Tuesday, November 11, 2008

Saving Detroit’s Big Three

Labor unions played an important role in helping get out the vote for President-elect Obama, and expect a payback for their efforts. In addition to the $25 billion appropriated by Congress for retooling by General Motors, Ford, and Chrysler, the big three are seeking another $50 billion lest they run out of cash in 2009 and declare bankruptcy. If President Bush refuses to go along with Congressional support for additional aid, it is almost certain that the new Obama administration will place such financial assistance at the top of its agenda.

Additional federal funds for the automakers is principally directed at keeping their employees on the job and sustaining the benefits that labor unions have extracted for their members. However, Obama will need to make clear that both auto executives and assembly-line employees will have to accept harsh measures to keep from facing the same problem in the next year or two. Unless Obama makes explicit that the additional $50 billion might be the last tranche of aid, the unions are likely to hold out for higher wages and benefits, instead of accepting the necessary reductions in jobs and compensation to make the automakers competitive with imports and domestically-produced foreign brands.

It’s hard to imagine the United States of America without General Motors, Ford, and Chrysler. But then again, the current financial crisis is a once-in-a-century event, and many long-standing, reputable financial houses are no more.

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