Wednesday, November 19, 2008

That Mormon's talking some sense!

(Likely the first time that's ever been said....)

Mitt Romney's op-ed about the automotive industry offers some pretty compelling points. When I was in high school and first learning about economics, I was anti-union. Through college, learning more about economics and American history, I turned pro-union. Now, I'm kind of pro-union theory, anti-(most) union practice (in full disclosure, I feel the same about free market capitalism; great in theory, way too prone to corruption in practice - the invisible hand is a myth). Anyway, the UAW is a perfect example of a poorly run union. Its practices were great for the post-War automotive boom, but without making adjustments - and concessions - for a changing market after, say, 1970 it's done a disservice to its members, current and retired. Current workers were and are hurt by the burdens of "the best pensions" in the world, retired workers are hurt by the fact that those unsustainable pensions are being cut and dumped and they're left with nothing to show. Romney's suggestion of cut benefits and increased profit sharing and stock options seem to be a logical solution*.

On the other side of the bargaining table, I was impressed by his suggestion to cut executive salaries and perks (private jets, corporate dining rooms). ("What a Michael Moore pinko piece of crazy!") Ben & Jerry's attempt at hiring a CEO that made only seven times the lowest paid employee was, of course, too extreme and a complete failure, but the idea of reining in pay at the top isn't necessarily a bad one. Even decreasing the rate of raises would be a start.

It seems like the American automotive industry is royally boned, but it's not necessarily hopeless. A win/win bailout package (in which Detroit is made to present the ways in which it will reform itself - and then follow through - to ensure the money isn't just blown through) could get things back on track.

* Perhaps the best solution would be to cut pension benefits and increase stock options on a sliding scale with the most recent retirees seeing the most of their benefits converted to stock, the oldest retirees, the least. (This would probably have to be legalesed up to prevent it from some sort of age discrimination suit; I'm not even sure this is legal or possible, anyway....) Since the market's in the tank, the oldest retirees would be most hurt by lost benefits - but also likliest to, uh, not draw on their benefits for too long; younger retirees might be hurt in the short term but could significantly benefit....


At 3:22 PM, Blogger Matt said...

Yeah, but the problem is that the standards that would have to be imposed can't really force the auto companies to make compelling products that people want to buy, which would make them self-sufficient again. The only way to do that is to force them to compete, on a level playing field (no bailout) with those companies that do make profitable products.

I totally agree that CEO salaries are just fucking ludicrous. Especially when those companies utterly fail, or the CEO makes some obviously bullshit calls. Like the guy who was in charge of TimeWarner when it merged with AOL? He got an insane salary/bonus/buyout. HOWEVS, that being said, I don't think any of the auto maker CEOs were making $25 billion, or really anywhere near enough to where cutting their salary would keep the company afloat, even for a little while. I'd actually kind of like to see if a CEO's salary could have EVER made such a difference.

In conclusion, y'all should be watching the Terminator show, cos it kicks ass. And don't bail out the auto industry, cos they're just building smarter robots, which will eventually become self-aware and kill us all.

At 10:00 AM, Blogger 3000 said...

True, you'd have to kind of operate on the "honor system" (and seriously, who's more honorable than auto company CEOs anyway), but you'd hope that they'd use the hundreds of billions of dollars of capital to offset the $2000+ per car earmarked for retiree pensions and to restructure those pensions (instead of cutting them outright, which could result in a major shitstorm in lending and health care) so they're not as big of a detriment to production.

If a substantial part of the remaining bailout money was tabbed for r&d, hopefully American manufacturers could get the playing field to level and then compete.

(It's like giving a kid extra math lessons on weekends so that he can participate in class the next semester; after he's up to speed, hopefully, he won't fall behind again.)

Another option would be to try to use the existing infrastructure to court mergers like the Daimler/Chrysler deal. (Toyota/Ford...Volkswaken/GM....) It would royally fuck the GNP, but GDP could benefit.


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