Letter to the editor:
Auto loans would have saved heartache
David Adams, Las Vegas
Wed, Dec 17, 2008 (2:01 a.m.)
The Republicans in Congress have managed to block the emergency loan to the Big Three auto companies, but at what cost?
Various publications report domestic labor costs at about $70 per hour, and labor costs for some foreign car manufacturers with plants in the United States run closer to $40 per hour. Senate Republicans insisted the unions renegotiate contracts to bring domestic labor costs more in line with those of the foreign companies.
What is missing is simple arithmetic. GM, Ford and Chrysler have been in business in this country for a century. Over that time, thousands of employees have retired and are (deservedly) receiving pensions.
When the $70-per-hour figure is used, it means that GM, for example, incurs labor costs that include pensions and other benefits for retirees. Because the foreign companies haven’t been in business as long, their retiree benefits don’t come to nearly as much, so their labor costs appear to be much less.
If General Motors, Ford and Chrysler are allowed to go into bankruptcy, those labor costs can be drastically reduced. How? Simple. The U.S. government (meaning you and me) will have to pick up the costs for all of those pensions, thus reducing the Big Three’s “labor costs.”
Immediately, labor costs will align very closely with those of the foreign manufacturers. This should please congressional Republicans, but it means the American taxpayer is stuck with the bill.
Beyond that, if the Big Three go into bankruptcy, they will have to work out payments to creditors (meaning small businesses across the country). They won’t have to make full payment, but will have to wait for a bankruptcy court to determine what percentage of the debts they will have to pay.
Meanwhile, small businesses will have to wait for payment, surely causing many to run out of money and either declare for Chapter 11 bankruptcy protection themselves or go out of business. More unemployment results, not to mention businesses disappearing along with their tax dollars.
Wouldn’t it be much better to extend the loan to the auto companies?
Auto loans would have saved heartache - Las Vegas Sun
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