Opinion: A Memo to the UAW from the Taxpayer

Memorandum To: The United Auto Workers From: The American Taxpayer Re: Team Spirit

First, we want to make it clear that we do not consider you overpaid or lazy. Your persistent reliance on that argument reveals that you either do not understand the issues before us, or are trying to divert attention from these issues by making it all about you. Either way, we want to clarify our position by submitting a number of questions and comments for your consideration.

Millions of us are struggling now. We are underwater on our mortgage payments and we might lose our jobs and health benefits. Sure, we should have planned ahead, but the word "should" is really irrelevant now, isn't it? We are all up against it. Hard decisions need to be made and unpalatable actions need to be taken. There is no "should"; there is only "is."

If General Motors (GM Quote - Cramer on GM - Stock Picks), Ford(F Quote - Cramer on F - Stock Picks) and Chrysler [collectively referred to herein as "your employer(s)"] have contractually agreed to pay total labor costs (which include benefits along with wages) of about $73/hour vs. the $44/hour that non-union competitors like Toyota Motor (TM Quote - Cramer on TM - Stock Picks) pay, who are we to judge? A deal is a deal, and your contract with your employer is none of our business. We respect your right to make as much money as you possibly can under the concept of "capitalism." If you are not familiar with the term, just Google it -- it's a concept that has served us well for over 200 years.

While the binding contract between you and your employer is none of our business, we think it's important to point something out. The guys who signed the contracts on behalf of your employer are largely inept, incompetent, arrogant and not particularly self-aware. Many epitomize the The Peter Principle. While this is not your fault and is not a reflection on your fine union, neither is it our problem.

Your employer is about to go out of business and will be unable to live up to the deal that was struck with you. Remarkably, you are now asking us to come up with about $15 billion to bail out your employer. We'll probably wind up bailing you out because we know that tens of millions of dollars went into the last election cycle, and favors need to be repaid by our newly elected representatives. We get that. We don't like it, but we get it. But if your employers are requesting a business loan, we have a right (in fact, an obligation) to review the cost of labor in order to determine whether the loan makes good business sense. To clarify, we have no issue with your compensation; we merely find that your employers' labor costs are sufficiently high as to render them non-competitive, thereby increasing the risk that your employers will be unable to repay us. [In fact, as a brief digression, we remind you that this entire mess was created by improper attention being given to the ability of borrowers to repay their loans]. We have no more standing to question your compensation than we have to question the money Nike(NKE Quote - Cramer on NKE - Stock Picks) pays to Tiger Woods. But you see, Nike is not asking for our help, your employers are. So we've got questions, and we want answers.

Let's cut to the chase. You insist that you are entitled to receive our tax dollars when many of us are facing the same hardships currently facing you? While you were negotiating deals with your employer, we were busy working and struggling to pay for our own health care expenses. We were putting money into our 401(k) accounts that rise and fall with the market. We "get what we get" and our only entitlement is from an unfunded Social Security system.

You complain about the horrible devastation that would ensue from a reduction in your retirement benefits. Rest assured that we understand your plight, because that has already happened to many of us. So while we do empathize with you, we are unmoved. Why? Because we are too busy dealing with our own problems.

We do not understand your refusal to make concessions that will at least give your employer a fighting chance to survive? Remember, we are struggling, too. But what would you do if we were not around and your only recourse was to renegotiate with an ailing Golden Goose? Would your president, Ron Gettelfinger, renegotiate with the Golden Goose to accept fewer eggs or would he continue to be Ron "Middlefinger" and flip the bird at the Golden Goose until it dies trying to lay the agreed-upon number of eggs? Your reference to the enactment of the $700 billion TARP program as justification for bailing out your employers doesn't work for us. We hate that bailout and resent that it was jammed down our throats by many of the same politicians, bureaucrats and businessmen who created the problem. We know almost nothing about that TARP program (which means we know only slightly less than those who are actually spending that money). And because we don't even know who that money is going to, do you really think we're now going to say, "Ah, what the heck? What's another $15 billion between friends?" That is a slippery slope -- the "devastating loss of jobs" argument can be made by numerous industries that are "too big to fail."

Many of us are just now becoming aware of facts that do not engender sympathy for your cause. Consider your "jobs bank" program. While UAW members are entitled to receive 95% of their base pay along with all benefits after they are laid off, most of us are lucky to get two weeks' severance pay and a COBRA application for insurance that we will probably not be able to afford in our newly unemployed condition?

That jobs bank program offends us at such a visceral level that your credibility is irreparably destroyed. While it's nice to be you, most of us who are unemployed are busy trying to find a job and are therefore not able to sponsor your Golden Egg Extraction Program, otherwise known as "GEEP." If you wish to continue GEEP, you must do it without our participation.

There is no legitimate reason why a prepackaged bankruptcy using debtor-in-possession financing with us as the debtor-in-possession would be any less effective than simply writing a check to be administered by a "car czar," otherwise known as a government appointed fall guy to whom politicians can pass the buck? Many of us are unsophisticated, but we do know that a bankruptcy trustee would void your contracts and declare that "a deal is not a deal." Your industry is currently in shambles, and there is no guarantee that avoiding bankruptcy will do anything more than delay the loss of jobs you claim will result from a bankruptcy proceeding.

Face it, your employers are all on life support and any process to save them will be very messy. There are no clean fixes, and if we thought a $15 billion sponge bath would save a critically ill patient, we'd send that nurse today! But your fear of bankruptcy merely reveals your underlying motivation as well as the incompetence and lack of imagination of your employer. You are not thinking outside the box. Well, we are here to help.

In the spirit of teamwork, here is a free marketing suggestion from us. Tell your employers not to say bankruptcy; describe it as reorganization. Simply put, "bankruptcy" sounds bad and signifies failure. "Reorganization," if properly marketed, can evoke a spirit of teamwork. Think about it -- the UAW, your employer and us -- all a part of the same team working to make America great. You've already got a pre-packaged, cost-effective ad campaign that can be rolled out tomorrow!

A short video clip gets the job done: While climbing into a Ford, General Motors or Chrysler car (in fact, do one version for each automaker), Vice President-elect Joe Biden reprises his immortal words justifying higher taxes on the most productive Americans: "It's time to jump in! Time to be patriotic! Time to be part of the deal! Time to buy an American car!" We think that ad is a home run!

Let's work from confrontation to resolution by agreeing that while we are not union bashers; neither are we union members. We recognize your constitutional right to enter into binding contracts with private parties -- but we are not a party to the contracts with your employers. So when your employers is in danger of breaching, we aren't obligated to help out. And if we do choose to help out, we have every right to require terms that put you on the same level playing field as our home turf -- that is, the field of capitalism. If you continue to stall for time until the next administration takes the reins in the hope that your political support will be rewarded by union-favorable expenditures of money that we'd rather keep for ourselves, you can rest assured that many of us will also be happy to take the reins. We'd rather buy a horse and saddle than buy one of your employers' cars for three reasons.

Second, your employers' labor costs would be passed along to us in the form of either an inferior automobile or a higher sticker price.

Third, the higher price paid for a UAW-made car would amount to being double-billed for the same product because we'd already have contributed our tax dollars to subsidize the high labor costs incurred by your employer.

In America, we work as a team when the chips are down. It is time for you to jump in, be patriotic, and be a part of the deal. If you refuse, then we can only assume that you are a part of the problem rather than the solution, and we will cease to do business with you or your employers.

Couldn't say it better myself. Collective bargaining agreements are private contracts, and so are the rights and obligations that arise from them. The Auto Workers have a right to everything they bargained for - but only the party they bargained with is obligated to fulfill those rights. Last I checked, the taxpayers never agreed to be a surety for either party.

It's a shame if the retired auto workers don't get all of their pensions, but it simply is not our problem. If GM and the others can't pay, then they can't pay. Most of us don't get pensions and never will, and it isn't right that we be asked to pay for theirs.

First, we want to make it clear that we do not consider you overpaid or lazy.

Well...speak for yourself. I think the UAW workers are overpaid and the fact that Ford lost $9 billion while Toyota made $4 billion suggests the same conclusion. You guys made your bed, you go right ahead and sleep in it. Just don't ask me for a financial blanket to cover up both yours and managements' excesses.

"First, we want to make it clear that we do not consider you overpaid or lazy."

Speak for yourself. I wholeheartedly consider these union members to be both overpaid and in many cases lazy. I will not voluntarily subsidize said pay, benefits and retirement when 98% of us taxpayers have nothing resembling it.

We'll probably wind up bailing you out because we know that tens of millions of dollars went into the last election cycle, and favors need to be repaid by our newly elected representatives. We get that. We don't like it, but we get it.

...and President Bush is determined to make that "probably wind up bailing you out" a definite...

It is not my problem as the taxpayer. I never was part of the contract. Bankruptcy is the best solution. A taxpayer bailout without fixing their costs structure is a band aid on a terminal cancer patient.

the cold hard fact is there are too many cars built globally and too few customers. The situation is worse due to a global economic slowdown. Cars from China and India will only make it worse. Argentina got automakers to sell cars there at cost. Argentina is a socialist/kleptocracy along the lines of Chicago and the new Obama admin.

I second that emotion. Being in the logistics and transportation business, we would never schedule a delivery after 12PM because we knew we would have to wait until the next shift because the previous one would have met their quota of 7. (Compare that to a Honda plant- 40+ per shift)

It is about the economy, stupid!
Nuclear Winter In Shipping

The Wall Street Journal is reporting Freight Haulers Slam on the Brakes.

Expecting the Weakest Year in Three Decades, Truck, Rail and Ocean Shipping Firms Are Cutting Back. In a normal year, Gordon Trucking Inc. might replace 20% of its fleet of 1,500 big rigs with new trucks. But given the bleak outlook for the freight business, the Pacific, Wash., hauler doesn’t intend to buy a single new truck next year.

“We’re settling in for nuclear winter in the first half of 2009,” says Steve Gordon, operating chief for the company, which hauls everything from paper products to electronics.

He’s not alone. Some industry executives and analysts predict that 2009 could be the worst year for freight-transportation volume in three decades or more. ….

(Should I get a bailout?)

I agree, though I think the point is it isn’t for us to say who is “overpaid” or “underpaid.” They’re being paid exactly what they contracted for. The fact that they’re being paid so much that their employers are uncompetitive and unprofitable is between, well, them and their employers.

Also, I’ll note the common union argument that the $73/hour figure includes “legacy costs” beyond their base wages. No one forced them to demand hire-to-grave pensions and benefits; it’s all compensation that the union bargained for. It makes no difference whether that compensation is paid entirely through a paycheck or partially through a pension plan; it still comes out of the employer’s labor expenses.

Time for a new career ~ after spending 38 years working in an industry where every single American citizen above the age of 5 thinks they OWN your employer, and that THEY are your boss, it's pretty clear my advice is going to be needed at General Motors, Chrysler and Ford (if they take the money), and definitely among the members of the UAW.

Just about any postal employee (former or present) can tell you all about the problem, but they'll also tell you that all you need to do is make sure you don't have any "uniform" parts on you or in your car, and just keep your mouth shut.

Alas, I worked mostly in organizational elements over the years where it was necessary to deal WITH the public on this very issue

Not revealing any secrets here, but guarantee UAW members and other Big Three employees are heading into a time of their lives where they will grow to despise all the busy bodies who want to tell them how to run THEIR business with THEIR money, and why YOU should fix their car for free, and, BTW, give 'em a big refund!

FTA “we do not consider you overpaid...”.

Oh yes I do. The unions killed their own golden goose through decades of greedy union contracts, getting unreasonable benefits and pay.

We have(now HAD) a GM plant in Janesville,WI. Any friends I had in school who had parents with a job at GM (1970s +1980’s) had it made.

Of course they worked hard, but they were well compensated. They made more per hour than most could dream of making.

The unions broke the US Auto Industry making greedy pay and benefits demands. Also add in blame with the gov’t, for demanding they make cars to the gov’t whims and enviro-wacko ideas that made producing the cars at a good price impossible.

Sure did. I’ll direct you to one of my favorite companies, Nucor. Their entire workforce is non-union, and their workers are primarily compensated through performance incentives. Also, they only have two levels of management between the CEO and the floor workers at the mills. They’ve been profitable for 40+ years straight in an industry in which common knowledge says Americans can’t compete with the Japanese and Chinese.

This is the sort of 21st century business plan the auto industry needs to look at.

***It’s a shame if the retired auto workers don’t get all of their pensions, but it simply is not our problem.**

They should do like I did when I retired. Take the cash payout and invest it in Bernard Madoff’s hedge fund! I’ll make zillions!

Oh, wait...;-)

when the chips are down. It is time for you to jump in, be patriotic

This essay expresses my thoughts exactly. I do want to emphasis one point.

The UAW along with the bailout proponents say "IT MUST BE DONE TO AVOID DAMAGE TO THE COUNTRY"

OK, then I say "IF THE UAW REFUSES CONCESSIONS, THEN I SAY YOU ARE TRAITORS TO THE USA"

I own 3 gm cars and I bought a new gm car in August during the employee discount promotion. I now consider the UAW traitiors and AS GOD AS MY WITNESS, I WILL NEVER BUY ANOTHER UAW CAR OR ANYTHING ELSE AS LONG AS I LIVE.

I WILL NOT SUPPORT TRAITORS.

Neither the government or the worker pays for regular Unemployment Insurance (U.I.) it is paid for by a tax on employers: http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp

U.I. for Federal workers, ex-military and extensions is paid for by the government, however.

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