December 10, 2008
The Car Czar
We are on the verge of appointing a "Car Czar" to dole out federal money to domestic automobile makers. As far as I can tell, his power is negative -- he will pass on federal bailout money unless various parties sit down and "negotiate." Translation -- he will set the terms of the bailout and force parties to comply -- threatening bankruptcy it they do not. We will put tremendous faith in such a "czar." "Is he sympathetic to the unions? ...to green cars?" He will fail, of course. Moreover, the czar, whoever she is, will become an industry lobbyist, seeking new funds from Congress to make his plan "work." The obvious solution, which is politically impossible, is three fold: 1) Repeal CAFE standards and other standards that affect the domestic car industry consumer choices; 2) Let the domestic auto makers restructure in Chapter 11 with DIP financing from, if necessary the federal government; and 3) tax gas up to $4.00 a gallon (if you are serious about alternative energy cars).
Union wages for domestic automobile production are too high; there is no "right" to get a certain amount of money for line work in domestic automobile plants. Their wage ultimately depends on whether the cars they make are selling. If workers produce cars that do not sell better than cars produced in a domestic plant of a foreign manufacturer, they should get less, not more, or even an amount equal too, the workers of the foreign manufacturer. Union also must learn that retiree benefits are not 1) an invitation to a federal takeover and bailout of retiree packages and 2) that they count against current wage costs of a product.
December 10, 2008 | Permalink
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I agree that the union wages of the auto workers are too high. However, it's a catch 22 situation. We WANT people to make money so that they will spend money and contribute to the health of the economy. But when you're talking about giving taxdollars to bailing out industries that are going to pay workers HUGE amounts of wages, it's another story altogether. But we can't put 3 million or so workers out on the street, either.
Posted by: Angela | Dec 11, 2008 11:47:27 AM
Greg Mankiw suggests we call it the Car Commissar.
Posted by: Nathan | Dec 12, 2008 3:03:50 PM
Nice blog.I can largely agree with most that is said.
Thanks for sharing.
Posted by: newport driving school | Jan 15, 2009 3:29:34 AM
When you are competing against companies with considerably lower overhead and a cost of living that is a third of what it is here in the states, the big three cannot hope to compete.
Kia, Nissan, and Honda, all have a car at $13,000 GM, Ford, Chrysler don't,
If we want to remain competitive shouldn't we raise tarrifs on foreign cars entering the United States?
Posted by: Miami Insurance | Jul 17, 2009 2:15:31 AM