Barn Door Dept.: A Canadian think tank study supports the auto bailouts but argues that in the future they should include cuts in the above-market wages of auto workers. Seems fair enough. … The study notes that even if the autoworkers had given up their entire above-market wage “premium” it wouldn’t have saved enough money to finance the entire bailout. But it would have financed over a third of it ($6 billion out of Canada’s $14.4 billion). And even a much smaller giveback would have saved a significant sum, and set a useful precedent. … P.S.: When you think about what might happen if GM starts to nosedive in sales and profits, you realize what a big favor the Obama administration did for the U.A.W. when it converted its loans to the company into stock. If there were still huge loans outstanding, after all, and the company threatened to default on them, it would be fairly easy for a politician to argue that GM’s workers should give up a bit of their premium wages** before they stiff the taxpayers. But now, with the government still owning 26.5% of GM’s stock, all that happens (at least for a while) is the value of the government’s stock goes down, and down, and down. Old news! And no dramatic default moment at which to ask the UAW for the obvious sacrifices they didn’t make in 2009. … P.P.S.: I’m not saying this is the only reason, or the main reason, for converting the bailout loans into equity. I’m just saying it’s an added bonus for the U.A.W. ..
**–The study estimates $31.80/hour in total compensation in Canada. In the U.S., most UAW workers seem to earn about $28/hour in base pay. A relatively small number of new UAW hires earn much less ($16-$19/hour), reflecting the lower going market wage in the overall economy.