Obama reverses Bush policies on emissions control

[The Duchess of Zeon]

I fail to see (and I think MoO may also fail to see) where converting these companies to "workers' collectives" (which terminology, I might add, sets off "THE COMMIES ARE COMING!!!" alarms in many Americans) in any way "guarantees" anything or prevents any sort of collapse.

Well, it's obviously in combination with billions of dollars of federal government money. But the companies are going to get that anyway, so what?

There is NO guarantee of anything we do at this point. Do the workers' have the ability to self-govern a corporation?

Some guys who had been to a Catholic run vocational school in the Basque country in the 1940s had the skills to start Mondragon and in the first 26 years bring it from 24 employees to 20,000. Are we to assume that the average American is a retard in comparison with the average Basque? Are Americans really so stupid that they can't replicate what some Basque guys who went to a vocational school were able to do? And more to the point they'd be starting out with vast initial assets, instead of, you know, successfully creating them out of nothing, making the task easier.

Although we have seen parastie executives in recent years that add nothing to a company's health there really are executive skills necessary to running a company of this sort, just as proper accounting skills are necessary, and skilled labor are necessary. You must be careful to preserve useful executive and management just as you must be careful to preserve the skilled labor on the factory floor.

And the workers' board of the cooperatives would indeed be hiring corporate officers, who would then be subject to further accountability and oversight by other bodies, as in the MCC.

I've worked most of my adult life for "non-profit" or "not-for-profit" companies. They still need to be in the black. Just breaking even is NOT good enough. The prime difference between a profit and a not-profit company is the not-profit recycles the profits back into the company and workers - they still need to have income exceed outgo, that is, see a profit. In other words, even not-for-profit companies still have to make a profit - what makes them different is what they do with their profits.

Sorry, in economics terms no company ever makes a profit (seriously), so I meant "making enough money to both pay for all operations and to pay for all obligations to the workers."

There are cultural issues here - workers can and have "de-certified" their unions and given them up. Starbucks, for example, used to have a union but management won over the workers to the point that the workers themselves voted the union out. In fact, I'd say workers choosing to get rid of a union is a sign of really good management. The UAW exists in part because the workers don't trust management and there are real reasons for that distrust (there's also a shitload of historical baggage, too). The UAW arose because the workers did need the union at one point - you must convince the workers they no longer need it before you can get them to let go of it.

They wouldn't need the union because they'd own the company and their elected representatives would hire the high corporate officers.

Do the workers really have the knowledge to set work regulations? Can they be objective enough when they need to be? Not all work regulations in the auto industry are set by the UAW, don't be too quite to get rid of some of them.

Obviously the federal regulations can stay; I'm talking about the ridiculous UAW ones like how you have to be a certain worker to do a certain thing in the plant and how guys stand around doing nothing until teams of the authorized workers can come and do something like move a machine tool five feet, which could have been accomplished in minutes by the guys on the scene, and that kind of crap that goes on in Detroit these days.

And if this venture does not succeed...? If your scheme fails (and it can fail) then your workers are NOTHING for retirement, neither pension nor healthcare nor anything else. You are asking the most vulnerable workers to bet their entire future on this scheme. If it doesn't work what the fuck are they (and you!) going to do? Say "sorry - too bad you're sick and starving"?

And who's going to take care of them if the companies fail right now? Social security? It's going to fail--I sure as hell never expect to see a dime from it. It's a better chance than the one they've got now. Is the federal government going to take over the pension plans when Detroit collapses? We'll just pour enough cash into the companies to make them succceed, which is what we're doing right now except with no serious attempt at reorganization. I am not sure how massive government handouts to the formation of workers' cooperatives out of Detroit is supposed to be worse than massive government handouts getting shoveled down the money hole in the existing corporate structure.

Except, of course, for the influence of "rich kelptocrats" who want a slice of the pie, and those who will panic at the term "workers' collective", and those who fear this will not work and they will starve in old age, and so on and so on.

Bluntly, most of the fuckheads in the US don't live in Michigan--Ohio, and this is MORE likely to be accepted than nationalized healthcare, since it only affects those evil northern socialists, muting the opposition from God Fearing Capitalists in Texas and whatever. I honestly think we'd have a better chance of this than single-payer healthcare, because single payer healthcare effects everyone, whereas the opposition to this reorganization would be less pressing in the deeply conservative areas of the country which have no investment in what happens in Michigan.

How about we just fucking nationalize healthcare like every other damn industrialized nation? How about we just fix social security so it functions as a national pension system? That would take the cost out of auto industry (which is what you really want) and spread the risk over the entire US population which means that even if the auto industry fails the workers will not freeze/starve to death in a gutter in old age?

Again, I think this is more viable than single-payer healthcare in the USA, because we'll have less opposition from people in Mississippi and Texas claiming that single payer health insurance will send you to hell to be tortured by Satan for all eternity. It doesn't affect them in a visible way, so their opposition would be more muted.

[Master of Ossus]

It's not a company. The structure and methods of compensation are fundamentally different, and there is no payout from being a worker-owner, just guaranteed income and benefits.

Whatever.

It does reduce the cost, when in combination with the billions of dollars of government investment that they're getting anyway, certainly, but the cooperative model is a vital part of that by allowing the reorganization of the model of labour.

HOW? What is the source of cost-advantage, here? You're claiming that the workers are not only getting the same compensation but are also getting guaranteed income.

Because the reorganization would allow them to make a profit on those cars by completely restructuring how it manufactures vehicles.

HOW?

No, the UAW management and top Union representatives thereof would be explicitly excluded from this. The worker-owners would be the rank and file, and the entire hostile culture of the UAW would simply be locked out. The political capital to do this would in fact be one of the justifications of making the companies collectives. It can't be Union-busting if the workers are getting to own the companies, can it? So the unions are just outmoded and going the way of the dinosaur.

HOW? Most of the UAW management are workers, too. Are you throwing them out of their jobs? Moreover, the issue with labor isn't that they think that The Man is holding them down or because they're hostile or whatever: the issue is that they've bargained for ridiculous compensation schemes that you claim to retain under your system. That is why the American automakers have such high labor costs. You cannot reorganize the company into an anarco-syndicalist commune and expect to cut labor costs if you turn around and guarantee them the same compensation. Moreover, they will NOT accept less compensation just because you label them all as owners (without any kind of equity share) and call it a day and you cannot enforce this agreement onto all of the retirees who are benefiting from the extremely generous pensions that they were promised in the past.

And yet the objective proof is that when workers have an interest in their company they are willing to accept wage cuts. This has happened numerous times at the Mondragon over its history during economic downturns.

Because they actually have an equity share in the company. That isn't true at Ford or GM.

What makes the workers in Detroit different from those in the Basque country, praytell? Anyway, since the alternative is that these companies go out of business and they all end up living in cardboard boxes next to fire barrels, what choice do they have?

A more standard bailout package if you really don't want them to go out of business.

You're also looking at this from a flawed prospect, since they don't have an equity share--they can never cash it in or redeem it. They are just one worker, one-vote participators in the management of an organization which secures their wages and benefits through the offering of products to the general public .

Who have an equity share in the company because they share in all of the profits of the company--something that's irrelevant in Detroit because the Detroit car-makers are persistently unprofitable.

Because the social security taxes on all the workers will be diverted into the retirement fund, firstly; secondly, because the workers will be accepting pay cuts and reduction in pension payments, especially in the short term, in expectation of the future profitability of the company they now have a vested interest in maintaining, instead of a vested interest in being hostile to. And because all of the highly inefficient regulations foisted by the UAW on the corporations can now be removed.

So we're back to profits, now, only ones that are distributed to the worker-owners as opposed to the evil capitalists? Have you even thought about this?

1. The federal government will have to provide billions in initial cash to unfuck the companies, but we're already giving them billions, so what's the big deal there?

The magnitude?

Especially since you think the companies are going to fail, so don't answer me with "they'll have to pay the government back someday", since you're on the record here as arguing that the workers would still be up shit-creek because the companies are going to fail.

Bullshit. I think the company's going to fail no matter what we do, and so the ideal solution isn't to bail them out but to assist with a package to help the workers more directly. The answer isn't to prop up a company that's dying indefinitely and has no expectation of future profitability but can expect continued losses forever.

They're not going to magically stay in business because super randite capitalists are running them. So either they need further reorganization to avoid failure, at which point we might as well just give them the money if it saves the corporations, or they're just up shit creek without a paddle no matter what, and so's the economy. Do we not agree on this?

I think some randy capitalist has the best chances of salvaging what's possible by reorganizing them; not turning the keys to the company over to the people who have been drinking the UAW Kool-Aid for their entire working lives.

And yes, as the articles on Mondragon detail, the workers should expect to get paid less, just like the worker-owners of Mondragon have accepted pay cuts during hard times themselves. If they don't, they can take their cardboard boxes and burn barrels.

Oh, so you're paying them less, now? And, again, Mondragon is a fundamentally profitable company. You have provided precisely no mechanism for restoring Ford and GM to profitability, other than your flailing claims that the workers will happily take a pay-cut, even though we've repeatedly observed that they're not willing to do that.

And yes, they will do exactly that, though on the understanding that when the companies are profitable again, those profits will go toward funding the services they previously expected; in short, they are being asked to make sacrifices now to make the cooperatives permanently viable.

HOW are you making them permanently viable? You want them to take pay-cuts in the near-term and promising them future viability? Fine. WHERE is the long-term viability coming from?

After the initial government funding for reorganization and restructuring they should be quite able to handle themselves without outside financing, just like Mondragon does. Mondragon clearly proves that companies even of the scale that have more than 100,000 workers can in fact successfully function without the sale of equity.

Mondragon is a fundamentally profitable venture. You have no answer for this point other than to say that the government knows how to run Ford better than Ford does, and will reorganize so well that the workers can't possibly fuck it up and will stick around despite "short-run" paycuts.

Yes it does, and I've coherently explained how it will. You just seem unwilling to accept the alternative to the capitalist model that the MCC stands as a proud example of.

MCC is a fundamentally profitable venture. Ford and GM are not. Unless you have some reorganization scheme that will fix the fundamental problem that it costs them $20k to make a car that their competitors can sell for $18k you cannot establish your collective as a going concern.

[Master of Ossus]

Well, it's obviously in combination with billions of dollars of federal government money. But the companies are going to get that anyway, so what?

So, I don't think you've given us any compelling reason to believe that the collectivist group is going to be more effective than a more typical bail-out plan, particularly because even very generous bail-out packages fall well short of buying out the entire company involved and THEN shoveling billions more dollars into them and THEN foregoing any potential future profits by handing them over to the workers.

Some guys who had been to a Catholic run vocational school in the Basque country in the 1940s had the skills to start Mondragon and in the first 26 years bring it from 24 employees to 20,000. Are we to assume that the average American is a retard in comparison with the average Basque? Are Americans really so stupid that they can't replicate what some Basque guys who went to a vocational school were able to do? And more to the point they'd be starting out with vast initial assets, instead of, you know, successfully creating them out of nothing, making the task easier.

I think you need to remember that 95% of small businesses fail in their first 5 years of operation. The Basque group that founded Mondragon was lucky and they were good. We have no evidence to suggest that the average Ford worker is different from the average American, and so that makes it 95% likely that their small business would fail. Not great odds.

And the workers' board of the cooperatives would indeed be hiring corporate officers, who would then be subject to further accountability and oversight by other bodies, as in the MCC.

And as in Ford and GM, right now, except that the worker's board of the cooperatives doesn't have the experience that Ford and GM's Board of Directors have in this precise area.

Sorry, in economics terms no company ever makes a profit (seriously), so I meant "making enough money to both pay for all operations and to pay for all obligations to the workers."

1. Uh... yeah, companies can make profits and they do.
2. And car companies have this little thing called "capital equipment" they need to buy and maintain.

They wouldn't need the union because they'd own the company and their elected representatives would hire the high corporate officers.

So how's the Kool-Aid?

Obviously the federal regulations can stay; I'm talking about the ridiculous UAW ones like how you have to be a certain worker to do a certain thing in the plant and how guys stand around doing nothing until teams of the authorized workers can come and do something like move a machine tool five feet, which could have been accomplished in minutes by the guys on the scene, and that kind of crap that goes on in Detroit these days.

So what are you going to get those guys to do, then, since you've guaranteed them all jobs?

And who's going to take care of them if the companies fail right now? Social security? It's going to fail--I sure as hell never expect to see a dime from it. It's a better chance than the one they've got now. Is the federal government going to take over the pension plans when Detroit collapses? We'll just pour enough cash into the companies to make them succceed, which is what we're doing right now except with no serious attempt at reorganization. I am not sure how massive government handouts to the formation of workers' cooperatives out of Detroit is supposed to be worse than massive government handouts getting shoveled down the money hole in the existing corporate structure.

Because the scale of your plan is dramatically larger than even the most generous bail-out packages. Do you really not understand this or do you just think it's a non-issue.

[Darth Wong]

Marina, putting limits on the difference between worker compensation and CEO compensation is fine; you can copy that from Mondragon. But making the workers the owners will not solve GM's problems, because many of those workers are GM's problem.

The inescapable fact is that GM has huge over-capacity and high labour costs, resulting in unacceptable overall operating costs. If you put the company in the hands of the employees, they will have to voluntarily decide to let some of themselves go. How is that going to work? It'll be a huge mess; you might as well go back to your previous plan of putting the company in the hands of government overlords.

Also, your plan would be a huge financial giveaway to the very people who caused this mess: the big unions. It would do absolutely nothing for the huge numbers of supplier businesses and their employees, who have been squeezed tighter and tighter over the past 20 years to make up for the union's greed.

[The Duchess of Zeon]

I'll concede the point, but primarily because it's grossly unfair to make comparisons between the MCC and the Big Three because the MCC operates in a country with a functioning social network and universal healthcare, both of which the Big Three have to provide out of their profits--it is unfair to ask American car manufacturers to make money when they pay entirely for providing excellent healthcare to their employees when the employees of Japanese, German, etc car manufacturers receive this from the government for free. Unfortunately, I don't see any solution except the immediate institution of universal single-payer health insurance.... And that is politically impossible in the United States.

[K. A. Pital]

@ Stas Bush, I've never heard that either. Are you talking about Solow growth model? That does show technological growth as a prime driver of economic growth since it directly impacts capital, but savings (when below K*) are another main driver, as are some other things.

Yeah, but basically, the non-zero technological progress, outside of other factors, is the only thing which is not constrained by natural factors (population size, market size, et cetera). So that's the only thing you can reliably consider bringing you forward even when all other factors start acting as limits.

[Starglider]

it is unfair to ask American car manufacturers to make money when they pay entirely for providing excellent healthcare to their employees when the employees of Japanese, German, etc car manufacturers receive this from the government for free.

A libertarian would say that the lack of government health care allows income taxes to be lower in the US than those companies, which means that the company can and should pay a lower gross salary to the workers, while maintaining the same net salary (and hence standard of living). The savings from should more than make up for the cost of providing healthcare, because private healthcare is always more efficient than government healthcare.

Of course this has been proven to be false in practice, but plenty of economic decision makers (in the US at least) still believe it.

[Master of Ossus]

I'll concede the point, but primarily because it's grossly unfair to make comparisons between the MCC and the Big Three because the MCC operates in a country with a functioning social network and universal healthcare, both of which the Big Three have to provide out of their profits--it is unfair to ask American car manufacturers to make money when they pay entirely for providing excellent healthcare to their employees when the employees of Japanese, German, etc car manufacturers receive this from the government for free. Unfortunately, I don't see any solution except the immediate institution of universal single-payer health insurance.... And that is politically impossible in the United States.

And, yet, Japanese car manufacturers in the US that hire American workers can still turn out cars for a profit, even though they're still paying for their healtchare.

[[R_H]]

(In case anyone has missed it, one key measure I support is to increase the retirement age to 70, or even higher, and encourage healthy middle-aged people to keep working which will solve a lot of the "problems" with SSI)

While I agree that increasing the retirement age is necessary, what about those who work in industries which require lots of physical labour or have harsh working conditions? Like miners or construction workers. Would you allow them to retire early than the others that have office/physically less demanding jobs?

[The Duchess of Zeon]

I'll concede the point, but primarily because it's grossly unfair to make comparisons between the MCC and the Big Three because the MCC operates in a country with a functioning social network and universal healthcare, both of which the Big Three have to provide out of their profits--it is unfair to ask American car manufacturers to make money when they pay entirely for providing excellent healthcare to their employees when the employees of Japanese, German, etc car manufacturers receive this from the government for free. Unfortunately, I don't see any solution except the immediate institution of universal single-payer health insurance.... And that is politically impossible in the United States.

And, yet, Japanese car manufacturers in the US that hire American workers can still turn out cars for a profit, even though they're still paying for their healtchare.

Would the Japanese really build factories in the US if it weren't for the public image issues they'd face by not doing so? I've wondered that for some time, I seriously doubt their American assembly plants are anything other than more expensive to operate than the ones in Japan, I suspect they just offer marketing and lobbying benefits in America that they judge to outweigh the extra costs.

[Broomstick]

(In case anyone has missed it, one key measure I support is to increase the retirement age to 70, or even higher, and encourage healthy middle-aged people to keep working which will solve a lot of the "problems" with SSI)

While I agree that increasing the retirement age is necessary, what about those who work in industries which require lots of physical labour or have harsh working conditions? Like miners or construction workers. Would you allow them to retire early than the others that have office/physically less demanding jobs?

A very good question. Let me attempt to answer it.

First of all, when raising the retirement age to 70+, we MUST maintain a viable mechanism to support those who become disabled through either accident or disease. At present, the so-called disability system takes an average of 500 days for a claim to go from initial submission to approval and that is far too long.

I would propose a two-tier system of disability. Tier 1 (shall we say) is the current standard, which is unable to perform any gainful work. If you qualify for Tier 1 you get to retire at that point with full benefits. Tier 2 would be unable to perform one's current work and would be geared towards retraining such individuals for work they are still capable of performing. This could even be in a related area - for example, someone not capable of working long days on construction sites might still be capable of teaching their skills to another generation (the retraining would then be educational techniques, perhaps). Or perhaps a completely different area. Ideally, it would be a stipend and tuition/training costs along with a plan that would, in a year or two, turn out a worker capable of gainful employment until the standard retirement age.

This is, of course, highly idealized, but such a two-tier system would sort out those capable of retraining/rehabilitation from those not, and the Tier 2 would apply at any age the worker became incapable of performing their customary work.

[Broomstick]

And, yet, Japanese car manufacturers in the US that hire American workers can still turn out cars for a profit, even though they're still paying for their healtchare.

Would the Japanese really build factories in the US if it weren't for the public image issues they'd face by not doing so? I've wondered that for some time, I seriously doubt their American assembly plants are anything other than more expensive to operate than the ones in Japan, I suspect they just offer marketing and lobbying benefits in America that they judge to outweigh the extra costs.

Duchess, I do not think you really addressed the point that the Japanese branded cars built in the US really are offered at less cost to the consumer and yet the Japanese corporations continue to profit (well, maybe not this year, but NO ONE profitted this year, it's an outlier) even though those companies DO pay employer-side social security taxes AND for employee healthcare. Japanese-owned factories in the US still compete under US rules and regulations and still pay US taxes - and they out-compete the US auto industry despite the disadvantage of anti-foreign sentiment.

If the marketing/lobbying/PR benefits outweigh the costs of factories in the US then yes, the Japanese really will maintain factories in the US. The US market really is of importance to Japan, as is some measure of US goodwill (remember, they depend upon the US to a large extent for the physical defense of their nation). The relationship between the US and Japanese in these matters is not purely dollars and cents and yen though, of course, profits matter.

One reason the Japanese plants were built here at all were consumer backlash and boycott post-1970's. There were even a few murders motivated by anti-Japanese sentiment in the Detroit area, the most well know the murder of Vincent Chin by two laid-off auto-workers in 1982 who didn't distinguish Chinese from Japanese immigrants, but it was far from the only hate crime of the time. I lived in the Detroit area at the time and people were afraid to buy Japanese (or any other foreign) auto whether they themselves were Asian or not. Foreign cars were being vandalized, greatly reducing their worth to their owners, especially when the owners were in the car at the time of hostilities. If the Japanese wanted to maintain their market share in the US (not to mention safeguard any of their citizens living here) they had to do something to mitigate those very harsh feelings. Providing some jobs certainly did help.

[The Duchess of Zeon]

Well, I guess the question is how much greate the healthcare liability is for the Big Three per worker (including retirees--a big factor we shouldn't forget!) against the number of workers and retirees for total expenditures, versus the Japanese factories here. I will try to go ahead and find those figures, which I suspect considering how much this issue is debated will be available.

That said, your post left me frankly confused about whether or not you agree or disagree with me; you spent the first paragraph disagreeing with me and the second two strongly agreeing with me, so what do you intend?

[Master of Ossus]

Would the Japanese really build factories in the US if it weren't for the public image issues they'd face by not doing so? I've wondered that for some time, I seriously doubt their American assembly plants are anything other than more expensive to operate than the ones in Japan, I suspect they just offer marketing and lobbying benefits in America that they judge to outweigh the extra costs.

It doesn't matter WHY they're making cars in the US: the point is that they're not selling those cars at a loss, like Ford and GM and Chrysler are, even though those factories still suffer from the allegedly impossible obstacle of having to pay for healthcare for their employees.

[K. A. Pital]

It doesn't matter WHY they're making cars in the US: the point is that they're not selling those cars at a loss, like Ford and GM and Chrysler are

Aren't Toyota as of now having a loss? Did US automotive industry have continous losses before this time?

[Broomstick]

Given the unusual economy of the past year or so perhaps this year is not the best for comparison purposes. The Japanese were out-performing the US auto industry on their home turf for some time. While the losses were not continuos over time the US industry has lost ground while Japanese and Korean companies gained market share. The result is that if something radical is not done GM and Chrysler WILL die - at this point Ford alone has a chance to survive and even that is not certain. If that happens the Asian companies will snap up what is left of the US market for autos, assuming anyone has the money to buy cars at that point.

[Broomstick]

That said, your post left me frankly confused about whether or not you agree or disagree with me; you spent the first paragraph disagreeing with me and the second two strongly agreeing with me, so what do you intend?

What, it's impossible to do both?

[Master of Ossus]

Toyota lost money last quarter because of the strong Yen, but it's been profitable each year at least since 2005. In fact, I think I remember some story talking about how it was Toyota's first quarterly loss in 50 years, or something.

Edit: Honda has also been a model of consistent profitability.

Ford last turned a profit in 2005, and in 2006 and 2007 lost a combined $15.3+ Billion. Their American operations are even worse, though, since they've credited strong foreign sales with driving their "income."

General Motors hasn't turned a profit in the last three years (at least) and has lost over FIFTY billion dollars in that time. General Motors has, similarly, survived off of foreign sales when it managed to squeek together profitability.

[The Duchess of Zeon]

A lot of those are writedowns due to the recent economic downturn and their credit investments, however. Also, the combined health insurance liability of the Big Three is $12 billion every single year. That means that the combined losses of the big three--in the range of 70 - 75 billion over the past three year--are only twice as great as their health insurance liability; if the had not been paying out $12 billion a year in health insurance for the past three years that would have at least halved their losses, in a world where the USA had universal health insurance. Add in the fact that a lot of those losses are not losses from their operating divisions but writedowns from depreciation of assets, changes in accounting practices and the loss of credit through writedowns as their lending arms take massive hits, and you start to see how health insurance may be the single largest structural factor affecting Detroit in reality.

[Master of Ossus]

A lot of those are writedowns due to the recent economic downturn and their credit investments, however.

You think that the recent economic downturn caused GM to lose nearly $40 billion in 2007 and over $10 billion in 2005? Moreover, their credit investments aren't coming back since they've long since lost their AAA credit status.

Also, the combined health insurance liability of the Big Three is $12 billion every single year. That means that the combined losses of the big three--in the range of 70 - 75 billion over the past three year--are only twice as great as their health insurance liability; if the had not been paying out $12 billion a year in health insurance for the past three years that would have at least halved their losses, in a world where the USA had universal health insurance.

Yet Toyota and Honda make the same payments and still turn a profit.

Add in the fact that a lot of those losses are not losses from their operating divisions but writedowns from depreciation of assets, changes in accounting practices and the loss of credit through writedowns as their lending arms take massive hits, and you start to see how health insurance may be the single largest structural factor affecting Detroit in reality.

GM's net income from its continuing operations was actually WORSE than their $50+ billion loss from 2005-2007 indicates because they sold off some failing operations. Ford hasn't turned a profit from its continuing operations since 2005. And saying that healthcare is their biggest problem with profitability is a massive fucking cop-out, anyway. It's not like their costs would disappear if they were turned over to the government, since presumably the government would have to increase taxes in order to finance global healthcare (which would actually be more expensive since not all Americans are covered, now), but more fundamentally it's like saying that they would be profitable if they no longer had to pay for their capital equipment. Paying for healthcare is a cost of doing business in the US; some automotive companies that aren't based in Detroit and aren't saddled with the UAW and other major unions can be profitable making cars here with that cost. Some companies which are based in Detroit and are saddled with the UAW and other major unions have not been able to profit with that cost.

[The Duchess of Zeon]

I do, however, have proof.

It is not within the power of United Auto Workers President Ron Gettelfinger to save GM, Ford and Chrysler. But it is certainly within his power to kill them. Whether he chooses to do so will soon become clear. What are arguably the most critical contract negotiations in the history of Motown's auto industry began this week.

America's former Big Three auto makers are teetering on the brink of bankruptcy—Ford's second-quarter profit notwithstanding. And one big reason for their dire state, apart from collective amnesia over how to make hit cars, is their ever-escalating health-care expenses. Every car they produce, they plaintively assert, contains $1,500 in health costs that their Japanese competitors don't face.

But Mr. Gettelfinger has already declared that he is not in a "concessionary mood." UAW workers at Ford and GM agreed to a health-care cost-sharing deal during an unusual round of mid-contract negotiations in 2005. Closing the competition gap with Japanese auto makers now, Mr. Gettelfinger insists, requires not more concessions by auto workers—but a Japanese-style government health-care system for all workers.

"We pay more, but get less," he thundered to roaring applause at a recent NAACP luncheon.

Doubtless, some of Mr. Gettelfinger's tough talk is posturing, calculated to extract the best possible deal from auto companies. Yet his perennial calls for a national health-care system -- echoed by leading Democratic presidential candidates -- affect the dynamics at the bargaining table: By feeding the notion that Japanese workers are getting a better health-care deal than UAW workers, they make it harder for Mr. Gettelfinger to make reasonable compromises and sell them to his rank-and-file.

But do Japanese workers really live in some single-payer, health-care heaven where all their medical needs are covered by general taxpayers with no cost to them? Hardly.

The Japanese system comprises three basic insurance plans: one for the self-employed and the unemployed, including retirees under 70; one for the elderly over 70; and one for all private- and public-sector employees. The employee plan is not just completely self-financed, with no taxpayer support. It actually subsidizes the other two, an arrangement that is becoming increasingly unsustainable as Japan's population ages. (Both Toyota and Honda declined to give an estimate of their current or future health-care premium burden.)

The employee plan requires a premium equal to 9.5% of a worker's annual income. Employees themselves pay about 45% of the premiums from their paychecks, their employers the rest. This works out to $1,557 for an employee with an annual income of $36,500—average wages for a blue-collar Japanese auto worker—according to figures provided by the Japanese Ministry of Health and Labor Welfare.

But that's not all Japanese workers are on the hook for. Working families also face a 30% co-pay—capped at $677 per month for a mid-income family—for medical expenses such as in-patient and out-patient hospital charges, drugs, doctor's visits and diagnostic tests. Because these services are exceedingly cheap, thanks to massive price controls, in practice the average Japanese family pays only about $720 a year in co-pays. This adds up to total out-of-pocket annual expenses of about $2,300 for every Japanese household, which is comparable to what active UAW workers pay after the 2005 deal in absolute dollars. But relative to their income, Japanese workers bear a far bigger burden than UAW workers.

Even that isn't the full story. In the event of a catastrophic or chronic illness requiring prolonged hospitalization, a UAW worker faces no further expenses. A Japanese worker who hits his co-pay cap each month would be out of pocket up to $10,000 a year—about 25% of his annual pay-check and five times more than a UAW worker under similar circumstances. This puts a huge strain on some Japanese families, forcing them to default on their hospital bills. Asahi Shimbun, Japan's respected national daily, reported that Japanese hospitals lost $180 million in unpaid patient bills in 2004.

UAW workers get a better deal not only than Japanese workers, but other American workers as well.

Before the 2005 "givebacks," the Detroit Three companies picked up the entire health-care tab for all their hourly workers—active, retired, dependents and, incredibly, even laid-off workers till they found other jobs. Workers were not required to pay any premiums, deductibles or co-pays-except for routine physical exams and prescription drugs. The 2005 deal left these benefits virtually untouched for retirees with pension incomes below $8,000. But for the first time ever it began requiring more well-off retirees to cough up $252 in annual premiums for family coverage and another $500 in total annual deductibles. In short, for a grand total of $752 in out-of-pocket annual costs, UAW retirees and their spouses get full medical coverage for life. Given the huge retiree population that the Big Three support—GM has three times more retirees than active workers—this has saddled them with a combined unfunded health-care liability exceeding $100 billion.

By contrast, 90% of retirees in other American companies don't get any employer-provided coverage after 65, when they become Medicare-eligible. Such couples, according to an analysis by Fidelity Investments last year, are typically on the hook for $10,000 in out-of-pocket annual costs for Medicare co-pays and other expenses not covered by the program, or 10 times more than UAW couples.

Meanwhile, the only concession that active UAW workers made in 2005 was to defer $1 an hour of their 2006 pay raise toward a UAW-controlled Voluntary Employees' Beneficiary Association (VEBA) fund. On average, this translates into roughly $2,000 in VEBA contributions per UAW worker per year. Some of the returns from the fund's investments subsidize the coverage of current retirees. But the rest are tucked away for the workers' own retirement coverage. In other words, by setting aside about 4% of their current wages annually, UAW workers secure not just all their medical needs now, but for life. In comparison, salaried workers with families contribute more than twice as much as UAW workers—$2,500 in premiums and another $1,600 in deductibles and co-pays—for just their current health care needs, according to two separate surveys conducted by Kaiser Foundation and Hewitt Associates last year.

What all of this shows is that the so-called competition gap that Motown auto makers and the UAW complain about is created by the lavish health-care and pension deals they wrote themselves—not by Japan's nationalized health care system. Indeed, it is often overlooked that Japanese auto makers import less than 45% of the cars they sell in the U.S., and the percentage will likely drop further, as Toyota plans to expand its share of U.S.-made cars to two-thirds of all vehicles sold in America in the next three years.

Active hourly workers at Japanese "transplants" face out-of-pocket costs not much higher than their UAW counterparts. The big difference, however, is that upon retirement they don't get limitless medical coverage. Instead, they get a fixed amount of money to buy supplemental Medicare coverage.

American auto makers too are hoping to cap their health-care liability to retirees by convincing Mr. Gettelfinger to accept a deal under which they would put a lump sum of money into a fund that the UAW would use to buy coverage for its members. Mr. Gettelfinger signed off on a similar arrangement with Dana, a large auto supplier, when it went into bankruptcy last year, but is reportedly not convinced that this would be advantageous for Big Three retirees.

UAW workers still enjoy a health-care deal that no one else in America or Japan—or quite possibly the planet—does. Yet Mr. Gettelfinger said last week that the 2005 health-care givebacks were the toughest decision he ever made in his entire career. This is a startling admission that reflects the depth of the UAW's entitlement mentality, and its detachment from the world that its fellow Americans inhabit. But such lavish expectations are unsustainable under any system—American or Japanese. This is a reality that Mr. Gettelfinger must accept. Otherwise, he may well push U.S. auto makers over the cliff—and his comrades with them.

Shikha Dalmia is a senior analyst at the Reason Foundation. This article originally appeared in the Wall Street Journal.

Now, it's true that in Japan many of these costs are passed on to the Japanese worker, and the Japanese worker doesn't get as good of healthcare--so what? I'm not interested in UAW whining. I'm interested in the fact elucidated above that each car the big three make contains $1,500.00 in healthcare costs--when it was earlier explained by Mike that GM, Ford, Chrysler all face a shortfall of about $2,000.00 in the amount of money they can put into their cars, explaining their poorer quality. Remove healthcare and the result is that the shortfall is reduced to 25% of what it was. Will this impose a financial burden on the workers? Certainly so, because the single-payer federal health insurance replacing it actually won't be as good as the insurance they had before.

But it does show that even just eliminating healthcare would largely solve the problem that the Big Three face, allowing for relatively minor salary and retirement cuts, or possibly none at all if the elimination of some of the more ridiculous union regulations which waste money could be obtained to completely bridge that $2,000.00 gap per car.

[JCady]

I'll never buy an American-built car in my life, even if I have to pay a 100% import tariff, to be blunt. The quality is just sheer unadulterated crap, and no attention is paid to the process of considering ergonomics, layout, and driving behaviour to allow for the maximum performance of the vehicle to be obtained by a skilled driver; they're automatic kludgebuckets.

Isofar as passenger vehicles go I agree with this, but in light trucks the imports are still playing catch-up. The Toyota Tundra is a lot better than the old Toyota T-100, but it still compares rather unfavorably to the Ford F150.

[Illuminatus Primus]

The biggest problem is that UAW wants to squeeze other American workers and working families to death with their unreasonable suicide pact, so their workers can have awesome health care at the unequal expense of the collective.

[Dahak]

it is unfair to ask American car manufacturers to make money when they pay entirely for providing excellent healthcare to their employees when the employees of Japanese, German, etc car manufacturers receive this from the government for free. Unfortunately, I don't see any solution except the immediate institution of universal single-payer health insurance.... And that is politically impossible in the United States.

German healthcare is *not* for free from the government. Right now, health insurance costs about 15.5% of your income, of which the employee and the employer each pay roughly half.