Business: U.S. Auto Industry's Future

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Steven Pearlstein
Washington Post Columnist
Wednesday, October 12, 2005; 11:00 AM

Delphi, the nation's largest auto-parts company, filed for bankruptcy protection on Saturday, the latest casualty in an American auto industry that has been struggling with high labor costs and aggressive competition from foreign rivals.

Washington Post business columnist Steven Pearlstein was online to discuss the future of the U.S. automobile industry. In today's column , he writes that Delphi's filing is likely to bring about the wrenching industry restructuring that automakers and their unions have been avoiding for decades.

A transcript follows.

About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here .

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washingtonpost.com: You can also read today's article about Delphi's first day of bankruptcy hearings: Labor Gears Up for Pivotal Battle

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Silver Spring, MD: Steve - as a gov't contractor with a good wage, basic but not frilly benefits, and the obligation to re-win my job every 2 years I look upon these union/pension bailouts with unhappiness.

One thing you hear is that health costs in other countries are assumed by the government so of course their labor costs are lower. Our set-up includes them in and makes us uncompetitive. There are so many entrenched interests regarding this issue that changing this is quite unlikely. Is this really a factor or just another excuse to keep taxpayers subsidizing these jobs?

Steven Pearlstein: Taxpayers aren't much subsidizing these jobs. That's simply not true. I did suggest in the column that the Pension Benefit Guarantee Corp. might want to buy some of that preferred stock (i.s. put money in the pot) for some of the unfunded pension liability that it would inherit in the event of a bankruptcy. But that money, at this point, would come out of the insurance premiums paid by the companies whose pensions are insured. If, however, one or more of the Big Three were to put their unfunded pension obligations to the PBGC would probably need to got to Congress for an infusion or money. It is that eventuality that we should be trying to avoid.

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Washington, CT: Hi Steven, With the dramatic decline in defined benefit retirement plans coupled with the recent default of United and US Airways do you think that in the next decade or so that we could see a pension default in either Ford or GM?

Steven Pearlstein: Well, that's the bad scenario. And if we do nothing now, that is a really good possibility.

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Laurel, Md.: Are there any measures out there about what the liquidation value of GM non-performing property is? On the books, the company is nearly worthless (zero net tangible assets), but they must own property that is still on the books at 1950s prices and plant and equipment that was amortized long ago.

Don't they own a lot of stuff that could settle these old debts (i.e. contracts made long ago)?

Steven Pearlstein: No sure. But you are right: depending on how you calculate its pension obligations, you could very well make the case that GM is insolvent. Which means its management has the bankruptcy reorganization option any time it wants to exercise it, although that would be very messy.

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Shanghai, Mainland China : Is Toyota among these foreign rivals?

Steven Pearlstein: Of course, Shanghai. Thanks for joining us.

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Washington, D.C.: Do the numbers mean that consumers in the 60s, 70s, and 80s actually paid less than the true, accrued cost of the cars? If true, is this yet another example of an older generation transferring costs to a future generation (or was it due to honest, but significant, forecast errors)? Lastly, has any pay-as-you-go system ever not ended up awash in large unfunded liabilities?

Steven Pearlstein: No, in the 50s and 60s, they were paying too much for those crappy Chevies that needed to be replaced every three years. A truly competitive market would have delivered them a better product for less.

But the other question you ask, about the accrued pension and retireee health costs, is another matter. In any group, as long as the number of active participants is growing, you can run a pay-go system. And for many years, the number of workers was growing. But at a time when productivity and lost market share are actually reducing the number of active workers and rapidly increasing the number of retired workers (including early retirees), pay-go doesn't wouldn't work for a private company just as it doesn't work for Social Security.

Having said that, company pension plans are not a paygo plan. They are pre-funded, supposedly with annual contributions of real cash. But the accounting for such things is quite squishy, and some companies have been allowed to be underfunded. That's what a pension reform bill now pending in Congress is meant to fix.

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Washington, D.C.: Of the price of an average "American" car today, how many dollars goes towards so-called legacy costs (e.g., pension obligations and retirees' health care) and how many dollars are caused by the wage premium?

Steven Pearlstein: That's probably not something I can answer with precision. I think I once calculated that the retiree burden is about $1,500 per car. And my guess is that the wage/benefit premium represents another $2,000. Eliminating them would be enough to make a UAW-made car competitive with a Toyota made car in North America, and still allow a reasonable profit.

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Fairfax, VA: How would the pending legislation to shore up pension plans affect the auto industry? Some have the opinion that the new laws would drive more plans into the arms of PBGC. I hold the admittedly simplistic view that if you accrue future liabilities today, then you should fund them today.

washingtonpost.com: Senate May Not Get to Pension Bill When It Gets Back From Recess (October 8, 2005)

Steven Pearlstein: Its a delicate balance. Set the premiums too high and you might trigger more defaults and plan cancellations. Set them too low and the insurance plan gets underfunded. Clearly stricter funding requirements are needed to keep companies from falling behind. But I don't think modest, gradual increases in premiums would be a bad idea either.

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Crofton, MD: Steven,

Enjoy your articles, but I missed a section dealing with the culpability of the top executives for these floundering companies. We are talking about reducing forklift driver salaries, which may be a necessity, but Delphi President Rodney O'Neal is looking at a cash bonus of $2.75 million, based on a $1.15 million average salary. Some 464 executives could earn bonuses ranging from $50,000 to $475,000, based on salaries of $120,000 to $450,000. These are BONUSES - can you blame the $30k workers for not wanting to give way with proposals like this on the table for top execs? Personally, I am sick of seeing this type of treatment and/or golden parachutes for CEOs when companies are in the tank.

Steven Pearlstein: That was a very bad move, from a public relations and union relations point of view. But the rationale-- keeping executives from jumping ship at a crucial moment--isn't unreasonable. Under bankruptcy rules, the judge can nullify those bonus and severance changes because they were done so close to the filing. The unions will ask for that, and I suspect the judge will be sympathetic to that. And to whatever extent he allows these things, they should be totally dependent on the success of the turnaround. Bonuses for failure are just stupid.

I want to make a second point here, which I'm sure I'll repeat several times this morning. If we get too caught up in the blame game, and notions of fairness, we'll never get out of this mess. People have to be very practical, not judgmental in coming up with these kind of workouts. Blaming unions or blaming management or blaming the government and its trade policies for stuff in the past just isn't very useful.

Executive comp is out of control in this country. I've written that many times. But GM and Delphi aren't going to solve that on their own. And they do have to hire executives from a market where salaries are bloated. If, in the name of fairness, these companies refuse to pay a competitive package, they will lose the best executives and be left with the second-raters. I don't think that benefits anyone. Is that fair to fork-lift operators taking a big cut in pay and benefits. No, of course not. But markets aren't fair. Efficient, yes. But not fair.

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St. Louis, Mo: How did labor loose sight of the fact that they were killing the goose?

Ted

Steven Pearlstein: They kept hoping against hope that they could prevent foreign competition through political means. And they kept kidding themselves about all the profit the company was making and all those big executive salaries. In fact, the profits were lousy and the executive salaries, in total, don't add up to much in the larger scheme of things. And look -- they kept this thing going for 25 years after everyone realized that foreign imports had changed the economics of the industry. So maybe they were quite clever: they got an entire generation of workers to enjoy the benefit of above-market compensation. The only problem is that, in the process, they have seriously hurt the generation coming along.

In many ways, this is a story of generational inequity. If the retiree costs were more reasonable here, the wages of current workers wouldn't have to be reduced that much (benefits, yes, but not wages). That's a tradeoff that needs to be made within the UAW.

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Rockville, MD: Along with your previous labor column, I think organized labor is in serious denial about the role of organized labor today. Yes, they did great things in the old days (40 hr workweek, basic workplace conditions) but they're becoming rapidly irrelevant in today's fast-paced economy where companies need to respond quickly to changing markets.

Along with the airline unions, the UAW seems to be firmly on the road of "winning the battle but losing the war". These union members need to seriously decide which is better, some big bucks now with a failing company, or less pay for a healthy company likely to stay around.

washingtonpost.com: You can read past Steven Pearlstein columns online here .

Steven Pearlstein: You got that right.

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Stafford, VA: Sir:

What will it take for the UAW to come to grips with the reality that the Big Three are drowning under legacy cost and work rules of this dinosaur of a union.

Even though GM has $32 Billion in cash and another $50 billion in untapped borrowing, do you think they could go Chapter 11 in an effort to restructure the union contracts.

Steven Pearlstein: As I said, the clock is ticking on GM, and everyone knows it -- stockholders whose shares are depressed, bondholders whose bonds are worth 75 cents on the dollar, management and union workers who see the future written in quarterly reports showing they are losing money at an annual rate of $4 billion on their North American business. And that's with overall sales numbers that are near historic highs.

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Potomac, MD: Isn't part of the problem with the troubled industries you mention (Auto, Steel, Airlines) that these companies have built their market dominance on exploiting economies of scale through highly fixed cost structures? Defined benefit pensions and labor agreements limiting cost savings from layoffs are part of this larger problem. Now that the markets for these companies are stagnant or shrinking (due to industry slowdowns or increased competition), the former industry leaders can't adjust. It's not just the labor unions that will need to give back to make these companies work.

Steven Pearlstein: That's all very true. And its why these industries are outsourcing like crazy, to shift the fixed costs off their books and onto other companies, that might be able to handle them better because they provide parts or services to many different customers. But we should be careful in criticizing these earlier generations for that. AT the time, it was the most efficient form of industrial organization. Technology changed, finance changed, and now its not. And the market is now adjusting-- painfully.

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WDC: The problem with the auto industry is the UAW. Where else can a person with just a high school education make $85-90K a year. Even when they lose their jobs they still get paid about 90% of their salary to not work in a so called "jobs bank"....where can I sign up to join this jobs bank?

Steven Pearlstein: That's what I meant when I said overpaid -- paid more than people with similar skills and experience get paid in other companies. The fact is you can't sign up anywhere because the gig is over. Finished. Caput. Companies paying those kind of premiums just can't survive in a competitive marketplace.

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Rockville, MD: With all the focus on GM and Delphi, there hasn't been as much focus on the troubles at Ford, where market share is slipping precipitously and top executives are leaving. Bill Ford's has even offered his CEO job to Dieter Zeitche and Carlos Ghosn, but no takers. Is Ford going to go the route of Chrysler and get bought out by a foreign automaker, like Nissan, Honda or Toyota?

Steven Pearlstein: Ford is next, no question about it. Obviously, each company has its own economics, its own strengths and weaknesses. But the basic story of too much legacy costs, and too high a wage and benefit structure, is common to all of them, and many of their unionized parts suppliers.

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Silver Spring, MD: I only can wish that my local government (Montgomery County, MD) wasn't swimming upstream on this issue. In cooperation with its unions, they're moving from "25 and out" to "20 and out". Unlike companies, Montgomery County doesn't worry about where the money will come from to pay all these health and defined benefit plans for its workers.

If I were king for a day, I would make defined benefit pension plans illegal because the taxpayer gets left with the bill. Failing that, can we just send out a memo to everyone in these plans that the money may not be there and they should pressure their employers to switch to a 401k-style plan?

Steven Pearlstein: Thanks for making that point. This retirement after 20 year thing is really crazy. Its killing the federal government. And its highly irresponsble if any unit of local government is now thinking of embracing it.

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Washington, DC: Steve -

You're right - this whole topic reminds me of the steel industry fiasco.

I grew up in a steel town near Pittsburgh, and joined my cousins, my dad, and my friends in the steel mill just after high school in the late 1960s.

Even then, it was clear to any objective person that wages and benefits needed to be reduced, but most of my fellow workers (especially the older ones who remembered the 1930s) would rather destroy their jobs, their families, their communities, and their future before they would give one hard-earned, stinking penny back to Management.

In hindsight, they were truly "stuck on stupid", wouldn't you say?

What do you think about this mentality? Reminds me of the old saying "Better dead than Red" from the cold war.

Do you think this mentality exists among the auto workers?

Steven Pearlstein: Unfortunately, it does with too many of the rank and file and the local stewards. At the top, I think they know better. But the incentives are for them to hold out for as much as they can for as long as they can. Otherwise, they might lose their jobs to those offering the false promise of keeping the class war against management going.

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Flint, Mich.: If the UAW won't agree to pension reductions for Delphi, will the Pension Guarantee Fund be liable for the full amount of the unfunded liability? If so, what incentive is there for the UAW to accept a reduction in pensions?

Steven Pearlstein: That's a real problem. But remember, its not just pensions. It is also retiree health benefits. And if by, giving a bit on pensions, they can keep the company going and keep the health benefits flowing, it may be a good deal for current retirees. Everyone benefits to a degree by keeping the golden goose alive -- and that's the guiding philosophy of doing a workout.

By the way, there are caps on PBGC benefits that may force a reduction in some pensions for the higher-paid workers. Not sure about the details on that.

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Flint, Mich.: What do you see in the future regarding wages/benefits/pensions for GM employees?

Steven Pearlstein: As I wrote today, I think the template is being written by Delphi and the UAW for the entire industry. That's what Wilbur Ross and the USW did in the steel industry. And it worked, albeit belatedly.

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Falls Church, VA: Why don't the US automakers take a lesson from the Germans and the Japanese and make more attractive and durable cars. US cars are awful both in styling and durability.

The only thing keeping US car makers a float are SUVs and Trucks. Even then who wants to drive a 10 mile to the gallon over sized vehicle in suburbia? It's not like the majority of Americans ever use their SUVs or pickups for rugged terrain.

Every time I see a new US car I wonder who is designing this garbage. Please US car owners hire some Japanese and German designers and engineers!

Steven Pearlstein: That's a separate issue. But I need to warn you: too much debate about the auto industry in the past has been focused on product. Product is important, no doubt about it. But the cost structure at this point is more important and needs to be dealt with. None of the companies is going to be able to design and market themselves out of this hole.

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washingtonpost.com: Today's Column: Listening to the Oracle of Delphi

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Woodbridge, Va: We have seen a series of shakeouts in blue collar industries including steel, airline and now autos. Are there any more blue collar industries left to shake out and do you think this trend will be picked up by older white collar sectors such as financial services, consulting etc.?

Steven Pearlstein: There are white collar sectors that will also soon get hammered. One obvious one: investment banking. Another: real estate brokerage.

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Takoma Park, MD:

What does the fact that workers' pay and benefits were determined by the structure of the labor marketplace at that time ("government-regulated and could automatically pass on labor-cost increases to consumers, or were dominated by a handful of large companies that tacitly agreed not to compete on the basis of price" )have to do with the alleged myth "that generous wages and benefits negotiated by the unions created the great middle class and lifted the standard of living for all Americans."

They are not contradictory. Whatever conditions made it possible for high wages and benefits could still have created the middle class.

Steven Pearlstein: If you want to know what I meant by that myth, read Harold Meyerson's column in today's Post. He trots out the favorite story of labor leaders, of Henry Ford raising the wages of auto workers so they could afford to buy a Model T. The implications of that is that if all industries paid higher wages to their workers, they would increase the demand for products produced by American companies, and--voila--everyone would be richer. In fact, that's economic nonsense. If every company was unionized and paid higher wages, all it would create in the end is inflation, and nobody would be better off. There are only two ways to get richer in a market economy. One, is to distort labor and product markets in a way that makes you richer at the expense of someone else. The other is to figure out how to work more productively. And in the golden years of the unionized industrial unions, alot of the gains were of the first sort rather than the second.

In short, the generous wage and beneits negotiated by the unions back then were only possible because the companies operated in uncompetitive markets that allowed them to overcharge their customers and get away with it.

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Chicago: I'm not sure that there will actually be a taxpayer bailout of the PBGC. That's because so many people don't have any pension plan or retirement savings at all. So why should taxpayers fund someone else's pension, just because they happened to work at United, or Delta, or Delphi, or GM. . .

I think the politics of all this are going to get extremely ugly. I say that realizing that politics were ugly even back when the pie was still growing.

Steven Pearlstein: The taxpayers are already on the hook to pick up the unfunded pension liabilities of the auto makers or airlines that "terminate" their plans, which often happens in a bankruptcy situation. The PBGC can try to raise premiums, but that probably won't be enough if many more companies terminate their plan. And in that case, the taxpayers are legally obligated to step in. Congress, I suppose, could simply refuse to honor that obligation and refuse to approrpirate money. But that would cause a global financial panic as the US, the world's largest debtor, announces that it's not a reliable borrower.

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Ellicott City, MD: Steven:

Why do the accounting rules allow companies to get away with not funding the pensions they agreed to pay to their labor force? Why isn't that figured into the stock price? And why do unions sign contracts with those companies when there is no enforcement provision for funding those liabilities?

Thanks.

Steven Pearlstein: All good questions. The answer: temporary expediency wins out over doing the right thing. Let's let the problem fester and hope we get lucky and it all goes away. That's the attitude.

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washingtonpost.com: Harold Meyerson: The Vanishing Middle

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Washington, D.C.: "-Company pension plans are not a paygo plan."

Are retirees' health plans a paygo plan? If true, then wasn't it the plan for today's consumers to pay for some past retirees' costs?

Steven Pearlstein: Retiree health plans may be paygo. There is no federal regulation on that, and the accounting rules may not require full funding. I'm afraid that's the edge of my knowledge on that one.

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Durango, Colo.: Let's see, in the 1970s Detroit was tooled for big cars, and they took a big bite to re-tool (Chrysler, anyone?) for smaller cars. Now, 2005, Detroit seems to have the same problem. Look out belooooooow.

Steven Pearlstein: Plus ca change, plus la meme chose, as the French say.

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Portland, ME: On executive officers, I would counter that the auto industry is loaded with 2nd and 3rd raters. They couldn't do appreciably worse by putting the forklift guys in charge. I feel bad for the workers, but for the industry itself? No. I ceased buying American long ago because they are inferior products by inferior companies. Play the blame game. It is warranted.

Steven Pearlstein: Okay, maybe you are right. But if they are second raters, and you want to bring in first raters, do you think you're going to do that by paying less than the second raters are getting now?

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Herndon, VA: If pension and medical costs are borne by the government in Europe and Asia (?), aren't these paid for in taxes on individuals and corporations? The money must come from somewhere. How is our system so uncompetitive when taxes are compared to private costs?

Steven Pearlstein: That's right, up to a point. But if the taxes in Europe to pay for health care are levied, at least in part, on employees rather than employers, then it is possible for money to be raised without disadvantaging the companies and their competitive position so much. The form taxation, and who ultimate pays DOES matter.

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Buffalo, NY: Is it just my perception of the situation, or is it true that American corporations tend to have extremely short-sighted management. Everything is geared towards this month's or this quarter's numbers.

Is it the market forcing this or is it something they teach in b-schools? I see so many obviously poor decisions (in the long run) celebrated by management and the market. I see this where I work too (large corporation.) An example is outsourcing core competencies to the lowest bidder.

It doesn't seem like Toyota and Honda make these short-sighted moves and they are crushing their American competitors. Am I crazy? Why isn't this obvious to everyone?

Steven Pearlstein: All good points.

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Winnipeg, Canada: As you pointed out, Toyotas are manufactured in North America so why do you consider it a 'foreign rival'? Is it not manufactured by UAW assembly line workers (who incidentally, are credited with generating almost a 1/2 million dollars in revenues each according to the US Bureau of Census)? And doesn't this 1/2 million stay at home instead of a fraction of it staying in Japan or Malaysia or China or wherever else cheap labour can be found?

Steven Pearlstein: Fair point. But it is foreign in two respects at least. One is that Toyota tends to buy more of its parts and assemblies from overseas. The other is that it ships its profits to its shareholders, who tend to be overseas. So there is that difference.

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Kingston, RI: In the long run, wouldn't it be good for GM and Ford to collapse under the weight of their own mismanagement, inefficiency, and unethical behavior? It seems to me they have repeatedly opted to be dinosaurs (and to produce them in the guise of SUVs) in the face of every signal to the contrary. A market with only Toyotas, Hondas, etc. would make more sense in terms of the auto and national economies.

And isn't what's good for GM good for America? The Bush administration, with its cronyism, self-dealing, inefficiency, and inability to react to market signals seems ripe for a collapse. Isn't that in the best long-term interests of America, rather than propping up these dinosaurs (GM, Ford and Bush) for a few more years?

Steven Pearlstein: Its so good to know that, no matter what issue I may write about, there will be some people writing in who will see the problem as one created by those evil, selfish people in the Bush administration.

Let's get something straight: This doesn't have anything to do with George Bush.

And no, it wouldn't be better if GM and Ford collapsed under the weight of their own mismanagement. It might be fair. But, on balance, the society would not be better off.

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New York, NY: Isn't all these talks about pension and health care cost the latest excuse offered by Detroit for myopically bad management decisions???

Steven Pearlstein: No, I'd put it differently. Letting all these pension and helath care costs get out of control was the biggest example of their mismanagement.

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Arlington, Va.: So the towns in the Midwest that have already been decimated by the loss of steel jobs will become ghost towns when the auto/parts plant goes away. Everyone then moves to the cities and wages are depressed here, right?

Steven Pearlstein: That's one of the many dynamics, yes.

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Rochester, NY: Do you really believe the $65/hour wage figures that get bandied about? I just find that difficult to believe. that easily comes to more than $100k annually. is that really possible for a high school diploma, manual labor job?

Steven Pearlstein: No, that figure is a bit misleading. It includes about $25 to $30 an hour in wages, another $15 to $20 in current benefits. The rest goes to paying laid off workers most of their salary and legacy costs, such as pensions and health care for current retirees that are unfunded in an actuarial sense. $25 an hour straight time works out to $50,000 a year in base pay.

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Yellowknife, Northwest Territories, Canada: Having lived in both the US (including the auto state of Michigan) and Canada, I would observe that perhaps one of the key factors that make the current Delphi (and by extension the US auto industry) debacle such a American story is that the United States is the only first-world country that has not stepped up to the plate with universal health coverage.

Imagine what the auto industry could be doing if it wasn't busy focused on health care issues. Hmm... it might have time to plan and build fuel efficient vehicles that acknowledge the fact that the rest of the world knows that the value of gas is $3.00 to $6.00 a gallon. Instead it bemoans healthcare costs and wakes up one morning to realize that the days of 10 mpg Hummers and SUVs was over some time ago, and they weren't paying attention.

Maybe it's time for Americans to realize that it has to deal with the healthcare issue and, gosh, taxes might actually have to go up to pay for it. It can't be any more expensive than bailing out airlines and auto industry pension funds, and it would raise U.S. healthcare to the level of civilized countries such as the UK, Japan, Sweden, Canada, and even, gasp, Cuba!

Until this happens, we will continue to see U.S. industry giants topple one by one under the crush costs of funding healthcare for their employees and pensioners.

Steven Pearlstein: You may well be right. But I don't think most Americans are willing to embrace national health insurance yet.

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Burke, VA: So what will happen to the middle class of the United States. Will it be possible to graduate with a High School diploma and be able to expect to be anything but poor and have no health insurance?

Steven Pearlstein: That's the $64,000 question. And no, it probably is not possible any more to graduate from high school and expect to have a middle class life. That's the reality. Otherwise, those workers are, indeed, competing against workers in countries where the standard of living is much, much lower.

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DC: So, what can an individual do to earn a middle-class wage?

Steven Pearlstein: Get a skill that is in enough demand so that you can charge a middle class wage for your services. Its easier to do that if you have a college degree. But I also know more than a few plumbers and electricians and nurses without college degrees who can do it as well. The idea that the middle class has disappeared is just hokum. Smaller, maybe. Disappeared? No way.

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Dusseldorf, Germany: While you are covering the US angle of the story, I would like to hear to take on the situation here in Germany. Since you have visited recently, you probably have some insight to offer. What do you make of the future of car assembly in Germany? Afterall, cheaper labor is just across the border. What has been your reaction to Porsche's investment in VW? Thanks. I always like reading your opinions, even though it is often hard to swallow for a German.

washingtonpost.com: Two Economies, Two Mind-Sets: Germany Gets It, France Doesn't (June 24, 2005)

Steven Pearlstein: Same problem, although some of the details are different (like health costs). The future of car assembly in Europe, like here, depends on the willingness of unions to set their pay packages are more competitive levels. They don't have to match those in Bratislava. But whatever premium they earn has to be justified by greater productivity and quality.

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Burke, VA: I don't think the businesses were uncompetitve - they just didn't have to compete much with companies and labor from outside of the US.

Steven Pearlstein: If companies agree not to compete on the basis of price, then its pretty easy, over time, to get sloppy about your cost structure. And that is the story of the American auto industry. This is a common phenomenon in industries dominated by a handful of big players who know that getting into price wars only lowers profits for everyone, without any gains in market share.Its called an oligopoly market.

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Laurel, Md.: I just got half a thought (maybe 1/10th) reading this chat:

One of the most basic changes in pensions since GM acquired their legacy costs has been the switch to 401k's. In a very few cases, like the steel company Nucor, employees own a company in a formerly management vs. union industry.

Considering how many ordinary Americans are stockholders now, wouldn't it make sense for GM employees to own more of the company to create better incentive to protect its competitiveness?

Steven Pearlstein: It makes sense only to a point. I think the experience of employee-owned companies, particularly large ones, is not encouraging. Having some skin in the game is a good thing. Having unions involved in management is inherently unstable. Ask the former employee owners of United Air Lines.

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Steven Pearlstein: Folks, that's all the time we have today. A good discussion. See you next week I hope.

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