When the Treasury sold some of "our" shares in GM recently and agreed to sell our remaining shares over a 12-15 month period, the expected loss on the GM bailout will amount to approximately $21 Billion. The "poor" auto worker has been saved.
Concurrently, the perceived victory for the President in raising tax rates on those earning over $400,000 reinforced the emotional capital that he garnered with his victory in the election of 2012. Taxes on the "wealthy" went up as he demanded. Greedy rich people would finally pay.
Greed. Interesting word.
The word could not be more appropriate today since the "victor" gets to write their perception of history. In defining the plight of America as the "greedy" wealthy, the President has failed to effectively solve any of our problems at all.
In the 1970’s the nation faced a tremendous dislocation in the steel industry. The industry was not bailed out yet the industry has rebounded since the bankruptcies of many in the industry. The reality of what triggered the steel demise is now apparent and multi-faceted with eerie parallels in the auto industry.
The steel industry refused or was unable to modernize effectively in light of emerging competition from overseas in the 1970’s as America’s wartime enemies emerged as formidable competitors. The industry rode the great successes that it enjoyed due to the "benefits" of being untouched by enemy destruction during World War II.
One of the causes of the lack of competitiveness of the steel industry resulted from the almost monopoly control the industry had on the post World War II world. The "monopoly" of the steel industry lead to JFK’s incendiary attacks against the industry which were almost legendary at the time.
President Kennedy’s attacks on the steel executives though failed to underscore the staggering economic disparity between steel workers and employees in other industries. The typical experienced steelworker in the 1970’s received 13 weeks per year of vacation compared to a national average of two weeks. These extremely high labor costs compared to others were passed on to the consumer until competitive entered in the industry and the domestic industry’s excessive costs collapsed the industry. The pay rates could have continued if productivity had continued to improve but work rules and contracts frequently prohibited those productivity gains.
In much the same way, GM and Chrysler benefited from the turmoil in the market place due to World War II. As GM’s and Chrysler’s competitors were rebuilt, however, GM and the automobile industry in general refused to modernize and rebuild itself.
The automobile industry refused to believe that times had changed.
In GM’s case, it even had the distinct advantage of having a board member and major shareholder who warned decades ago of the problems ahead. The board member was H. Ross Perot who described GM’s plans as "gorilla dust". GM’s Board was ineffective in solving its problems. Perot believed that GM "shot" the messenger and paid $700 million to quiet a critic.
In much the same way that the steel and rail industries succumbed to monopoly like control of their markets, so did GM and the automobile industry.
Unlike GM and Chrysler, Ford, decided to work with its unions to solve their problems. The UAW and Ford management worked together to save the company. Both shared in the desire to survive and did so at no expense to the U. S. taxpayers.
GM and Chrysler on the other hand, took taxpayer monies and protected themselves at others expense.
What we protected as taxpayers for GM and Chrysler workers was appalling.
Pre-bankruptcy benefits included substantial benefits for retirees as well as paid time off, "banked" hours and vacation time for current workers. It is interesting to note that most pre-bankruptcy wage and hour benefits costs for the automotive industry have been removed from the websites of the U. S. government. The contracts at the time though called for workers to receive pay up to 80% to 85% of pay whether or not they worked. Vacation pay of 10-13 weeks per year were common.
This is what American taxpayers bailed out.
But post bankruptcy the GM website for benefits shows a whole host of dental programs, health insurance, 16 days paid holidays annually, up to six weeks vacation per year for longer service employees. Compare these benefits with the average taxpayer who either supplies GM or is merely employed elsewhere and you quickly see that you "bailed" out an industry to give them benefits at your expense that you will never see yourself.
All the while, the President touts GM success coming out of bankruptcy. He claims that he saved the industry. Yes, he did, but at your expense.
Greed is greed! No matter the source.
To pretend that greed operates only with the wealthy is silly.
The same greed of the monopoly type industry exists in many areas outside of the automobile industry. The teachers unions, public sector employees or corporations with monopoly like powers demand benefits that others are forced to pay that they themselves will never have.
Real class warfare is not from the wealthy but from those protected by politicians! Greed is greed! It knows no economic boundaries only political ones.
Col. Frank Ryan, CPA, USMCR (Ret) and served in Iraq and briefly in Afghanistan and specializes in corporate restructuring and lectures on ethics for the state CPA societies. He has served on numerous boards of publicly traded and non-profit organizations. He can be reached at [email protected] and twitter at @fryan1951.