What if...? Issues Beyond Palo Alto, posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Nov 22, 2008 at 6:50 pm Walter_E_Wallis is a member (registered user) of Palo Alto Online
What if, as a condition of the bailout, the auto industry was to be required to convert their retiree pension and medical to an ESOP at present value of the stock, in lieu of any other contract to the contrary. It might make the union less likely to strike.
Posted by T, from Duveneck/St Francis, a resident of the Duveneck/St. Francis neighborhood, on Nov 23, 2008 at 12:10 am T, from Duveneck/St Francis is a member (registered user) of Palo Alto Online
Walter, it is hard to provide a meaningful comment on your plan without a little more detail. Please share with us the overall goal or intended purpose of your plan and also how you envision it being implemented. For example, would this contractual change be applied to every auto company asking for a bailout? What if that company's medical/pension plan is not tied to the stock market and is actually reasonably strong? (I do not know that such a company exists, but the question does come to mind.) Also, what is the likely impact of such a contractual change upon people who have already retired, and on people who are on the verge of retiring? Or would the change be applied from this point forward only?
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Nov 23, 2008 at 1:44 am
Unless the medical and retirement are fully funded, and I doubt they are, they are now subject to termination by bankruptcy. An East Bay steel company went bankrupt and lawyers ate up the residual value, leaving the workers with nothing. Outside, that is the real me.
Posted by RS, a resident of the Duveneck/St. Francis neighborhood, on Nov 23, 2008 at 9:48 am
I think there problem is more fundamental. Basically when asked how they were going to be profitable, they responded and I paraphrase, "Sell more cars". Maybe they should be thinking more on the lines of how do we reach profitability with the number of cars we are selling today. That unfortunately requires harder choices that they are trying to avoid.
As to your question which like T, I am not quite sure I follow either, I dont know how you get individuals to give up vested pensions. Its sort of like taking away a person's 401k or IRA to save a company. Its an existing earned asset they have. Now you could give them the choice of moving over to a performanced based incentive plan, but they could choose not to take that choice. Since these are union shops we are talking about that makes presenting the choice even harder as union leadership will need to be convinced as well and seem to like to play chicken on these sort of matters.
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Nov 23, 2008 at 11:21 am
The pensions are a pledge against future earnings. Prudence would have suggested some 3rd party insurer, but the unions opted for pensions out of the revenue stream. When the stream dries up, no uninsured contract or vesting will do a damn thing to keep the money flowing. The parable of a goose and gold eggs comes to mind.
Posted by T, from Duveneck/St Francis, a resident of the Duveneck/St. Francis neighborhood, on Nov 24, 2008 at 12:21 am T, from Duveneck/St Francis is a member (registered user) of Palo Alto Online
Hmmm... it sounds like the auto unions gambled with their pension plans and lost. Similar to the way upper management gambled with the future of the American auto industry and lost. My pet peeve is that they purposely dropped their early lead in electric & solar technology because it was "too hard to develop" and fell back on SUVs instead. They even bragged about it, saying that the fact that people were buying their vehicles was proof that they'd made the right decision. Huge mistake! The writing was so clearly on the wall. And now these companies are failing because other companies stepped in and did what they couldn't. Honestly, I'm not in favor of an auto bailout for companies that are not in a position to compete. I think it would only be throwing good money after bad. Unless our auto industry can demonstrate that it has ideas worth developing, it should be allowed to die. Perhaps something good will rise from the ashes. As things look now, an auto bailout would only prolong the inevitable -- subsidize a slower and more painful death.
But of course I am not the decision maker. So, assuming the bailout happens, here is a question about Walter's "what if": How important would it be, in this case, to keep the unions from striking? I mean, if the companies aren't selling cars anyway, how much need will there be for those people to be working the lines? (I do understand that the failure of some of our auto companies would mean the loss of millions of jobs and would have a noticeable impact on our economy.)
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Nov 24, 2008 at 2:37 am Walter_E_Wallis is a member (registered user) of Palo Alto Online
The Corvair was America's equivalent of the Bug, a car whose popularity bypassed the Model T, my first car, but war unfairly trashed by someone who lacked the concept of driving. The industry is largely to blame for its troubles as we all are, but it is not guilty of denying consumer choice. For all the buyer's piety, we still pick the sporty model unless we are sensible enough to buy a pickup. Kinda like the guy who lauds the ideal woman, but only dates those with big attributes.
Posted by Perspective, a resident of the Midtown neighborhood, on Nov 24, 2008 at 6:13 am
You don't see non-American cars having troubles because they have avoided the Unions since coming here, giving them more flexibility and less overhead, they have 1/3rd the dealerships so less overhead, and they don't have to live by the REGULATIONS put in place by our Dems on our own auto industry.
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Nov 24, 2008 at 8:49 am
Most of the foreign makers were granted subsidies by their government to get into our market, and special tax treatment to locate in our South. I have owned a few foreign cars and currently drive a KIA, but my years of driving pickups favorably impressed me about native trucks. I only want the UAW to give US makers a chance.
Posted by T, from Duveneck/St Francis, a resident of the Duveneck/St. Francis neighborhood, on Nov 24, 2008 at 3:32 pm T, from Duveneck/St Francis is a member (registered user) of Palo Alto Online
Walter, I think your proposal might make sense for certain companies and should be an alternative to consider, but not a requirement. There probably isn't any one ideal strategy to employ for bailouts. Probably best to look at each company on a case-by-case basis.
Posted by R Wray, a resident of the Palo Verde neighborhood, on Nov 25, 2008 at 9:53 am
Fatal wounds were not self-inflicted but inflicted by the government. Included are the regulations that give the unions unfair bargaining power and the CAFE regs that force them to make small cars which are not profitable for them. The government should get rid of the regs and then let them reorganize under bankruptcy.
Posted by Walter_E_Wallis, a resident of the Midtown neighborhood, on Nov 25, 2008 at 11:00 am
No argument with that, RW. When they first established the CAFE standards I begged them to, instead, establish ton/miles/gallon standards, a real indication of efficiency. Alas, the forced abstemiousness would not concede to comfort or convenience.