Justice For American Auto Workers and Stockholders

America Needs to Return to Manufacturing Health Again

The Big Three Auto Manufacturers see the long line of other industries getting government bailouts, and wonders why not jump in and get some before it all runs out? We hear the the requests of the Big Three car makers and wonder, why?

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The Big Three Have Nothing New To Offer - But They Want Money For It! We Have An Answer For Them Here In This Article!

Democratic & Republican leaders in Congress crafted a plan to fork over at least billion to Detroit, above and beyond the billion in loans the government already committed to help the Big Three make more fuel-efficient cars. The problem with that is that is it really a UAW Bailout and will do more harm than good. The Big Three need to go through Chapter 11 of the Bankruptcy Code so they can reorganize and level the playing field with foreign Manufacture of automobiles. While the big three are in chapter 11, Congress can sanction recapitalization and the following tax law changes.

Eliminate All Income Tax & Capital Gains Taxes on the Auto Industry

Replace the income tax with a national automobile sales tax that is equal for all automobiles. Both American and Foreign. This way American Manufacturers will now have a level playing field. Finally, we will have economic justice. After the U.S. Treasury see how helpful the tax law changes are, other industries should be permitted to sign on. Capital will flood into the auto industry, after filing Chapter 11, and the taxpayers will not need to put up the capital. See the bottom of this report for further information.

Following are several important reasons why a bailout is not a good idea:

- A bailout would provide money only for short-term survival. It wouldn't alter car makers' seriously flawed business models. GM is running through cash at the rate of billion a month. So billion from the government would give it only five months' breathing room. Can they turn over their business practices in that period? We all know better than that! They would be simply to come back to taxpayers for more. These companies need new business plans. The old ones should have been scrapped in 1973.

- A government handout would allow the Big Three to avoid necessary cost cutting. Because of a strong union, the average GM employee received an hour in combined pay and benefits last year. And it's not just line workers who are making too much. GM chief executive Richard Wagoner garnered about million a year in 2006 and 2007, while leading his company toward oblivion. That is too much money to be paid for crashing a legendary company! What is wrong with CEO pay plans that pay so much to executives who trash companies like this?

- Bankruptcy isn't a bad idea, it is a very healthy idea whose time has come. It doesn't mean liquidation, which is what a Chapter 7 would be. It means taking the painful steps the companies have been unwilling to contemplate to date. The real losers in such a deal are car makers, equity shareholders and creditors. Bankruptcy would give the automakers the chance to throw out existing employee contracts with their onerous health and pension systems. The unions would be forced to temper their demands if they want the car companies to survive. In the case of GM, it could also dump some of its uncompetitive product lines such as Pontiac and Saturn. Discontinuing five of GM's eight domestic brands would save the company billion annually. The unions either go along or go under with the automakers. That is reality and that is their choice. Remember that GREED KILLS!

- Taxpayer money won't change the fact that many foreign cars are made better than their U.S. counterparts. Kelley Blue Book announced its top 10 brands for resale value this week, and not one of the Big Three was on the list. Chryslers, for example, keep only 24.2 percent of their sticker price on average after five years. By contrast, Hondas retain 44.5 percent of their value. The taxpayers already have Billion committed to help the Big Three retool the plants and now it is time to retool the labor contracts.

- Bailout funds would help automakers continue their outsourcing of auto jobs to foreign countries, where costs are lower. All of the Big Three have increased the percentage of manufacturing and assembly done overseas in the past year, especially in China and Mexico. In May, Ford agreed to build billion auto plant in suburban Mexico City and upgrade two other Mexican plants, the largest foreign investment in Mexican history. We need more jobs here in America, not in Mexico. If we run short of workers, we can change our immigration laws and upgrade our guest-worker program.

- Big Three bankruptcies wouldn't mean the end of auto industry in the United States. It may increase production here. Foreign companies, which already have plants here, could pick up the slack and open new factories. Some 78,000 Americans already work for foreign car makers, a number likely to rise in the wake of any U.S. automaker demise. The depressed South could benefit particularly from increased production of foreign auto companies. Let us move forward now!

- Other industries have survived bankruptcy just fine. Most of the major airlines have spent time in bankruptcy, including United, Continental, Delta, Northwest, and US Airways. Their predicament looked particularly dire after 9/11. But the major carriers made it through. And to the extent that they suffered, low-fare competitors such as Southwest and JetBlue picked up the slack, often offering superior service in addition to cheaper prices. Southwest does pretty well and seldom turns in a loss. Is anyone paying attention? It is past time for lazy overpaid executives to sit on outdated business plans. It is time for investors to shake up stockholder meetings. Let's have some fun!

- Bailing out the auto industry would only encourage other sectors to beg for government handouts. Remember that the 0 Billion Troubled Assets Relief Program was designed only to assist banks, but now insurance companies and even credit card giant American Express are trying to get in on the action. Home builders, who arguably are as strapped as the automakers, could lobby for some of the action.

- Stockholders deserve no mercy. Some argue that they should be compensated for the fact that GM and Ford's share prices have hit their lowest levels in decades. We all know that is pure 100% non-sense! But in a free market, stock prices go down as well as up. The automakers' problems have been clear for years, so investors had plenty of time to get out for demand overdue changes. As for Chrysler, it's owned by private equity firm Cerberus, no innocent victim itself. The stockholders have not held the manufacturers accountable. From this day forward, they need to do just that. Then we would have more American Economic Justice.

- Bailouts have been tried in the auto industry, and they don't work. In the 1970s, Britain's Leyland hit the skids, hurt by slipping quality in its vehicles and imports from Germany and Japan. Sound familiar? Leyland, which made MGs, Jaguars (Jaguars are now schedules to be made in India) and mass-market cars, accounted for 36 percent of the UK market. So the government sunk in .5 billion to keep it afloat. The result? Unless you're a car buff, you've probably never heard of Leyland, because it no longer exist. The same will happen for the Big Three if we bail them out.

So let us consider the four items below:

- Fair Access Amendment - ([http://justicetimes.com/?p=1254])
- Fair Tax Act - (http://Fairtax.org)
- Read The Bill Act - (http://downsizedc.org)
- One Subject at a Time Act - (see above)

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Justice For American Auto Workers and Stockholders