From today’s LA Times:
At Goldman Sachs, for example, employee compensation made up 71% of total operating expenses in 2007. In the auto industry, by contrast, autoworker compensation makes up less than 10% of the cost of manufacturing a car. Hundreds of billions were given to the financial-services industry with barely a question about compensation; the auto bailout, however, was sunk on this issue alone.
Something to keep in mind. There is a lot to be said for and against the idea of bailing out the Big 3 (and it seems clear the White House is currently working on doing just that), but much of what I’ve heard coming from many conservatives on this issue isn’t based so much on reality as it is ideological grandstanding against auto workers in order to take a cheap shot at unions.
Americans will remember that in 2010.
- Jason
I see your point, but I am not sure I buy it.
It seems to me that the “systemic” risk posed by the collapse of the financial sector would have absolutely devastated ALL areas of our economy. The collateral damage resulting from the collapse of American automobile manufacturing, however would in NO way be as severe, and certainly does not pose the same systemic risk. If the financial sector would have imploded, there would not be an automobile industry.
The argument about the differences is in wages is weak propaganda. If Goldman Sachs was paying 40% more for its labor than Merrill Lynch, and crying for a handout, you bet their would be questions about wage discrepancy. Especially if Goldman had been horrendously inefficient and in the midst of a decade long downward spiral.
It’s not a cheap shot at the unions, it is a fair shot. Their is an unholy alliance between Democrats and union “thug” leaders.
Maybe someone should explain to Jason the difference between making an automobile and underwriting a stock offering.
To suggest their is any comparison 10% vs 70% labor cost ignores the nature of the two businesses. On one hand you have a product that has two tons of metal, rubber, plastic and electronics; requires enormous factories, automation and transportation costs. On the other hand you have a product that is almost entirely the product of the thinking an education of human beings.
It laughable that someone would attribute any validity to such a comparison.
Second of all I heard an enormous amout of opposition against the financial bailout. It happened anyway.
If there is any distinction between the two bailouts based on merit, at least the financial industry had a track record of success and is/was a model of competitiveness and efficiency. The UAW has been a begar at the doorstep and ransom artist in the backalleys of american industry for over three decades.
Thanks for the perspective Jason.
I would not, considering the current state of their affairs, laud the model of efficiency you see in the credit markets. We bailed them out, remember. Because they could not self sustain. Which is the same situation we face with GM. The nature of the two businesses has no relevance when discussing the arguments conservatives are using to justify obstructing the bailout. Their argument is that the wages are the deciding factor. If that is their argument, there is a hypocrisy in their thinking. And I’d ask you to justify your assertions about UAW. Union hatred may be required of modern Republicans to get their conservative card, but I’ve never seen – in my lifetime – a decent and non-ideologically founded argument defending the reasons.
Regardless, the point here is that workers wages are neither a) the primary reason for GM failure, and b) a justifiable reason for House Republicans to oppose a bailout for the Big 3 – and the millions of workers their failure would effect – when they asked so few questions of the finance industry leaders coming knocking for a hand-out.
LaRuski –
The financial industry had a track record of success and is/was a model of competitiveness and efficiency?????????
Wait, that wasn’t enough ????????
I mean if that’s true all we need is a good car bubble and the auto industry is saved right? The financial industry has relied on bubbles, hopping from one to the next to keep profit high enough to satisfy their own stock holders, when the housing bubble burst and there was nothing new to jump to it all fell down. This is your track record of success and model of competitiveness and efficiency.
Secondly you assume that there’s no cost in underwriting stock. So they’re making they’re money on nothing but human beings thoughts. If so, then i agree, that is a model of competitiveness and efficiency, and I would like to get into that industry. Think about it, getting paid to think about it. If you were the finance business you would have gotten paid for reading that last sentence. Oh but of course there are those pesky assets, you know, the things that were getting packaged and sold and insured. One could argue that the cost of supplies stands the potential to be greater in the finance industry (depending on the markets at any given time), especially when looking at it in terms of investment, return, and risk.
I would actually take the comparison even further. The financial bailout was about 20 times larger than what the auto companies are asking for, and the auto companies employ more people. In terms of keeping people employed and auto bailout is more bang for the government (ie your) buck. The real argument comes down to what is worse for the economy, clogged credit markets or 3 million more unemployed (actually a lot more when you consider secondary industry, auto sales, parts manufacturing etc)? The answer is they’re both bad, that’s why there was a financial bailout, and that’s why there should be an auto bailout. Oh, wall street wants an auto bail out too.
My point here LaRuski is perhaps you could consider the situation a little more thoroughly before you jump on board with your conservative talking point (although thanks, I didn’t get a chance to hear Rush or Sean today, and it’s always good to know what they were talking about). We’ve got enough people running around saying “it’s a bad business model let it fail” without considering what that might cause. Likewise we’ve got enough people saying that auto workers make too much money (darn those union communist so and sos), they need to take a pay cut.
These may be valid points, they could also be applied to the financial businesses in my opinion (some people got paid a lot to watch the housing market bring it all down), but neither of those arguments do anything to fix the economy. Like it or not, something has to be done to keep it from getting worse.
Thanks for the perspective though, it’s good to realize that some people will oppose everything until they’re the ones getting the pink slip. That “I’ve still got a job, so don’t spend my tax money bailing out anyone” mentality is narrow minded and doesn’t consider the larger economic impacts of something like the big 3 going under. And people of similar thought processes to those you’ve shown here are the ones opposing it, I doubt anyone would be against it if we were discussing their job. But in a way, we are, just as a rising tide lifts all ships, a sinking economy brings us all down.
Steel costs the same for all car companies. The difference between successful foreign companies and their US counterparts is wages and benefits to workers (as well as products). That’s why the UAW contracts matter. Plus, from a political standpoint, I don’t think too many Americans are sympathetic for people who have access to job banks..
I really think, other Craig, that it is more narrow-minded to say that we should save the Big 3, despite their inefficiencies, in order to save a specific job sector. Our economy has a history of creative destruction, and an auto bailout will retard this process. While the pain of auto failure will be real, it will pass.
ROFL @ “Big Texas Craig” for the “Other Craig.”
Craig’s are funny.