12/01/2008
As Congress wrestles with the question of what do to about the problems with Detroit's automakers, they should remember one thing. Small businesses owners are adamant: Don't ask us to send our tax dollars to Detroit to pay for their mistakes without significant restructuring and effective independent oversight.
Proposals to provide as much as $50 billion to the Big Three auto companies are a misguided attempt to bail out companies that did not get into this situation because of the current credit crisis, but because of a long series of decisions that have led these once-admired corporations to where they are today.
While Detroit has been shedding American jobs, small businesses have been creating them. It's unfair to these entrepreneurs and small business owners to ask them to help pay for:
- Gold-plated healthcare plans they don't have and can't afford
- Generous pensions they don't have and can't afford
- Platinum-level retirement benefits they don't have and can't afford.
The cost of healthcare benefits alone is staggering. For example, in 2005, Ford spent a record $11 billion on healthcare benefits. That same year, GM estimated that healthcare costs added more than $1,500 to the cost of every new vehicle the company built. Even under the restructured union agreement that goes into effect in 2010, the companies will still pay $15 billion for these benefits.
The costs for workers is higher than average as well. The Big Three's workers average cost is $73.20 per hour, while Toyota's workers average cost is $48 an hour. The average for all American workers is $28.48.
In the meantime, other automakers are thriving. This year, Honda will open a new manufacturing facility in Indiana, while Kia and Toyota will open plants next year in Georgia and Mississippi, respectively. These will be followed in 2010 by a new Volkswagen plant in Tennessee.
A strong domestic auto industry is important to the U.S. economy and many small businesses. But any taxpayer dollars provided to the companies must come with specific conditions, starting with top-to-bottom scrutiny of everything from the effectiveness of current management to the nature of their union and supplier contracts.
The Big Three and the auto workers unions must make serious changes if they want to survive. Once these costs are reduced, the price of domestic cars will come down as well, and U.S. auto dealers will be more competitive.
We should learn a lesson from the success of the federal Air Transportation Stabilization Board, which helped to support a restructuring of the airline industry after 9/11. Any public assistance to the Big Three must come with the same type of rigorous oversight to ensure that taxpayers' interests are protected. And that protection should be Job One in any debate over this issue.
Todd Stottlemyer is president and CEO of the National Federation of Independent Business in Washington, D.C.
