious to the fact that the companies may well not exist by then.
I’m in full agreement with those who voted against the bill: the UAW needs to make sacrifices for the sake of its workers and the survival of the industry. It is unfortunate that the local press has blamed the Senate for the failure to reach a deal, while the unions get away with strangling the life out once world-beating businesses. Sadly, chapter 11 bankruptcy is probably the Big Three’s only way out.
And with an estimated 3 million jobs tied to the Big Three and their failure, it’s only a matter of time before Michigan finds itself in serious trouble as well. While the Bureau of Labor Statistics reports national unemployment at 6.7 percent, Michigan sits at 9.3 percent, with nearly half a million residents unemployed. The US as a whole is coming to realize that it is in a recession; Michigan, however, has (arguably) been in one for eight years. Unlike the rest of the US, the state was unable to recover after the downturn of 2000, thanks to its uncompetitive industrial base.
Regardless of whether a bailout yet goes ahead, the cost of Detroit to the taxpayer is expected to be high. According to the Detroit News, “If two of the Big Three declare bankruptcy and are forced to liquidate, federal and state taxpayers would lose $66 billion in the first two years alone”.
In the long run, I understand that automakers would be best off filing for bankruptcy protection, allowing for massive restructuring and rebuilding of the auto industry. In the short term, however, it’s a frightening time for Michigan.