An Automotive Industry Bailout Update

It turns out that the $70 per hour calculation for the average pay of U.S. autoworkers was completely bogus.  Among other things it took the cost of all benefits including retired workers and applied them to the pay of current workers.

Nevertheless the companies are still in trouble, though not because of  high labor costs.  Since my last post it has been pointed out to me that in Europe cars are bought the way I recommended, to order from small store front dealers with tiny inventories.  It would take a change in the American culture of instant gratification, but it would be worth it.  If you have to wait a few days to get a car at one dealer, and you can get it next door the same day, that’s pretty tempting.

There is something surreal about the bailout process because we are now expecting Congress to evaluate the quality of automotive company business plans.  Who is less qualified to do that than a bunch of lawyers?  It makes me think that we should let the companies go into Chapter 11 so they can make more radical reorganization plans.  We would need to convince the public that existing and future car warranties would continue to be valid and recognized through the bankruptcy process.

I don’t have much confidence that the bailout money is going to anything more than delay the eventual collapse of at least one of the big three.  And this may slow recovery.

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