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Showdown looming in Congress of automaker rescue

Congress considering bailout for auto industry

(WHAS11)—A University of Louisville economist said the proposed $25 billion bailout of the domestic auto industry will not make a difference and it would just be pouring more money into an industry collapsing under union wages and benefits.

Dr. Paul Coomes, U of L economist, has researched regional economics, including Kentucky’s auto industry, for decades.  The city and state have relied on his expertise for planning, as have major local employers like UPS, General Electric, Churchill Downs and LG&E.

But Coomes unvarnished account of the proposed auto bailout will not be a welcome assessment to Ford and the United Auto Workers.

WHAS11’s Joe Arnold talked with Coomes about the bailout and asked him if he thought the plan would make a difference.

“I don’t think so. I don’t think so.  In my opinion it delays the company making a business decision they need to make,” Coomes said. “Which is to renegotiate their union contracts.”

The labor cost of each Toyota autoworker is about $44 an hour.  Including benefits and retiree obligations, the average cost at Ford, G-M and Chrysler is about $73 an hour. 

“You have to do it on the revenue side and the cost side,”  Coomes said. “The revenue side has to do with putting vehicles out people want to buy at the right price, which they know how to do that. 

The problem is the cost side.  Where labor costs are 20, 30 or 40 percent higher in the American car companies than in the Toyotas and the Hondas and the Subaru’s of the world.  And that to me is the most important reason that they are talking bankruptcy.”

Coomes said the threat of bankruptcy may force the United Auto Workers to make major concessions. But the suggestion that Ford workers make too much money galls UAW Local 862 President, Rocky Comito.

“It’s just disgusting to listen to the people who are not shooting the screws have no idea what it’s like in there to be on that job continuously ten hours a day,” Comito said. “We’ve given up and given up and I say from the last two years, the wages the cost of living.... part of our cost of living going into our benefits that we never had to do before. The co-pays and our office visit costs, our educational benefits we used to have has been cut enormously.” 

Tuesday on capital hill, UAW National President Ron Gettelfinger sat side by side with Ford CEO Alan Mulally.  They were seeking a lifeline, but they got a lecture, including from Kentucky’s junior U.S. Senator Jim Bunning (R-KY) who said he was wanting to hear “whether or not they are serious about making painful decisions for these three companies to survive the long term.”

Bunning said that the $25 billion bailout proposal was “not a serious proposal,” a sentiment echoed on the streets of Louisville.

“I think they can stand on their own two feet,” David Clement said. “They’ve got a lot of years of market development and production.  They know where this market’s going. I think they have what they need to go forward and sell cars for people to buy.”

Amber Rogers said she wanted to know the reason behind the bail out of the auto industry and if they would have to bail out every other industry if they get in trouble.

“If we keep bailing out people and companies when they get into trouble,how much more debt are we going to put our own country into?” Amy Cannon asked.

However, there was one supporter of the bail out plan. 

“If it does keep the places open as far as being able to pay the workers and things like that is the main thing I’m concerned about,” Jeff Evens, Jr. said.

Even if the big three automakers were to collapse, Coomes said Louisville’s location and workforce is still a natural fit for future vehicle manufacturing.

“Even if they were to go belly up, I suspect that particularly the truck plant would be taken over by another manufacturer.  I don’t think that’s likely, I think Ford will stay here and keep doing that,” Coomes said.

From testimony on Tuesday, it appears that GM and Chrysler are in worse shape than Ford, but they’re all starving for cash.

Ford announced Tuesday they are selling more than half of their 33 percent stake in Mazda, worth about $540 million.

Politically, Republicans are generally willing to let the automakers use $25 billion in federal loans already approved to help develop fuel-efficient vehicles, but Democrats want $25 billion on top of that.