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EDITORIAL
OPINION
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How to save DetroitBy David Chassin, Friday November 14, 2008The problem with the Big Three automakers is not that they don't innovate. It's that they can't compete against companies that don't pay as much for pensions, health-care, and other benefits. GM, Ford, and Chrysler have long-standing commitments to their workers, and as a result, each of their employees supports more than 1 retiree. In contrast, Toyota, Honda, and KIA workers each support fewer than 1 retiree.
This structural disadvantage forces up US automakers' prices while allowing foreign automakers to keep prices low. For years, this problem has been masked by the domestic demand for SUVs, which command higher prices.
Now that gas-guzzler sales are slumped, revenues are down and the automakers are in trouble. But loaning GM money to survive isn't going to help, because in the long-run the disadvantage remains.
Fundamentally the solution is to make US automakers more like foreign automakers. Conservatives think this means make GM more like Toyota by doing away with unions because they demand pensions, health care, and other benefits the automakers can't afford.
But that's wrong.
The solution is to make it so GM doesn't need to provide health care, pensions, and other benefits that its competitors provide. If the government provided health care to all americans and a living retirement to all workers then all US companies, not justGM, would have a fighting chance. This would make the US generally more competitive in world where almost all governments already subsidize health and retirement of domestic companies.
For health care, the Obama administration already has a solution in hand in the form of the health-care plan proposed during the election campaign. As for retirement, to solution is to fund the retirement plans for all working americans above and beyond social security.
So you ask where the money for this comes from. I would start with a $25 a barrel oil import tax. This would raise roughly $125 billion a year, which would substantially support both the Big Three workers. This would reinvigorate domestic energy developement and increase revenues from existing oil leases. It would also have the effect of raising the floor on gasoline prices, which would help GM profit from its innovation.
Then, I would close the tax loopholes oil companies get on oil profits. This would raise another $30 billion a year.
Finally, I would give every American company the opportunity transfer the plans to the government at the current value. This would be a significant windfall for the government in the long term because today's low market makes these plans significantly undervalued, but the assets remain sound, particularly if this plans works. The government would then make good on pension benefits and the companies would continue to pay into them according to how many workers they employ today, not according to how many they employed in the past.
Democrats in Congress need to be careful with the GM bailout plan. They mustn't just give money to GM if it isn't going to fix the problem. And they mustn't let conservatives use this as an opportunity to help corporations at the expense of workers.
This is wonderful opportunity to fix what's wrong with US competitiveness abroad and level the playing field in international trade. Send us your comments to Reader's Letters |
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