Why are we talking about spending about 8 times what the companies are worth to bail them out?

http://www.powerlineblog.com/archives/2008/11/022087.php

We should be honest about this - it is a payoff to the UAW in exchange for them not trying to destroy the economy. Because we all know that the UAW is NOT going to let go of all the goodies they have wrangled over the past 50 years in a bankruptcy proceeding. They will almost certainly end up demanding a Chapter 7 liquidation and force a strike at all the component manufacturers to force them out of business.

The UAW needs to be forced out if GM and Ford are to have any hope of survival.

I would suggest a fire sale and let Toyota, Honda, Volkswagen, etc. pick up the pieces. Budweiser just sold itself to the Belgians, so I can't see why anyone should cry about this.

I have just heard the most self-entitled comment on a CNN news podcast: The representatives of the UAW not only demand that the 25 Billion dollar help package should be received pronto but they also declare that they unilaterally refuse any concessions over the salaries, health benefits and the like.

I can't believe how full of themselves the UAW is. It is up to playing a game of poker with the very future of the American automotive industry while acting like a parasite towards the other players around the table.

They really need to be put down a peg or two.

Are you surprised? Entitlements are vitually irreversible once they are handed out. There's a french term that sums it up perfectly ... "droits acquis".

It is up to playing a game of poker with the very future of the American automotive industry

No, they are playing chicken with the U.S. Economy. And they show no sign of flinching.

Hubris is the rock upon which our economy will be shattered.

Why should anyone be surprised? This is the same UAW that fought for the right to smoke on the assembly line. I guess they thought it was the customer's problem if the leather seats in their new cars were burned full of holes.

You could write an encyclopedia about the follies of management at the Big 3, but it's hard to believe that Toyota, Volkswagen or any other company would not be staggering toward bankruptcy if they had the UAW dragging them down.

Over-inflated sense of entitlement, anyone? o.O

Are you serious? They're expecting TAXPAYERS to make all the concessions? (Not that I'm surprised.)

I am serious. It was a 25 sec. spot but it weight heavy on my mind. The UAW just transited from corporate parasite to Governmental leech.

I can't understand this attitude in a time of crisis. One local example; Bombardier Avionic just launched the construction of a new plane. What did the Syndicate said when they heard of the plan? They called the company leader and they make concessions to MAKE IT WORKS! They knew that the construction could be easily exported and they opted for some flexibility to keep the work done in the Montreal area.

So, here's my point; what kind of parasite will suck his victim dry when there's no other prey around? A dumb one.

Toubrouk - case in point, a local job shop here was bought by another company, and they wanted to move some jobs to another plant in North or South Carolina. I think they were willing to pay relocation expenses for anyone who wanted to move with the job. That wasn't good enough for the union.

They struck. Demanded that all the jobs stay here, everyone gets a raise, and a guarantee that no jobs will be relocated in the future.

The company closed the plant and fired everyone.

The union was fine with that outcome.

It's all about power and money. As long as the union gets theirs, everyone else can burn.

I read today that 70% of Americans are opposed to a Big 3 bailout.

And it is pretty hard to feel sorry for a bunch of people who are so overpaid! The rest of us have gotten used to asking ourselves if we could make the same money somewhere else. The attitude of some of these union workers makes me think of stories I've heard about the mentality of workers in the U.S.S.R.

IMHO, the crisis facing the Big 3 is primarily, or even largely, of their own making.

They didn't dream up the Wagner Act, nor did they create the credit crunch that is causing their sales to plummet.

That said, Brian et al above are correct: the UAW is a pox on the economy. The only way to see the back of that rent-seeking cartel is to side with the 70% of Americans who are opposed to a bailout.

Here's an article to calm your nerves about the coming, bigger, Detroit crisis:

http://www.time.com/time/business/article/0,8599,1859511,00.html

IMHO, the crisis facing the Big 3 is not primarily ...

Ooops.

Economist Michael Jensen is quoted above:

He wanted his students to understand that when a company makes money-losing investments, the cost falls upon all of society. Investment capital represents our limited stock of national savings, and when companies spend it badly, our future well-being is compromised.

I understand that he is a noted economist, and I am just me, but this statement is wrong, and it is a big part of our problem understanding the free market.

When a company loses money, it is supposed to be the people who invested in the company who lose money, the stockholders and the lenders. The view above, that a company is allocating capital for us all, is the justification for over-regulation, control, and government meddling (city, state, and federal).

Note. I recognize that there are side effects. The employees of GM bought houses and established families in the "company town" of Detroit and other towns dominated by this single, large business. That is a type of investment in GM. The danger of one large business going broke is balanced by the employment opportunities of working for that business. GM's workers balanced the danger of GM going broke (a small probability) against the large salaries and benefits for working there.

Everyone takes chances on his study, career, and job choices. Why should GM workers be special? Almost all have skills that can be transferred to other companies, like us all.

Consider that I can take $50 and go to dinner or buy (invest in) a share of GM (forget the actual prices). I am not depriving the society of my investment if I go to dinner. That is my right. If I invest in GM and lose the money, I am also not depriving the society of my investment by betting wrong.

Of course, I would be happier to gain on my investment. Certainly the society would be happier, because a profitable company is producing value for its customers, more value than is returned as profit to the shareholders. But, the society is a bystander, benefitting from the company's success, but not suffering from its failure.

That is the beauty of free-market capitalism. The risk and reward goes to the investors and the people who choose to work on the project. The investors take the loss if the company does a bad job (with some loss to the workers who must change jobs). The public can benefit from the company's products by freely choosing to buy or not, and the investors make a profit if they have organized a business which creates value.

The GM bailout is the worst of market socialism. Now that GM investors and workers will suffer a loss, they go to the government (all of us) to put the loss on us. Under this system, the politically connected investors, cities, and states get money from us. They want to make us the investors when the company fails, but keep the profits (and wages) when the company is successful.

They made the bets, why come to the rest of us to reimburse them? They shouldn't, and we shouldn't pay them because they failed. If GM and others have great prospects, they should make their case to willing investors, not to the politicians of congress.

Andrew --

We use the institutions of private property and the market to allocate our finite stock of value earned and not yet consumed, i.e. capital.

In the aggregate national production depends on the efficient allocation of these national savings.

It's a risky business. In detail the market system ensures that gains from risky allocations that worked out well are received and spent first by those who were directly at risk.

This seems to work better than having the allocation decisions made by people without direct feedback from the results.

--
phunctor