Big Three bailout

Posted Nov. 13, 2008, at 6 p.m.
Last modified March 20, 2011, at 3:28 a.m.

These are not good times for conservatives whose faith lies in the unfettered marketplace. With President Bush, Congress and President-elect Obama all supporting the $700 billion federal bailout plan, the government has committed to playing lifeguard, even if it means rescuing those who decided to go swimming in a hurricane.

The latest in the “too big to fail” list is the U.S. auto industry. While a decision on the auto industry bailout will have to be made soon, the new administration should look ahead to playing a more sustaining role for businesses of all sizes. Rather than merely throwing lifelines, the Obama administration can hand out life preservers to all businesses, large and small, by boldly addressing the high cost of health insurance. That cost is eroding business profits more and more each year.

In September, Congress agreed to loan $25 billion to the Big Three automakers to help them retool to build vehicles that burn less gas, or rely on alternative fuels.

But in recent days, General Motors, Ford and Chrysler are seeking more funds from the $700 billion federal bailout package to just survive into next year. There is precedent, of course. In 1979, the Carter administration agreed to give Chrysler almost $1 billion to prop it up. That company limped into the 1980s, but then enjoyed prosperity when its CEO, Lee Iacocca, helped create the popular minivan.

But a look even further back in history reveals that the Big Three’s biggest problem came not through a lack of market savvy, but by insisting — yes, insisting — that each company provide health insurance to its workers and pensioners. According to a piece in the Aug. 28, 2006 New Yorker, in the late 1940s then-GM president Charles E. Wilson offered the United Auto Workers union, for the first time, health care benefits and a pension. The UAW initially balked, favoring instead a portable pension plan whose costs would have been borne by the entire auto industry, including small auto-parts manufacturers, plastics shops and electrical component makers. Every company would have paid 10 cents per worker hour into a central fund to cover the benefits.

Today, about $1,500 of the cost of each new Ford or GM vehicle goes to paying for health insurance for current workers or those drawing a pension. That puts American vehicle manufacturers at a serious disadvantage with their European and Asian competitors.

Though Mr. Obama does not favor a single-payer health insurance system, perhaps a federal bail-out of the U.S. auto industry could be tied to a group health insurance plan that includes manufacturers and their related businesses, much like that proposed in the late 1940s. If both unions and corporate boards of directors accept such a deal, it could serve as a demonstration to other sectors of the economy of the efficiency of broadening the burden for health care.

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