Union Keeps Special Privileges Through Taxpayer Bailout of General Motors

by Hans Bader on June 3, 2009

The federal government is spending more than $50 billion to bail out General Motors, with no end in sight. But the UAW union refused to sacrifice its privileged position to save the company, demanding excessive wages and benefits that are much higher than most Americans get. The Obama Administration caved in to its demands, saddling GM with high labor costs that may doom the company in the long run.

As the Washington Post notes today, the “concessions” that Obama obtained from the UAW were merely cosmetic: “Union concessions were ‘painful’ only by the peculiar standards of Big Three labor relations: At a time when some American workers are facing stiff pay cuts, UAW workers gave up their customary paid holiday on Easter Monday and their right to overtime pay after less than 40 hours per week. They still get health benefits that are far better than those received by many American families upon whose tax money GM jobs now depend. Ditto for UAW hourly wages . . . . Cumbersome UAW work rules have only been tweaked.” Earlier, the Post lamented the “preferential treatment of the autoworkers’ union at the expense” of other company stakeholders and creditors, noting that “the union can boast that it has been promised no loss in ‘base hourly pay, no reduction in . . . health care, and no reduction in pensions,’” even though excessive union wages and benefits helped sink the company. Small wonder that even the liberal Post, which backed Obama’s bailout of GM in March, now has soured on it.

If GM had rejected a federal bailout, and filed for bankruptcy in December, it would be recovering right now, since it could have used bankruptcy proceedings to tear up the collective bargaining agreements with the United Auto Workers that saddle it with excessive wages and benefits and rigid work rules, and it would also be benefiting from the fall in gas prices from $4 last year to $2.50 now. By avoiding a federal takeover, it would also have greater freedom to oppose costly regulations proposed by the Obama Administration, such as CAFE and global warming regulations, which will destroy tens of thousands of autoworker jobs).

The bailout is neither necessary nor likely to be successful in the long run. In its auto bailout in the 1970s, England did the same things that Obama is doing now, like propping up high union wages and promoting the production of little “green” cars consumers may not want. Its bailout failed miserably, destroying the British auto industry’s chance of survival.

Even more wasteful than the GM bailout is Obama’s wasteful $800 billion stimulus package, which has destroyed tens of thousands of jobs.

Even as it engages in costly, unauthorized auto bailouts that have no legal basis, the Administration is abdicating core federal responsibilities like enforcing the voting-rights laws. Political appointees in the Obama Justice Department recently blocked action against a racist, anti-semitic hate group (whose members included an Obama poll-watcher and city democratic official) that used nightsticks and racial epithets to drive white voters away from a polling place in Philadelphia last year. The Obama Justice Department has also rubberstamped unconstitutional legislation, failed to protect the voting rights of American servicemen, and been deafeningly silent about a liberal black political boss in Mississippi who prevented voters from casting ballots and engaged in vote fraud.

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