A suggestion for Big Three and UAW (updated)

My conceptual solution to the auto company bailout question is as follows:

The federal government makes a one-time only injection of the requested $25 billion into the Big Three in return for a proportionate ownership stake in the companies.  Based on the current market  capitalization of GM and Ford and my estimate of the market value of privately-held Chrysler, that would give the government about 80% ownership in the 3 companies.  (A discount from the market price could be justified for such an investment, providing a higher ownership stake.)

The $25 billion cash injection is conditioned on the United Auto Workers (UAW) accepting a gift of the 80% (or higher) ownership stake from the government, giving the UAW absolute control of the 3 auto companies which will then be exempted from any anti-trust restrictions on consolidations, etc. The fate of the Big 3 and its workers will then be entirely in the hands of the UAW, which could strike the appropriate balance between compensation and competitiveness, as well as the many other issues that will determine the fate of the auto companies it now owns, the jobs they provide and the workers it represents.  In that regard, the obligations of the PBGC might be limited as part of this grand bargain.

Better yet, purchase the ownership stake by using the $25 billion that has already been appropriated for loans to upgrade factories to build more fuel-efficient vehicles, and suspend or eliminate the CAFE standards allowing the worker-owned auto companies to respond to current and anticipated consumer demand as it sees fit.

This form of libertarian socialism, where a worker collective owns the means of production, may be more palatable to conservatives than the inevitable continuing bailouts leading to a form of socialism characterized by state ownership and administration of the means of production under Obama-Pelosi-Reid.

Update -- Richard Baehr adds:

The key issue for the new administration regarding the auto companies, and pretty much every other economic challenge appears to be eliminating greenhouse gas emissions. Read what Obama said yesterday to a "green" seminar.

Al Gore has been elected co-president. I think the industrial policy the Administration plans to follow will lead to success in this arena. When there is no longer any industrial activity, or economy, emissions will decline. It looks like Henry Waxman will take over key Congressional Committee chairmanship on energy. The beginning of the end of free enterprise in this country is in in sight. Two terms from now, the country will be unrecognizable.

Update from Michael Nadler

It was most interesting to read the comments to my suggestion that the auto companies be turned over to the United Auto Workers union.  My blog post drew a distinction between worker ownership under my union ownership scheme and government ownership and control.  The distinction is significant, and I was probably too provocative in using the terms "libertarian socialism" and "worker collective",  revealing my bias with respect to the parties in the tragedy of Detroit's auto industry.   In fact, there is a long history of employee ownership within our capitalistic system, with examples of both success and failure.  One success story close to home for me here in Florida is Publix Super Markets, Inc., employing over 140,000 people and the recipient of national awards in a range of categories including customer service and satisfaction, best places to work and employee pay, most admired companies, and charitable giving.

For those of you who thought I actually advocate socialism, rest assured that my proposed approach flows from the fact that, come January, the Democratic President and Congress will pay back its union supporters by "saving" the old auto industry at any cost.  I agree that Chapter 11 is, in fact, designed exactly for the situation confronting the Big Three; but the prospect of Democrat lawmakers being perceived by the unions as turning their back on the auto workers or putting them in a position where their juicy labor contracts are subject to renegotiation in bankruptcy is not a likely scenario.  Political reality often trumps economic logic.

I'm glad that at least some of the comments recognized that UAW ownership would offer some degree of entertainment, even without seeing the twinkle in my eye as the idea came to me and I announced it to my wife while watching Larry Kudlow last night.  But this is serious business, and my proposal aims to put the onus for solving the industry's problems squarely where it belongs.  I personally doubt whether the union would accept this responsibility; but if it does, it will have total freedom to rectify the exorbitant labor costs saddling the three companies, without the same ability to relieve the auto companies from the broader range of obligations to suppliers and other easier targets that might be permissible under Chapter 11.  

For those who object to the government spending $25 billion of our money, I did point out that it would be preferable to redeploy the $25 billion already appropriated for loans to the Big Three to develop more fuel-efficient cars, which would have the added bonus of necessitating at least a suspension of CAFE standards.  If not, the new $25 billion could still be money well spent if it co-opted the major impediment to the economic viability of Old Auto, or put the blame where it would belong if the UAW was unwilling to accept the challenge or take the necessary steps for the business to attain economic viability.
My conceptual solution to the auto company bailout question is as follows:

The federal government makes a one-time only injection of the requested $25 billion into the Big Three in return for a proportionate ownership stake in the companies.  Based on the current market  capitalization of GM and Ford and my estimate of the market value of privately-held Chrysler, that would give the government about 80% ownership in the 3 companies.  (A discount from the market price could be justified for such an investment, providing a higher ownership stake.)

The $25 billion cash injection is conditioned on the United Auto Workers (UAW) accepting a gift of the 80% (or higher) ownership stake from the government, giving the UAW absolute control of the 3 auto companies which will then be exempted from any anti-trust restrictions on consolidations, etc. The fate of the Big 3 and its workers will then be entirely in the hands of the UAW, which could strike the appropriate balance between compensation and competitiveness, as well as the many other issues that will determine the fate of the auto companies it now owns, the jobs they provide and the workers it represents.  In that regard, the obligations of the PBGC might be limited as part of this grand bargain.

Better yet, purchase the ownership stake by using the $25 billion that has already been appropriated for loans to upgrade factories to build more fuel-efficient vehicles, and suspend or eliminate the CAFE standards allowing the worker-owned auto companies to respond to current and anticipated consumer demand as it sees fit.

This form of libertarian socialism, where a worker collective owns the means of production, may be more palatable to conservatives than the inevitable continuing bailouts leading to a form of socialism characterized by state ownership and administration of the means of production under Obama-Pelosi-Reid.

Update -- Richard Baehr adds:

The key issue for the new administration regarding the auto companies, and pretty much every other economic challenge appears to be eliminating greenhouse gas emissions. Read what Obama said yesterday to a "green" seminar.

Al Gore has been elected co-president. I think the industrial policy the Administration plans to follow will lead to success in this arena. When there is no longer any industrial activity, or economy, emissions will decline. It looks like Henry Waxman will take over key Congressional Committee chairmanship on energy. The beginning of the end of free enterprise in this country is in in sight. Two terms from now, the country will be unrecognizable.

Update from Michael Nadler

It was most interesting to read the comments to my suggestion that the auto companies be turned over to the United Auto Workers union.  My blog post drew a distinction between worker ownership under my union ownership scheme and government ownership and control.  The distinction is significant, and I was probably too provocative in using the terms "libertarian socialism" and "worker collective",  revealing my bias with respect to the parties in the tragedy of Detroit's auto industry.   In fact, there is a long history of employee ownership within our capitalistic system, with examples of both success and failure.  One success story close to home for me here in Florida is Publix Super Markets, Inc., employing over 140,000 people and the recipient of national awards in a range of categories including customer service and satisfaction, best places to work and employee pay, most admired companies, and charitable giving.

For those of you who thought I actually advocate socialism, rest assured that my proposed approach flows from the fact that, come January, the Democratic President and Congress will pay back its union supporters by "saving" the old auto industry at any cost.  I agree that Chapter 11 is, in fact, designed exactly for the situation confronting the Big Three; but the prospect of Democrat lawmakers being perceived by the unions as turning their back on the auto workers or putting them in a position where their juicy labor contracts are subject to renegotiation in bankruptcy is not a likely scenario.  Political reality often trumps economic logic.

I'm glad that at least some of the comments recognized that UAW ownership would offer some degree of entertainment, even without seeing the twinkle in my eye as the idea came to me and I announced it to my wife while watching Larry Kudlow last night.  But this is serious business, and my proposal aims to put the onus for solving the industry's problems squarely where it belongs.  I personally doubt whether the union would accept this responsibility; but if it does, it will have total freedom to rectify the exorbitant labor costs saddling the three companies, without the same ability to relieve the auto companies from the broader range of obligations to suppliers and other easier targets that might be permissible under Chapter 11.  

For those who object to the government spending $25 billion of our money, I did point out that it would be preferable to redeploy the $25 billion already appropriated for loans to the Big Three to develop more fuel-efficient cars, which would have the added bonus of necessitating at least a suspension of CAFE standards.  If not, the new $25 billion could still be money well spent if it co-opted the major impediment to the economic viability of Old Auto, or put the blame where it would belong if the UAW was unwilling to accept the challenge or take the necessary steps for the business to attain economic viability.