What does the Union and Government want the Automakers For?

First off let me say that I am NOT "Anti-Union", Many of my friends are Union workers and "Unions" can be good when hey are used for the right reasons. Worker safety would not be anywhere near it is today if it were not for the early Unions in this country. Labor rates would be somewhat lower and worker benefits would likely be somewhat lower as well, especially in Union companies. They have certainly done what was necessary to raise the bar in these areas.

If you already know the history of the Auto unions you can skip to the Summary :D

The auto workers union functions as its own company, it has employees, and President and CEO as well as uses money for advertizing and Lobbying congress. They survive by charging every worker that is signed up, a monthly or weekly fee. They then use those fees to advertize to expand and to Lobby with Campaign contributions of Money to Congressmen. They to this to get laws passed to support their cause such as Higher Minimum Wage or better benefits being required by law. This is where the problems start, the use of Money and gifts to manipulate the law should ALWAYS be controversial, but in this case it’s just standard practice. Another tactic the Unions will employ is the threat to strike if their demands are not met. This is arguably THE most powerful aspect of a union, because if the company needs t lower costs, but the union will not bend on Wages or Benefits, then the company is doomed to fail.

Over the last several years GM, Ford and Chrysler have all gone to the Unions and asked for help. They have asked that benefits be lowered for new employees, and that Retirees who can now be covered under Medicaid or Medicare, sign up for those instead of the Automaker Pension Healthcare. The Unions would not bend, and with rising healthcare costs and slumping auto sales the companies were sure to fail, it was just a matter of time.

Now here we are, a Month after Chrysler went down and 3 days after GM Filed bankruptcy. Many Economists have said that allowing a Bankruptcy was the best bet for GM and Chrysler from the beginning. A Non-Government structured Bankruptcy would have allowed the dissolving of the Union contracts that have Plagued GM for many years. They could have become Non-union and restructured to similar, arguably more successful business models like Honda and Toyota. If that happened we would have a Successful automaker, making profitable, well build cars, employing Thousands of Americans and the union would have been literally history. So how could the Union, with Millions of Dollars in the bank and Senators in their pocket let that happen.

Now for the summary of how it all goes down.

-December 19th 2008, Bush allows 17.4 Billion Dollars in loans to the Automakers to keep them afloat.
-March 7th 2009, Chrysler tells the White house that sales will be sufficient to keep them afloat through the year. They are okay and will not need any more bailout money.
-March 29th 2009, the Obama Administration gives Chrysler 8 Billion Dollars in cash.
-May 14th 2009, Chrysler files for Bankruptcy. the Obama administrations takes charge in the Organized restructuring and gives 55% to the Auto Workers Union, 20% to Fiat, 8% to themselves for the money that the government has paid, and 2% to Canada. None went to the Bondholders, those who have Billions of Dollars in Chrysler Bonds, and of course non went to the Stockholders, but they should be last anyway.

So it can be said that one of the Biggest contributing factors in the Failing of Chrysler, became the BIGGEST beneficiary in the restructuring. Imagine the Child who racks up $30,000 in credit card debt while away at college, on their Parents cards, Forcing the parents into Bankruptcy and the Judge rules the Child (Not the Creditors) get their house and Cars. The parents and the ones that are owed all that money get little to nothing.

As far as the GM bailout, it went in a similar fashion, started by the money they received from the Bush Administration, continues with $20 Billion more given by Congress earlier this year, and ended with 30 Billion more given last month for restructuring under bankruptcy. The difference being that this time, instead of the Union gaining control, the US government now holds 72.5% of one of the worlds largest car manufactures.

The Obama has said numerous times that he doesn't "Want" to be in the car business, however they seem to really like handing out this money and "gaining" control of companies. Most independent economists and Analogists have said the bailouts were bad from the beginning, spending 50 Billion to save a fraction of a fraction of a percent of our unemployment, in the tune of 1 MILLION Dollars PER WORKER. Yet the Govt keeps on doing it and "Accidently" ending up with control. The Obama has said that during this restructuring GM and Chrysler with begin to build "Affordable Green cars that Americans want to buy". Although if that was the case, then why was the Truck and SUV business of GM Chrysler and Ford the most profitable part of their company?

This all leads to my next topic on Green cars, the future of our automobiles, and how the new emissions requirements will affect YOU bottom line for years to come.