Fox Consensus: Union Burdens Pull the Auto Industry Towards Bankruptcy

Neil Cavuto felt so certain that the auto makers will never fix the bankrupting problem of legacy costs that he placed a serious bet with Ben Stein -- “I will bet you a double cheeseburger with extra cheese.”

On Dec. 20, Cavuto invited Stein, author of “How to Ruin the United States of America,” and other analysts on “Cavuto on Business” to scrutinize the $17.4 billion loan President Bush offered to General Motors and Chrysler this week.

General Motors, Chrysler, and Ford are feeling the burden of heavy union demands by United Auto Workers (UAW). Legacy costs imposed by UAW require American automakers to pay the pensions and retirement health care plans of more than 600,000 retired workers.

Despite his professed free market ideals, Stein insisted that the Detroit automakers should not be allowed to fail. “We’ve got to keep these companies in business… I’m a free market guy. I would like to see the free market work but in this situation we simply have to smooth out the business cycles.”

Cavuto pointed out the inconsistency in Stein’s statement. Through his generous bailout solutions to failing companies, President Bush has also effectively said “I’m a free market guy, but not when the economy suffers.”

Stein maintained his position, saying, “we cannot worry about ideological purity at this time.” He accurately called bailout of the auto industry “a sort of welfare” to keep the autoworkers employed “so they do not go crashing through the floor and cost us another depression.”

     Unable to receive a loan elsewhere, the automakers have turned to the only entity gullible enough to offer assistance – the government. If Chrysler or General Motors declare bankruptcy and are unable to repay it, the loan indeed becomes a form of welfare – auto jobs subsidized by the taxpayer.

     Analysts on “Forbes on FOX” also discussed the loan and criticized the UAW on Dec. 20. Host David Asman lamented that the bailout loan for the automakers does not “force any concessions from the unions.” Steve Forbes, Forbes Magazine editor-in-chief, agreed “that’s why it’s ultimately going to fail.” Later Asman said that the Bush Administration had almost gotten needed concessions from union leaders. They were “very close to a deal until the White House said ‘Okay we’ll give you money,’” he said.

     Analysts on the show listed other problems with the UAW. Victoria Barret, Forbes Magazine associate editor, cited a New York Times study that U.S. automakers pay U.S. autoworkers $10 an hour more than foreign automakers pay their nonunion workers in the U.S., excluding legacy costs. This agrees with a recent Heritage Foundation article that said, even without legacy costs, American automakers pay an average of about $73 an hour for labor and benefits. 


     Union jobs banks are another hindrance to automaker health.. According to Asman American automakers “pay workers who are laid off about 95 percent of their income. At least get rid of that!” The UAW should have been forced to give up the dysfunctional jobs bank system in order to receive bailout loans.

     And the UAW harms automakers’ productivity, as publisher Rick Karlgaard noted. “At UAW plants absenteeism is higher” than at nonunionized U.S. auto plants in the South, he said. He also blamed UAW work rules for stifling creativity on the factory floor.

     Asman concluded that “the car companies down South are doing a hell of a lot better because they don’t have these UAW union rules.”