General Question

wundayatta's avatar

Where does the bailout money go when the auto industry spends it?

Asked by wundayatta (58722points) February 19th, 2009

They seem to need endless amounts of cash to keep operating. Is this to pay employees? Suppliers? Interest? What? How can they go through it so fast? Do they have no income whatsoever? How does this industry work, and how do they make money? Is it by standing with two feet in the public trough?

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15 Answers

bodyhead's avatar

Actually the auto bail out money when to pensions for older workers. None of the money actually went towards solving the current economic crisis. None when into research and development. None went into factories.

That’s what I read.

jrpowell's avatar

Awesome… Blame the workers who expect what they were promised. Actually the money probably went into something called “Operating Expenses.”

It is like if I give you a thousand dollars because you need it. It goes into your checking account. You could spend it on food, rent, or whatever. It really isn’t accounted for in that way. It just gets put into the pool of money you have to pay your bills.

FrankHebusSmith's avatar

The money went into all of the above. Paying bills, paying workers, R+D, EVERYTHING. They were literally just that far behind on their budgets.

(and for the record if you want to blame someone, blame the CEO’s. Their business plan was to keep building gas guzzlers and SUV’s that people “wanted,” even when it became blatantly apparent that hardly anyone could afford them).

bodyhead's avatar

I’m not blaming the workers for getting what they were contractually obligated (probably). I’m just saying that that’s where the money went. Be mad about it or not, it doesn’t change what happened and what the money went in to.

Here’s the (admittedly pro-republican) email that I got on the matter:

Do we wonder why we are going broke as a NATION!!!!

Even if only some of this is true, just think what our cars should really cost. A whole lot less. We certainly shouldn’t be bailing out such an inefficient industry.

D3 – Detroit 3 Automakers – Union Wages


According to Forbes:

Labor cost per hour, wages and benefits for hourly workers.

Ford: $70.51 ($141,020 per year)

GM: $73.26 ($146,520 per year)

Chrysler: $75.86 ($151,720 per year)

Toyota, Honda, Nissan (in U.S.): $48.00 ($96,000 per year)

According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).

Bottom Line: The average UAW worker with a high school degree earns 57.6% more compensation than the average university professor with a Ph.D., and 52.6% more than the average worker at Toyota, Honda or Nissan.

Many industry analysts say the Detroit Three, must be on par with Toyota and Honda to survive. This year’s contract, they say, must be “transformational” in reducing pension and health care costs.

What would “transformational” mean? One way to think about “transformational” would mean that UAW workers, most with a high school diploma, would have to accept compensation equal to that of the average university professor with a PhD.

Then there’s the “Job Bank”

When a D3 (Detroit 3 carmaker) lays an employee off, that employee continues to receive all benefits – medical, retirement, etc., etc., PLUS an hourly wage of $31/hour.

Here’s a typical story….

Ken Pool is making good money. On weekdays, he shows up at 7 a.m. at Ford Motor Co.‘s Michigan Truck Plant in Wayne, signs in, and then starts working—on a crossword puzzle. Pool hates the monotony, but the pay is good: more than $31 an hour, plus benefits.

“We just go in and play crossword puzzles, watch videos that someone brings in or read the newspaper,” he says. “Otherwise, I just sit.”

Pool is one of more than 12,000 American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in a jobs bank set up by Detroit automakers as demanded by the United Auto Workers Union – UAW – as part of an extraordinary job security agreement.

Now the D3 wants Joe Taxpayer to pick up this tab in a $25 Billion bailout package – soon to be increased to $45 Billion if Nancy Pelosi and Hillary Clinton have their way.

The “Big 3” want this money – not to build better autos. No. They want it to pay the tab for Medical and Retirement benefits for RETIRED auto workers. Not ONE PENNY would be used to make them more competitive, or to improve the quality of their cars.

We ALL have problems paying for our Medical Insurance – but the Democrat leaders in Congress now want us to pay the Medical Insurance premiums of folks who have RETIRED from Ford, GM and Chrysler.

Not a good deal for us.

How about Chapter 11 – and getting rid of these ridiculous union contracts?

dynamicduo's avatar

Awesome… Blame the workers who expect what they were promised.

This issue of promised retirement or other long term compensation being revoked is being seen in many sectors of the workforce, not just car manufacturers. The common implications of revoking such help (people close to retiring having to go back and work to support themselves) is what disturbs me the most about this issue. To me, this signifies that many people have put large amounts of trust into letting their employers manage their retirement savings instead of taking personal action and creating investment solutions on their own.

While I do feel compassion for people who have had their promised retirement benefits eliminated, at the same time I can’t help but wonder why these people did not take steps to secure their future on their own. Furthermore, I believe that while an employer should take steps to encourage and help employees plan and save for their retirement (for instance, my company has a payroll deduction system set up where I can have 0–4% put aside for retirement, and my employer will contribute the same amount of their money), the employer should not be forced to take responsibility for their employees’ secure retirement. Employers have enough to deal with regarding running their business successfully, it doesn’t make sense to force them to also become involved with investments, because it can often lead to the exact same situation we are in now, where the investment world was tainted via manipulation and stupidity and these employees are now affected. Many businesses can’t even run themselves successfully and yet they are somehow expected to be experts in purchasing successful investments to guarantee the well being of employees’ retirement funds.

TheBox193's avatar

Pay for the private jets.

bodyhead's avatar

Didn’t all the execs get bonuses and they went away for some type of party weekend after they got the bailout?

FrankHebusSmith's avatar

@bodyhead wrong industry…. one of the banks that was bailed out had a huge “business retreat” the weekend or next weekend after that bailout (which I should note that bank on it’s own got about as much as chrysler and GM combined).

gooch's avatar

Into the pockets of many “bosses”. I think they should work for free until they make money. If my part time business that I own and run all alone does not make money nobody pays me until I make a profit.

FrankHebusSmith's avatar

@bodyhead I looked up the hourly income of the american auto workers, including benefits…. and it’s not $70+.... it avgs out at about $55….. Still significantly more than their foreign company counterparts, but nowhere near the bludgeoning you listed.

bodyhead's avatar

Yea that was a take with a grain of salt type of email. I’m not standing by the things in that email but it does make you think. Even at 55+, it’s still far more then all of the teachers I know (all have masters not doctorates).

Not many people I know make $55 per hour. And of that, none of those people only have a high school diploma.

And if 55 is the average, it could still be likely that some people make $70 and some make $30.

FrankHebusSmith's avatar

The thing you have to keep in mind is that $55 an hour includes all benefits. Actual cash in hand pay is probably closer to the mid $20’s an hour, and into the $30’s for the more veteran employees. But that number includes health insurance, 401k money (including what the company puts in too match), etc.

BUT, you’ll get no argument out of me that our teachers deserve a lot more money than they get now, lol.

laureth's avatar

I notice many conservative folks (not just here) complaining about how the automakers are contractually obligated to pay for the retirees’ health care and pensions, and say that it’s what makes American automakers less competitive than foreign imports, such as cars from Japan or Germany.

Interestingly, Japanese and German automakers do not have such draining obligations because their health care (for everyone, including retired automotive workers) is socialized by the government. Socializing medicine in this country would help the automakers become profitable again, actually.

So, conservatives who avoid American cars and buy imports from Germany or Japan (and who know wherever else) can rest assured that their purchase has been subsidized by the taxpayers of that country, whereas the American cars they turn up their noses at would be better (due to a higher investment in R+D) and cheaper (due to getting retirees off the books) if they just didn’t go in for the American way of having the companies provide for the workers. Ain’t socialism grand?

FrankHebusSmith's avatar

@laureth haha, i hadn’t thought of that…. It’s a good point.

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