The discussion to bailout the big three American automakers resonates not only in the floor of congress, but also in the streets of heartland America. The issue of rescuing an unsuccessful business ventures resulted from corporate mismanagement and union greediness appears contrary to the American ideals of free enterprise.
Free enterprise in a layman terminology is an economic system where there is limited control of the government in the trading of goods, business owners compete against each other for bigger profits, and their success is determined by their own decision-making.
The core value of free enterprise is the financial responsibility of the individual owners or corporate organizations. They have to set their own strategies about acquiring services, production of goods and selling their products in the market. The individual or a company is solely to blame if the business failed to generate profits.
In the current crisis, the problems that confront the General Motors Corporation (GMC), Ford Motors Company (FMC) and Chrysler LLC (Chrysler) are the results of misplaced strategic policies and corporate hubris, not from the effects of current financial crisis that beset the banking industry. The crisis did not occur overnight, but it is the culmination of years of negligence from the management side and greediness on the labor side.
For instance, the automakers failed to catch up with the evolving US car market and unable to compete with ingenuity of Asian and European car manufacturers. While the market is trending towards fuel efficiency and hybrid cars like Toyota Prius and Honda Civic hybrid that consume 48 MPG and 45 MPG respectively, the three American manufacturers still anchor their products on gas-guzzlers vehicles like the GMC Yukon and Chrysler Sebring that run on 13 MPG and 16 MPG respectively.
Although the big three manufacturers are able to release Flexible Fueled Vehicles (FFV) and Fuel Efficiency Vehicles (FEV) in the recent years, the majority of the consumers though still lean towards the foreign cars.
Moreover, the salaries and benefits of the personnel of big three car manufacturers have contributed to the crisis at hand. The Washington Times reported the salaries of GMC, FMC and Chrysler blue-collared laborers are twice bigger than other car-makers like Toyota. The laborers from the big three, who are under the United Auto Workers (UAW) union, receive an average of $73.00 per hour compared to their counterparts in Toyota who earn an average of $48.00 per hour.
The Media Matters for America debunked the Times' claim and stated that "the figure is based not only on current workers' hourly wages and benefits, such as health care and retirement, but also retirement and health-care benefits that U.S. automakers are providing for current retirees."
Furthermore, the UAW workers reportedly enjoy a lopsided union contract with the management considering their salary, medical benefits and pension plan. For instance, the UAW-run health care trusts amounting to billion of dollars pay for medical expenses of close to 800,000 retirees and their families. In addition, the so-called Jobs Bank program where laid-off UAW workers receive 95 percent of their salary are simply mind-numbing - bearing in mind how their companies fare in the current car market.
It is a simple issue of the laws of supply and demand, which in layman terminology is the higher the price of the car the less people will demand it. The big three produces many expensive SUVs that have been in their inventories for months. Consumers would not want to buy SUVs that consume 13-mile to a gallon of gasoline when they could buy a car that runs 45-mile to a gallon. In this free-market system, consumers have many cars to choose from that would suit their taste and budget, especially in this difficult times when they worry more of their basic needs.
It is puzzling to know that the federal government under a Republican administration would pursue the bailout plan of a failed auto industry. What happens now to the conservative ideals of fiscal responsibility? Or to the personal and corporate accountability under the free-market system? This would set precedence for other industries to play hurt to get infusion of taxpayers' dollars, which the federal government seems willing to hand out.
On December 11, Bloomberg News reported the United States senate rejected the bailout plan with 52 votes in favor and 35 against it. The votes were short of the majority vote of 60. Some political observers pointed out that this was pay back time for the Republican Party when the UAW and State of Michigan supported overwhelmingly the candidacy of President-elect Barrack Obama in the 2008 election. (This was the reason Senator John McCain did not even attempt to campaign in Michigan as he regarded the state as a lost cause. It is not a secret that UAW and for this matter every union in United States supports the Democratic Party.)
The following day, Reuters reported the Bush Administration is willing to consider dipping into the $700 billion Emergency Rescue Program for the financial industry. Democratic leaders and the UAW appealed to the incumbent administration for immediate help. Given that President George W. Bush is a "compassionate conservative," the likelihood that the bailout plan would come into fruition is not impossible.
One thing is sure about any bailout plans is the government's involvement in private ownerships and business transactions. This encroachment started recently with the government oversight of Freddie Mac and Fannie Mae, the failed mortgage finance institutions. Although they are government-sponsored companies, they were never subjected to direct oversight from Washington D.C. until they received the taxpayers' bailout monies.
The oversight that would result to helping the big three car manufacturers would mean the appointment of the so-called auto industry czar by the United States congress. The czar would oversee the whole car manufacturing business to make them productive and ensure that the bailout monies are used properly. This is a great leap from capitalism to socialism - modern American style.