Without a substantial bailout by the US government (similar to that offered to Chrysler in 1979), I predict that at least one of the big three will be bankrupt within the next few years. Their pension overhangs and health care expenses are absolutely staggering. Rising gas prices have caused a pretty big shift away by consumers from the higher-margin SUVs in recent months. As well, the big 3 have painted themselves into a corner by offering massive discounts and financing deals; now people won't buy their cars without them. Honda et al have no such problem. On top of that, the Japanese automakers are now knocking down the door of the last un-competed auto market in North America: trucks. The NA makers will have their heads handed to them.

Last weekend, I was flipping through the latest issue of Consumer Reports. Inside, they rated the various car makes according to reliability. I believe the highest American brand was 18th on the list. So, although the American companies have closed part of the gap that existed between them and the Japanese car makers, there's still a sizable chasm.

[ 19 April 2005: Message edited by: Dex ]

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It's absolutely sickening, but it's a viable strategy, given current regulations.

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Why do you find it "sickening," Dex? I thought you said over on this thread that laid-off workers who lose their health care and pensions should just go back to school and get PhDs like you are doing? In the case of the Big Three automakers, isn't the threat of bankruptcy and cutbacks to health care and pension benefits just "tough luck" for the workers?

To be clear, my own opinion is that I do think the crisis in U.S. manufacturing, which can in fair part be traced back to the crisis in the U.S. health care and social welfare systems, is indeed "sickening."

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Originally posted by robbie_dee:
Why do you find it "sickening," Dex? I thought you said over on this thread that laid-off workers who lose their health care and pensions should just go back to school and get PhDs like you are doing? In the case of the Big Three automakers, isn't the threat of bankruptcy and cutbacks to health care and pension benefits just "tough luck" for the workers?

To be clear, my own opinion is that I do think the crisis in U.S. manufacturing, which can in fair part be traced back to the crisis in the U.S. health care and social welfare systems, is indeed "sickening."

But I find your position much more confusing and I would be interested in your explanation.

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The thread to which you're referring was about outsourcing jobs. A company needs a task done and it can either get it done in-house or get some other company to do it for them. As long as they're meeting their obligations to their employees, I have no problem with this. In that thread, I was objecting to the notion that a person can take a job in a specific area and be guaranteed a job in that area for the rest of their life without question. Besides, a huge portion of Japanese and other cars is made right here in North America, and both types of companies have union and outsourcing issues. The big 3, in fact, are widely recognized to have worse labor and supplier relations than do the Japanese makers. so you're barking up the wrong tree there.

The Japanese and others are still outstripping the Big three on quality issues.

You'd think that the Big three would have a leg up on rust prevention, being that they are all headquartered in Detroit, the salt corrosion capital of the world. But no. You still see U.S. cars rusting out in the same dam places that they rusted out in over a decade ago or more. Bottoms of doors, bottoms of trunk lids, edges of wheel wells.

Drain holes, boys, drain holes.

I'll give you the reason why Big three quality sucks.

Our plant does have some quality issues right now. So, Ford comes in to "help" us. You know how they help?

Ah, tree diagrams of the problem.

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The thread to which you're referring was about outsourcing jobs. A company needs a task done and it can either get it done in-house or get some other company to do it for them. As long as they're meeting their obligations to their employees, I have no problem with this. As long as they're meeting their obligations to their employees, I have no problem with this. In that thread, I was objecting to the notion that a person can take a job in a specific area and be guaranteed a job in that area for the rest of their life without question.

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The question then is what obligation do employers have to employees, isn't it?

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DETROIT -- General Motors Corp. and the United Auto Workers union appear headed for a historic clash as spiraling health care costs seemingly threaten the very survival of the world's largest carmaker.

GM reported Tuesday it lost $1.1 billion in the first quarter, its largest quarterly loss in more than a decade, and it cited the cost of providing health coverage for its workers and retirees as a main culprit.

GM didn't provide details of what it spent in the quarter for medical expenses, but it has said the bill for covering its 1.1 million employees, retirees and family members is likely to approach $6 billion in 2005, up 15 percent from last year's tab of $5.2 billion.

"Addressing health care is our top objective," GM chief financial officer John Devine said Tuesday.

But it may be years before any concrete results are evident. That's because the current four-year labor agreement with the UAW runs through 2007, and union leaders said last week they have no intention of renegotiating the current contract. Instead, they said they'd do what they could within the agreement to help GM reduce health care spending.

UAW spokesman Paul Krell said the union had no comment Tuesday about GM's first-quarter results.

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Originally posted by robbie_dee:
What's the difference between telling someone he or she is laid off, or has to accept big wage or benefit cuts, because of rising health care costs, versus telling someone he or she is laid off, or has to accept big wage or benefits cuts, because it turns out someone in another country can do their job cheaper? I think its the exact same thing.

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So long as companies obey labor laws in their hiring and firing practices, I have no issue with what they do. When they are breaking a legal contract in order to get out of prior obligations (that's what bankruptcy allows them to do), I have a problem with it.

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You're attempting to distinguish between two types of actions, both of which are legally permissible. One is the "right" of employers to fire employees (subject of course to collective agreements and anti-discrimination laws), the other is the "right" of employers to declare bankruptcy. I don't think that distinction makes sense. And I don't think your comments on "prior obligations" vs. obligations "going forward" makes sense, either.

When many people (often decades ago) took jobs at large, successful manufacturing companies, they had no reason to think that in the future, their governments would negotiate international trade treaties that would eventually lead to their jobs being eliminated. They may have expected some retraining and moving around within the company, but I also think those workers expected that if they showed up and did their jobs well, they quite likely would have a career there. I don't think that most employees were naive to believe this, either. It was precisely what their employers were telling them, and often what parents and grandparents in the community had done before.

Widespread outsourcing has been a total, unexpected, non-negotiated shock. If anything, it is an even bigger shock than a company declaring bankruptcy. While it was historically rare for a large employer like GM to declare bankruptcy, it was not unheard of. If workers were to try to imagine what might possibly threaten their jobs, they were far more likely to think about what happened to Studebaker than they were to think about the threat of foreign competition and outsourcing.

I think a company which shirks its obligations to workers through bankruptcy is doing pretty much the same thing as a company which dumps on them for any other reason. And I think to take a consistent position one has to believe either that workers be protected in all cases, or that they not be protected in any case.

What would you say to a rule that would allow companies to outsource as many jobs as they wish, but obligates those companies to retrain, at its own expense, any workers who are displaced by the outsourcing up to the point where those workers are able to obtain a new job with the same compensation and benefits as the old one? And if such retraining is not possible, the company is obligated to pay the workers compensation equivalent to their lost expected future income?

[ 20 April 2005: Message edited by: robbie_dee ]

The airlines are going through the same thing as they try to compete with Southwest. They cut back on meals and service and prices, and they still can't keep up with Southwest. Many are now heading to bankruptcy court to squeeze concessions out of their various unions. Many are in their death throes and only delaying the inevitable.

Many of these companies, airlines and automakers alike will either have to drastically restructure their companies or close their doors for good.

Edited to clarify to whom my post was referring

[ 20 April 2005: Message edited by: Dex ]

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Originally posted by robbie_dee:
What would you say to a rule that would allow companies to outsource as many jobs as they wish, but obligates those companies to retrain, at its own expense, any workers who are displaced by the outsourcing up to the point where those workers are able to obtain a new job with the same compensation and benefits as the old one? And if such retraining is not possible, the company is obligated to pay the workers compensation equivalent to their lost expected future income?

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Following your logic, we would still have companies around today paying gajillions of dollars to people who took a job in order to get ready for the Y2K issue at the end of 1999. And companies would still likely be paying a whole pile of people who worked on the '76 Olympics or whatever. It's lunacy.

[ 20 April 2005: Message edited by: Dex ]

• I'm making a fairly decent living
• The company is hemmoraging money due to pensions and benefits
• I had unions and other activists professing to be fight for my (worker's) interests demanding that the company spend more money on pensions and benefits
  

It's the system in the States that stinks. Workers there are propping-up big pharmaceuticals and private sector health insurance. Now Bush wants to cut Wall Street in for a share of public pensions. Somebody's got to go to work everyday with lunch pail in hand to create all this surplus value in the corporate welfare state.

[ 20 April 2005: Message edited by: Fidel ]

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Following your logic, we would still have companies around today paying gajillions of dollars to people who took a job in order to get ready for the Y2K issue at the end of 1999. And companies would still likely be paying a whole pile of people who worked on the '76 Olympics or whatever. It's lunacy.

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Its not my logic, its yours. You say that companies should be obliged to pay workers the benefits they previously committed to them, regardless of bankruptcy. I say (for sake of argument) that companies should be obligated to cover the cost of retraining, or to pay workers the expected value of their lost earning potential, before outsourcing their jobs. A profitable company that engages in outsourcing is going to be far more able to cover costs such as this than a company that is going bankrupt would be able to cover its pre-existing health and welfare benefits costs. Those costs are a reason why the company is going bankrupt!

Anyway, the point of my hypothetical rule was to illustrate what I saw as an inconsistency in your own position. My own opinion is probably closer to Fidel's. I do think its reprehensible for companies to default on past obligations. But the problem at GM is not so much that the company is a bad guy trying to default on its past obligations; rather the problem a cycle of escalating health costs driven largely by Big Pharma and private health insurance. This vicious cyclee affects everyone, but particularly affects companies that used to be relatively generous in the benefits they offered.

Rather than trying to hold the generous guys to increasingly unsustainable past promises, we should try to find a way to make those past promises sustainable again, and try to extend the availability of the benefits promised to more people than just the employees of the generous companies.

Look, the labor and associated health costs are only part of it, and it said so in the article. The big three flat out don't make good vehicles compared to many other automakers. Their past history in the US means that they have a much bigger pension overhang than do Japanese carmakers, who only started to have a big presence here in the 80s.

And companies like Honda and Toyota probably don't outsource at significantly higher rates than do the big three. This article is not about the big three's attempts to outsource; it's about why their company is hemorrhaging money.

Chrysler was bailed out by the US government in 1979 and Ford almost went bankrupt in the 80s. It's pretty widely accepted that GM senior executives were standing, staring at a fax machine at the end of a day in 1992. If the expected fax had arrived, GM's debt would have been downgraded and the company would have been bankrupt. Even the most naive of the general public should be able to tell that the big three are having trouble. To be an employee there within the last 20 years and not realizing that things weren't looking so good is pretty much inexcusable.

I understand your passion to save workers pain, I really do. And I think it's admirable. BTo anyone who took a job at Enron after the scandal blew wide open, do you still feel like they are owed earnings in perpetuity? For all of the people who signed up during the dotcom boom and were getting insane amounts of money to do pretty much nothing, where are you going to get the money to recreate the same paying jobs for those people? If you signed on-- as I did years ago-- to decommission Eaton's stores when the company was going under and selling off its assets, should you have expected to get paid for that same job for the rest of my life unless you could find something that paid better?

I submit that the absolute last place you should be looking to clean up this mess is with corporations. Not only do they have no interest in doing so, but when it's time to do so, they're in the absolute worst position to be able to do it. It's like expecting an evicted tenant to shampoo the carpets before they leave. What you are calling for is for a company that is all but bankrupt to suddenly conjure up untold billions of dollars to either completely re-train its workforce or place them on the dole for the rest of their working lives. You need to understand that when companies go bankrupt, even the banks don't get their money back.

Edited to remove an irrelevancy.

[ 20 April 2005: Message edited by: Dex ]

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Originally posted by robbie_dee:
Rather than trying to hold the generous guys to increasingly unsustainable past promises, we should try to find a way to make those past promises sustainable again, and try to extend the availability of the benefits promised to more people than just the employees of the generous companies.

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I think that companies should not be able to make promises like pensions and lifetime benefits unless that money is explicitly set aside into a firewalled account that is protected from bankruptcy. Active workers can vote to access that money in the event of a crisis, but they shouldn't be allowed to determine the fate of retired workers' benefits. Either that, or a system should be set up like we have for the banking system where companies basically get together and buy 'insurance' on these future obligations so that, in the event of their bankruptcy, the employees still get what is owed to them.

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I think that companies should not be able to make promises like pensions and lifetime benefits unless that money is explicitly set aside into a firewalled account that is protected from bankruptcy.

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It's not "firewalled," but currently U.S. companies are required to meet minimum funding requirements so that their pension plans are approximately able to meet expected benefits liabilities. They also pay into an insurance program called the Pension Benefit Guaranty Corporation, which is supposed to assume responsibility for defunct pension plans in case of bankruptcy. The problem is that neither of these safeguards appear to work 100% of the time. They also only protect "vested" pension benefits, which are often much less than expected benefits for most active workers, do not protect health benefits, and are capped in any case so may pay not even pay full "vested" benefits to all workers. Oh, and the PBGC itself is teetering on the edge of bankruptcy because companies have been claiming far more than they've been paying in for a number of years now.

The reason why I took exception to your earlier post is that, while the above is a highly leaky "safety net," it is still a better safety net than most outsourced workers have. You wrote on the other thread that outsourced workers have "access to student loans and grants, reasonably priced post-secondary education, employment insurance, and any of a myriad of other programs that encourage and facilitate everything from job hunting to skill development." I pointed out that I thought that was a load of crap and that few if any of those programs offered outsourced workers anything close to what they lost.

The relevance to this thread is that I think a lot (obviously not all) outsourced workers wind up just as screwed-over as GM's pensioners or worse. Yet you seem to be much more sympathetic to the latter than the former, without I think very good reasons.

Personally I would like to see the PBGC system in the U.S. strenghthened to better protect workers private pensions. I would also like to see a stronger public pension and health care system that lifts all workers out of poverty regardless of whether they happen to work for an employer with generous benefits or an employer with not-so-generous benefits. I would also like to see workers who are worst affected by outsourcing to have more protections both through direct government programs and tighter regulation of corporations. I would like to see more companies make a greater (if not lifetime) committment to offering career employment rather than just chasing the lowest labour costs at all times.

[ 20 April 2005: Message edited by: robbie_dee ]

I think I understand your guibble with my position. My only point is that I absolutely do not believe in guaranteeing a job at a certain company or in a certain industry or at a certain pay level (beyond basic labor regulations that ensure pay equity and minimum wages, etc.). I have exactly the same amount of sympathy for a person who is laid off as I do from one who is down-sized as I do for one who is outsourced. All should be given the severance packages and pensions, etc. to which they are entitled.

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Originally posted by Dex:
It's my position that the Canadian government is staggeringly generous as far as helping people in their transitions from job to job. You don't seem to think so and that's fine with me. I can tell you, however, that you'd be substantially more disappointed were you to live in probably 95%+ of the rest of the countries in the world.

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