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Dec 20, 2008

Bailing Out Auto Makers Without Conditions

12/20/08 - Online.WSJ.com Review and outlook   --> Article

[edited] The President is lending the last $15 billion in the $350 billion Troubled Asset Relief Program (TARP) to keep GM and Chrysler afloat through inauguration. Bailing out nonfinancial companies is a bad precedent. Democrats will use it to give the next $350 billion to mortgage holders, states, cities, and anyone with political clout.

Mr. Bush agreed to rescue U.S. companies whose business and labor mistakes have been known for decades. The President explained, "In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action." But, that would qualify any struggling industry, and no doubt Congress will prove it.

Mr. Bush didn't mention the hedge fund Cerberus that owns most of Chrysler. It might be embarrassing to reveal that taxpayers earning far less than UAW wages will be rescuing Cerberus's rich investors.

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There are "non-binding" terms and conditions that Detroit will supposedly meet to keep the money. Non-binding means they can miss the quantative targets if "the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations."
Note that the "U.S. auto industry" is not being bailed out, only the companies with highly paid union labor and many plants in Michigan. Ford refused bailout money, so far. There is a healthy auto industry represented by the U.S. branches of many "foreign" auto companies, branches that employ Americans to build cars in the U.S.

The UAW Reneges
12/24/08 - Investor's Business Daily Editorial

[edited] The White House last week granted $17 billion in emergency bailout cash to auto makers, with conditions on both management and labor. The UAW union agreed to cut worker's pay to the levels of their successful competitors, Toyota, Honda and Nissan.

Just days before Christmas, the UAW let it be known it will fight any concessions on wages and benefits. Union boss Ron Gettelfinger broke the deal almost before the ink was dry, calling concessions "An undue tax on the workers".

This is one of the most cynical acts of political manipulation. Barack Obama and congressional Democrats are big recipients of union contributions. The UAW agreed to concessions, knowing the new administration would let them renege, and the UAW read the situation correctly.

Rep. Barney Frank (D. MA) called union concessions an "unfair assault on working men and women", echoing Gettelfinger's comments.

The only real assault here on "working men and women" is the enormous cost that all working taxpayers will have to bear, $75 to $125 billion.

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