It's been incredibly slow here at Shark and Shepherd. This past week presented one enormous (but not bad) distraction and one smaller one as we cope with a new canine addition to the Esenberg family compound. My bipolar blogging identity (here and on the Marquette University Law School Faculty Blog) has now muted into full scale multiple personality disorder as I take my first guest stint on PrawfsBlawg. There will be a storm of crossposting for me this Christmas season.
But, for now and here, I want to comment on John Nichols' column suggesting that the UAW is in need of bailout because it has devoted some of its considerable resources to causes that he - and, with respect to some of them, even people like me - like.
But this ignores the economic reality of the matter. The UAW negotiated sweet contracts for its members during an era that the Big Three enjoyed an oligopoly in the US auto market and it extended the cost of those contracts far into the future by securing outsized pension and retiree health care benefits.
But we need to understand the narrative correctly. It wasn't that the UAW took advantage of the auto companies. It was that the auto companies were taking advantage of us because they lacked competition. Sharing some of the swag with the UAW in order to buy industrial peace made perfect sense. Think of them as cohorts.
And cohorts they remain. When I was a kid, we talked about planned obsolescence in the auto industry. American cars weren't very good because they didn't have to be. Management, shareholders and labor put it to us.
But the foreign manufacturers came in and raised the bar. There was no more free ride but, for too long and even now, the UAW and Big Three management wanted to act as if there was. You can't compete by paying production line workers total compensation in excess of six figures while your competition is paying roughly half that. It's not that the only problem with the American companies is their labor costs but their labor costs are an inextricable part of the problem.
We can't just bail out the auto companies. Their union contracts must be repudiated because they can no longer afford them. If the shareholders have lost value, tough. Management should be fired, but at the direction of the owners (even if those come to be the creditors) and not the government. That is what would happen in bankruptcy. If bankruptcy, which has worked for a number of other companies, is somehow thought to be impossible for car companies, then the alternative should not leave any stakeholder - labor or owner or management - better off than bankruptcy would have.
If there is a bailout, it should be in the form of an imposed bankruptcy adjudication. Contractual obligations (including executive salaries and bonuses) are restructured. Shareholders take a hit and are free to exact their revenge on management.
But throwing money at failure is silly.