General Motors, Ford and Chrysler are hemorrhaging cash and asking Congress to bail them out – with your money. Congress has already given them a $25 billion low-interest loan, and congressional Democrats want to give them $25 billion more.

Many factors have combined to bring the Big Three down, including poor management, too many brands, poor product design, and too many costly dealerships. But the main reason they’re on verge of bankruptcy can be summed in three letters: UAW.

The United Auto Workers were once the crown jewel of the labor movement. Through strikes that could shutter Detroit’s entire auto production, the UAW had the leverage to win almost any concession – and they did.

UAW workers are among the world’s most affluent. They take home an eye-popping $75 an hour in wages and benefits – triple the average private-sector worker. They get seven weeks’ paid vacation and holidays, three weeks more than most in the private sector.

UAW workers retire after 30 years on a generous pension, regardless of age. If they don’t qualify for Social Security benefits because they’re in their 50s, they get special bonus payments until they do.

Not to mention gold-plated health coverage. For $10 a month and a $250 deductible, UAW workers and retirees get comprehensive medical, hospital, surgical and prescription drug coverage. Most retirees in Medicare, by contrast, pay thousands of dollars annually in premiums, deductibles and co-pays.

Worse, the UAW insists their members get paid not to work. Under the union contracts the automakers do not lay off workers when plants close. Instead they transfer them to the JOBS bank. There they get nearly full pay to not work. Nice work, if you can get it. It’s not so nice, however, if you have to pay for it when buying a car.

Americans want value for their money. Those health benefits add $1,200 to the cost of each GM vehicle. The JOBS bank adds $200. Americans won’t pay for that if they have a choice. Competition gives them one.

The Big Three have been losing market share for years. Today they sell only half the cars built in the United States, by American workers. The typical hourly worker at a Honda plant earns $43 an hour. That’s a good living, but $30 an hour less than GM. Union contracts have driven the Big Three to the brink of ruin.

Management also made mistakes. Focusing on gas-guzzling SUVs was foolish in hindsight. But even that was brought on by the UAW. At $75 an hour the Big Three couldn’t compete in the small and mid-size car market. So they concentrated on making trucks and SUVs on which they could still make a profit. Until oil hit $140 a barrel.

Now it is time to pay the piper. The automakers face restructuring in bankruptcy court. This would mean a fresh start for GM, which would order union contracts re-written to reflect competitive realities. Pay would come down to market levels, the JOBS bank would disappear, and UAW retirees would pay more for their health benefits.

The UAW, understandably, doesn’t want this to happen. Less understandably, they want Congress and the president to give automakers a lot of your money. A bailout would only delay the inevitable, but it would keep UAW wages and benefits sky-high for a little bit longer.

A bailout redistributes wealth to the already well off.

Change we can believe in? Not quite.

James Sherk is the Bradley Fellow in Labor Policy at The Heritage Foundation.


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