|
|
|
|
|
|
|
Jens 'n' Frens
Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.
"A strong conviction that something must be done is the parent of many bad measures."
-- Daniel Webster
|
|
|
|
|
|
Tuesday, September 16, 2003 :::
The Big Three auto-makers are having pension troubles. Here's a bad way to solve them:Any plan should have these parameters: The promised pension and health care benefits must be paid. They shouldn't drive GM or Ford or Chrysler under. I can't see why not. If a company's costs are higher than its revenues -- whether these costs are in cash, in opportunity costs of capital, or in pension benefits to be paid in the future -- it dies. This is a good thing -- the company is destroying value.Every automaker--foreign ones, too--would collect a $500 "assessment"--for political reasons let's not call it a tax--on the sale of each new car and truck in the U.S. The amount would be built into the sticker, like a destination charge. At 16.5 million sales, that is $8.25 billion a year for the fund. This money would pay benefits for the retired workers of the three U.S. companies. If $500 isn't enough, up goes the levy.
Prices needn't rise. The carmakers set aside $500 to $1,500 a vehicle now to fund the pensions and health care. To the extent they are now allowing for more than $500, they could cut the car price. Or they could keep the difference as profit. I'd prefer that. Detroit has next to no profit on vehicles right now.
That screaming you hear is coming from Toyota, Honda, Nissan, Mercedes and all the other foreign manufacturers. This plan makes them share the burden of promises that their competitors GM, Ford and Chrysler have made to workers. Or, to express it more concisely, we impose a tariff on foreign cars to pay for a subsidy to two domestic auto-makers and a domestic/German hybrid.It is unfair that someone should get a competitive advantage of $1,000 a car because he hires young workers and the other guy is doing the right thing paying pensions. If I buy a house with a mortgage, and you buy your house with cash, is it unfair that I have a mortgage payment and you don't? That's what he's suggesting. And why is defering a big chunk of your employees' compensation "the right thing to do"?
It is unfair that hundreds of thousands of workers be put on the street when companies go down because of this unfair age advantage. Perhaps. It's certainly unfortunate that employees of declining industries have to adapt, often after years on the job. Perhaps some transitional assistance is called for -- protectionism is not.
::: posted by Steven at 5:10 PM
|
|
|
|
