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Since the 1970s, Detroit’s Big Three auto makers have failed to keep up in the global auto market. High labor costs and inflexible work rules, staggering legacy costs, an unwieldy dealer network, and a failure to overcome negative consumer sentiments have combined to bring the Detroit based auto manufacturers to their knees.
Ten years ago the Big Three posted a combined profit of over $16 billion. During the good times management failed to invest this profit in a diversified product pipeline, but rather assumed that Americans would never stop buying high profit SUVs and trucks.
Now that market conditions have changed, the Big Three are calling on Congress to bail them out. The Big Three are weighed down by irresponsible labor costs from unrealistic union contracts made decades ago. These contracts did not give the industry the needed flexibility to respond to market changes and have burdened the automakers with impossible legacy costs.
GM is leading the call for a $75 billion taxpayer bailout: $25 billion to develop fuel-efficient vehicles, $25 billion in general support to keep creditors at bay for a few more months, and $25 billion to bailout luxurious union benefit packages.
A GM funded grassroots campaign is threatening the American taxpayer with blackmail to fund the bailout by claming, “lose $25 billion now, or lose $156 billion later.” GM is attempting to make their inability to rein in union contracts and create products consumers want a taxpayer problem.
What the Big Three needs is to get their own financial house in order through a painful adjustment process. Like other companies, the Big Three needs flexibility to deal with the realities of a shrinking auto market as Americans look to buy only 12 million vehicles in 2009 and 2010, down from 16 million in 2007. The Big Three should start with labor costs, since average labor cost per hourly worker at GM is $75, compared to $50 per hour for Toyota employees.
FreedomWorks President Matt Kibbe commented:
“GM and the Big Three are looking for a bailout from reality. In a debate driven by romance and not fact, GM is threatening the American public to bail it out or else risk economic Armageddon."
"A healthy manufacturing sector is based on quality products, innovative manufacturing processes, and flexible workplaces, not on lifelines form the government. Without catastrophic change, the Big Three will continue to burn through cash and look to Washington for more taxpayer dollars to just postpone the inevitable."
"FreedomWorks salutes Senators Richard Shelby (R- AL) and Jon Kyl (R-AZ) for leading Senate opposition to the bailout, and the hard work of House Republican leader John Boehner (R-OH) and Jeb Hensarling (R-TX) to protect the taxpayers in the House.”