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As it scrambles for a share of the bail-out funds designated for financial firms, the US auto sector is engaging in some public relations overkill. Take the letter sent to Congress by a group of parts suppliers asking for their cut of any cash given to the sector, pointing out their much larger workforce – 590,000 people or more than double the “Big Three”. A lost job at Dana or Visteon is no less of a shame than one at General Motors or Ford, but the lobbying effort raises the question of where Washington’s gravy train should stop. How about auto dealers, who employ 1m people? Would Starbucks baristas, similar in number to GM workers, then merit a bail-out?
Detroit’s lobbying blitz is aided by greater public sympathy for auto workers than Wall Street bankers, but the sector seems to be crying wolf. An industry-funded report recently grabbed headlines estimating that a “collapse” of the industry would cost 3m jobs and result in a total government tax loss of $156bn, making a mere $50bn bail-out a good deal. This assumes a highly unrealistic shutdown of every US car and car parts factory, including those that supply foreign companies, as if Michigan were hit by a cosmic blast. That imagery is used in a video posted on YouTube by GM itself, showing shockwaves engulfing Detroit before spreading across a map of the country. It also cites the “grave” threat to national security that somehow was never an issue when outsourcing auto production to China.
Public sympathy may shift in the face of such hyperbole, particularly as pundits discuss the lavish wages and benefits of unionised auto workers, equal to $73.20 an hour according to economist Mark Perry. Far from a “collapse”, Chapter 11 would be painful, but it would hasten the restructuring needed to make the industry viable. It is time for some tough love.
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