An Ethical Approach to Bailing Out Detroit

Susan, good article. I have always said ethics beat morals hands down because ethiccs apply equaly to both sides. I totaly agree with all your points. How do we get the goverment to do this with all of or at least a majority of the economic problems we face. if they would we could walk out of this economical breakdown much sooner.

TheObserver,
I'm not against getting what they deserve, I'm just saying that it isn't right they get more. I understand they "bargained" for this but I don't think it was a fair bargain. That is why pretty much all Unionized businesses are going bankrupt.

If someone stuck a gun to your head and said give me all your money, you would probably bargain with them and give it up, but in truth it wasn't much of a bargain. This is essentially what happened to the auto industry. Unions would have bankrupted the car companies by refusing to build their cars. In retrospect, car companies should have fought back more, but at the time I don't blame them. Now everyone is paying the price, including the Unions. Everyone needs to learn to be responsible and make reasonable bargains and manage their assets well.

If everyone did Union labor then every industry would be in the same situation as the car companies. How is this good for our country. I am much happier myself actually earning my money by being valuable to my company and not bullying them to give me more by refusing to work. That's what they do in other countries.

If you want to look at the ethical merits of a bailout then I have to ask is it ethical to provide pension/health care benefits to autoworkers and not Citi Bank workers or anyone else for that matter who has been laid off. I can see why the Democrats are so eager to help out the UAW since they are such huge supporters of their party but I really can't see where it is ethical or fair.

The Union contracts that the big 3 signed are killing them and the only way they can get out of them is through Chapter 11. They also shouldn't be getting any help until all of the executive perks are gone that cost the company money and the entire upper management structure who haven't learned a thing from the 1980's are fired without "golden parachutes".

The Honda, Nissan, and Toyota plants in the US are not unionized. The workers there refused the UAW offer to join and it looks to me that they are doing pretty well. Maybe there is a lession there somewhere...

kert1 Author Profile Page:

There are some interesting ideas here that may work out and some others I'm not fond of.

I don't like guarenteeing the workers benefits and pensions. This is a trap. I don't know about you but my benefits and retirement aren't guaranteed and I doubt most people have this. Just because a Union forced the auto industry into making promises it could only meet under ideal conditions. If you want to talk ethics, this would be the place to start. How about making people earn their salary, instead of strike for it. They should get a resonable return on what they put in their pensions and they should get benefits at a fair rate. Neither involves government intervention.

-The workers did pay into GM to get their guaranteed benefits. The only unfair issue here is that most everyone else has to deal with a shoddy 401K plan (including me) Just because the Union collectively bargained for something better than what you have is not a reason to crush it. That's the whole point guy. If more of us collectively bargained then we wouldn't lose health benefits so quickly, we'd still have defined benefits, and there'd be a grievance process to shoddy management.

Last count 85% of people have lost those benefits because they voluntarily decided to stand alone and look where it's gotten most of the US workforce. Anyone who voluntarily cuts their hamstring needs to have their head checked.

I would suggest that it would be immoral to even consider bailing out the automobile makers. The executives travelled back to Washington in their private jets to beg for money; they stayed in the most expensive hotels in town, ate in the most expensive restaurants, palled around with their connected political friends. These are the Sadducee of our time, the ruling elite without morals, with absolutely no connection to ordinary people. The "workers" they claim to represent, are another face of the same coin, big unions that are quite as much to blame for killing these companies, as are the slicked down executives. Put them all down, like a rabid dog! Help shove the automotive industry over the edge.

The financial plight of the auto industry and many other US companies needs to be addressed in a serious, intelligent way not driven by the hysterics of the managers, the workers or the media. It is clear that the autoworker’s compensation cannot be sustained at current levels. One benefit of reorganization may be to divorce health care from compensation leading to a free-market system of required health insurance for all Americans. Also, with the significant increase in life expectancy, it is impossible for the country to support a system where workers can retire in their mid-50ths and live 30 to 40 years on company and taxpayer funded benefits. Finally, the level of top executive compensation cannot be sustained if taxpayer support is to be provided. The arrogance of these executives at the Congressional hearings was disgusting.

I think the solutions are proportionally correct and completely reasonable. To bad so many others are not gifted enough to simply explain a problem and solution. I agree with your solutions. Technically, I most like the committment to the workers and valuing their controbution to the workforce. I am always disappointed when I hear of those who state others ought not have because I don't or did not have. That level of thinking is extremely shallow. You should consider doing a article on the the evolving role of unions and collective bargaining from an ethical standpoint. Many get the issues confused with regard to worker participation and collective bargaining. The fact is it brings about economic effeciencies and the best products. So union ought not to be dead as a result of the auto makers dilemna just more evolved. Kudo's to you and I look forward to reading more of your articles.

Petition Congress:

http://www.rallycongress.com/no-bailout-for-the-auto-industry/1409/

NO BAILOUT FOR THE AUTO INDUSTRY

Nancy Pelosi, with the help of Barney Frank, wants to bail out yet another failed sector of the economy. It is not government’s role to reward incompetent, overpaid executives pursuing a failed and anachronistic business model. The American auto industry is in trouble because it produces a shoddy, polluting, gas guzzling product at noncompetitive prices driven by trade union benefit packages. It is a waste of taxpayer money to try to shore up an industry that needs to be radically restructured. The Big Three should be allowed to fail and file for reorganization under Chapter 11 of the Bankruptcy Code. They will not cease to exist, but will be restructured under the supervision of the bankruptcy courts. Congress cannot do a better job than the courts. The courts will supervise the reorganization of the industry without being tempted to reward lobbyists, campaign contributors and unions for their political and financial support.

Congress must allow the economy, existing laws and judicial bodies to resolve the Big Three’s financial problems and not throw more taxpayer money away under a hasty and ill conceived bailout.

It is hard to replace auto parts with ethics when there is no more parts for american cars. How about some common sense which seem to be in short supply also.

These bailouts are a joke. We've already given away $2 trillion but haven't fixed the underlying problem which started this - housing. We must stop rewarding poorly managed companies with bailouts that have no oversight. All these execs seem to care about is vacationing with our money, and today we learn the automaker execs travelled in style to D.C. to beg us for this money.

I hear it argued that we must save the automakers to save jobs. But the total number of jobs provided by automakers and those dependent upon services to automakers account is only 846,000 positions. Yes this sounds big, but Walmart alone has 1.4 million employees. And furthermore, yesterday the automakers stated auto sales will be down to 10 million annually (from the 15 million last year). That to me says job losses/consolidation regardless of whether they get the money. And furthermore, they stated this money will only get them through March. Why are we not investing in our roads, alternative forms of energy, etc?....each which would create millions of jobs?

Any bailout should be spent on fixing the housing crisis or it won't matter if GM/Ford/Chrysler survive. If you can't afford your mortgage payment, you surely aren't going to buy a car.

If we don't stop this bailout, this will set a precedent for the airlines to be next, then hotels/travel industry, then restaurants, etc. It's got to stop.

Contact Congress and tell them to vote no.

There are some interesting ideas here that may work out and some others I'm not fond of.

I don't like guarenteeing the workers benefits and pensions. This is a trap. I don't know about you but my benefits and retirement aren't guaranteed and I doubt most people have this. Just because a Union forced the auto industry into making promises it could only meet under ideal conditions. If you want to talk ethics, this would be the place to start. How about making people earn their salary, instead of strike for it. They should get a resonable return on what they put in their pensions and they should get benefits at a fair rate. Neither involves government intervention.

I do think that the best use of government money may be in helping guarentee what the automakers produce. This would help keep the automakers stay afloat without fear from customers. This is the lifeblood of the industry. I'm not sure if it is necessary but it may be the best way.

I am definitely for the auto companies declaring bankrupcy as the airlines did. Unfortunately the Unions have just taken too much and are unwilling to compromise. I think the figure is around $75 an hour for GM and $45 an hour for Toyota manufacturers. How did people let this happen. This is the main problem. Let the American workers earn a fair wage and I do mean earn. They shouldn't get tons of money just for being in a Union. That's not the way I earn my money.

If the Auto industry does this the government may see fit to help out in some small ways to make sure these companies stay around. But declaring bankruptcy is not the end, but simply a new beginning. Let's make sure we are fixing the problem.

Some points we shouldn't ignore:
-Job retraining for what? No one is hiring in this recession, and as we dismantle our manufacturing infrastructure, no one will in the future either. We can't all be med techs. "Job retraining" is only a compassionate sounding way to dispose of workers.
-For the past ten years, our economy has run on home appreciation financing consumer purchases and debt securitization. Foreigners have bought, not our goods, but our mortgages and fancy financial instruments. Some day we need to manufacture some goods with intrinsic value to pay our way. Disposing of the auto companies, 20% of our manufacturing base, is not a good way to start.
-Foreign carmakers set up plants in the US, not because it made business sense, but because of pressure from domestic manufacturers (remember the talk of quotas?) and Congress. If there is no domestic auto industry, there is no reason for foreigners to continue manufacturing here. It's a lot cheaper in China, India, Korea and Mexico.
-Ceding the auto industry to foreign companies would certainly mean the loss to our economy of billions of dollars and good jobs in research and design. Not to mention the national security implications of such a loss.
-There's more than a little politics in this controversy. Henry Ford did a lot to build the middle class when he implemented the $5 day. The UAW won many battles in building the middle class that benefited millions of workers not even members of a union. Political hay is being made of the "gold-plated" pensions and health care of UAW workers, building resentment even among those who have indirectly benefited. Republicans see this crisis an an opportunity to kill one of the largest and most powerful unions. We as a nation need to decide if we value our middle class, and what steps we're willing to take to preserve it.

It is ethical to make sure that workers pensions and health care are guaranteed. However, the author ignores the crucial issue (for republicans) of workers' unions under the new "reorganization". I assume they will disappear, which would be unethical. In addition, if we had national health care, as do virtually all civilized countries, then it would be much more ethical and more easier for GM to take care of its workers.

-Repeated for support

GM should file Chapter 11, all Officers/Board immediately terminated, and healthcare/pensions for workers guaranteed by the gov't. Any lost jobs should be retrained for a coming energy revolution in our economy.

We need to fix health care and then Unions won't be as much of a threat. If universal care is considered a human right in the rest of the civilized world why is it that we scream "you're on your own" so loud here?

It is ethical to make sure that workers pensions and health care are guaranteed. However, the author ignores the crucial issue (for republicans) of workers' unions under the new "reorganization". I assume they will disappear, which would be unethical. In addition, if we had national health care, as do virtually all civilized countries, then it would be much more ethical and more easier for GM to take care of its workers.

...the major problem is that the government shouldn't be dealing with this at all. Yes, the failure of a company the size of GM will send shock-waves throughout the economy, but this is the natural result of it growing so large.

Are we to avoid all risk or negative results in life, from now on, and use the government to make sure that this happens? This is the true ethical question here. Do we really want the government to get involved in the private sector to such an extent that is necessary to make sure that Americans never suffer any hard times?

It's not possible for that to happen. What happens is that some of us suffer for the benefit of others, at the behest of government agents. In this case sure we'll just keep on paying taxes to keep part of the economy afloat instead of letting these people diversify or migrate into new industries or into new collaborations to maintain their own existence. At some level you just have to stop paying-out rope and let people climb with the rope they have.

Thank you for a balanced and sensible alternative to the extreme solutions that are usually presented.

Hmmm, the most efficient and ethical approach would be to sell GM, Ford and Chrysler to Toyota and Honda for a $1 and replace all the Big 3 stock with stock from these companies that know how to make cars we need.

1. The guaranteed warranty is an interesting idea. But, if the company goes away, there's a great risk that not all replacement parts will be made by other companies. And without replacement parts, a guaranteed warranty is worthless.
2. If GM's pensions and retiree health care disappear, it will likely cost all of us a lot more than $25 billion. Have you researched that, or was it just a guess?
3. If GM files for bankruptcy and survives, what happens to Ford? It looks like Ford can survive without the bailout. But if GM can void its union contracts and pay its workers a fraction of what Ford pays, how can Ford compete? Would it force Ford, an otherwise viable company, into bankruptcy so it, too, can void its union contracts.