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 Southern Auto Corridor News

November 24, 2008

Editorial

The Employee Free Choice Act is not Democracy

By Michael C. Randle

We endorsed Barack Obama. We stand by our endorsement. So far, we like the direction Obama seems to be headed in regarding his cabinet choices. It looks as if the cabinet will include a good representation of Republicans. Good for him. It is about time we had a President who is unafraid of mixing in ideas from the right, the left, the center and all points in between. 

More than anything we supported Obama because we believed he would bring a more centrist or moderate approach to governing than his opponent would have. We have written it 100 times since about 2002; "This country's mindset is in the center. The far right and the far left are dead for now." Other moderates and independents apparently feel the same as we do. Moderates and independents, more than any other group, were responsible for putting Obama in the White House.

But we are going to have to strongly disagree with one thing Obama apparently supports. The misleadingly named Employee Free Choice Act is not legislation that can be viewed as one a moderate President would support. The EFCA, in short, requires that the National Labor Relations Board certify a union after a majority of the firm's workers has signed union cards (the crude card check method), putting an end to almost all union organizing elections. If the NLRB finds that a majority of the employees in a company (50% plus 1 vote) sign authorization cards, then the Board shall not direct an election but shall certify the organization, therefore unionizing the entire group.

The problem we have with that is that under current law ballots cast during organizing votes are done in private. That is done after 30 percent of a company's workers sign unionization cards in a "card check." This constitutes a showing of interest and then the NLRB can and will order a secret-ballot election of the company's workers.

The EFCA will change that, giving the NLRB the power to unionize a company if 50% plus 1 of the workers of a company signs a card. In other words, if the EFCA is passed by the Senate next year, union organizers can collect cards publicly and if a majority of the workers sign the cards, all workers must join the union without a vote. That means that up to 49.99 percent of the workers at a plant would have no say in whether their workplace organizes or not. The 50% plus 1 simply eliminates a secret ballot of all workers, opening up the possibility of intimidating employees during the card check process.

It is important that we do not eliminate voting for anything in this country -- whether it is a vote for student council, President of the United States, or a vote to unionize or not -- without the peace of mind of voting in private. The elimination of a private vote for or against unionization would eliminate safeguards that are truly a fundamental democratic right. A card check as opposed to a private vote through the secret ballot process is simply undemocratic. We urge our lawmakers, including President-elect Obama, not to pass the Employee Free Choice Act.

Final note: Mr. Obama, you are a smart man and unlike President Bush you explain clearly your policies and what you believe in. I am not sure you can find any explanations the majority of Americans will buy regarding the support of the Employee Free Choice Act.

Sen. George McGovern Comes Out Against Employee Free Choice Act

Many of you don't remember former Sen. George McGovern (D) of South Dakota. McGovern ran against Richard Nixon in 1972 for President of the United States and lost in a landslide. Less than two years later Nixon resigned and vice president Gerald Ford took office.

George McGovern, a likable and smart man, has always been described as a liberal democrat. He campaigned against Nixon, relying heavily on the anti-Vietnam War movement. McGovern has also been labeled a champion of big labor unions. But even McGovern has come out against the Employee Free Choice Act.

McGovern recently said about the EFCA, "It is hard to believe that any politician would agree to a law denying millions of employees the right to a private vote. I have always been a champion of labor unions, but I fear that today's union leaders are turning their backs on democratic workplace elections. I've listened to all of their arguments and reviewed the facts on both sides. Quite simply this proposed law cannot be justified. Working families deserve a voice and a private vote." 

Editorial

There is a Big Difference between "Subsidies" and "Incentives"

By Michael C. Randle, Editor

On Friday night, November 7, at 7:30 ET, I was fortunate enough to be a guest on a CNBC special report titled "Auto Industry Civil War" (here is the link http://www.cnbc.com/id/15840232?video=922861345&play=1). The show began with a comment by Wilbur Ross, the American billionaire, investor, takeover specialist and Chairman and CEO of WL Ross & Co. Ross started the show by saying, "The Southern states have given subsidies to the Asian manufacturers to locate their plants down there at wages that are more or less half of what are being paid in the Midwest. So what's really killing the Big Three car manufacturers is not foreign competition abroad, it's foreign competition in the U.S., subsidized by American states (in the South)."

While I did get a chance to address Mr. Ross' statement on the show, let me write first that this was one of those news programs where there are numerous people (this one featured six) stating their opinions on a subject, half of which end up arguing with the other half.

On the show in addition to Wilbur Ross were Scott Paul, the Executive Director of the Alliance for American Manufacturing, CNBC anchors and reporters Michelle Caruso-Cabrera and Scott Cohn and two other CNBC reporters. Scott Paul supported Ross' suggestion that the South and foreign automakers are partly responsible for the decline of domestic automakers' Ford, General Motors and Chrysler. Paul maintained that instead of "competing with other countries such as China," states like Indiana, Ohio and Michigan (where the Big Three have there headquarters, engineering centers and many of their plants) are competing with "Southern states like Alabama" for auto-related manufacturing jobs. It didn't seem to occur to Paul or Ross that foreign vehicle manufacturers such as Honda and Toyota operate some of their largest North American facilities in those three Midwestern states. In fact, just this week Honda officially opened its Greensburg, Ind., plant that assembles the Civic model. 

I wasn't really into this short, made-for-television, hissy-fit news program to argue what should or may become of the Big Three. I chose to be in the program's fray to try and correct Mr. Ross' assertion that the South is partly to blame for the trouble the Big Three are in. A CNBC screener revealed to me earlier in the day what Wilbur Ross was going to say on the program. I heard the words "subsidies to Asian automakers" and that the South was to blame for those "subsidies," therefore striking what could be a final blow to Detroit. After hearing that, the vein in my forehead did more than protrude. It was close to bursting. And it was then that I realized Wilbur Ross may be a billionaire businessman, but he possesses little knowledge about how economic development works, particularly here in the South.

For one, there is a big difference between a subsidy and an incentive. A subsidy by definition is a gift. An incentive is far from a gift. Incentives must be earned in that they are performance based. For example: Company A will receive X millions in incentives (tax credits, job training, site prep and even cash on the front end and back end of the project) once X jobs are created and X amount of investment is placed in a local bank to be distributed to local contractors, workers, utilities, etc. If the millions of dollars announced to be invested and the hundreds or in many cases thousands of jobs are not made and created, then the company receiving the incentives will be subjected to claw back provisions. In short, any incentives given out will be refunded back to the government entities that gave them out in the first place. On the other hand, a subsidy, since it is considered a gift, cannot be returned.

Scott Paul also accused the South of giving away "subsidies" to Asian automakers and complained that the competition between the Midwest and the South "is not being played on a level field." Apparently Paul and Mr. Ross are not aware of the "subsidies," sorry, incentives the South has given out over the years to domestic automakers. In fact, Tennessee gave General Motors millions in 2006 and 2007 to retool its massive Spring Hill, Tenn. plant, which recently reopened. Shortly after doling out incentives to GM, Tennessee officials landed Volkswagen's first U.S. plant in 30 years with an incentive package worth over $500 million.

One can argue that Tennessee gave out more to Volkswagen to open its new plant in Chattanooga than it did GM to retool its Spring Hill plant to produce the Chevrolet Traverse SUV model. But those making that argument have no idea how much Tennessee has given to GM and Saturn over the last 20 years to keep the Tennessee plant up and running. The incentive total given out to GM over the years in Tennessee is in the hundreds of millions of dollars, and exceeds what has been committed to VW as it begins construction on its new Tennessee plant. Now, with GM teetering on the brink, which business deal looks like the best one for Tennessee; the VW deal in Chattanooga or the GM deal in Spring Hill? 

And that's exactly what incentives are; a business deal, almost all of which are sound state and local government investments. A subsidy on the other hand isn't a business deal, it is, well, a subsidy. For example, let's look at the state of Alabama, the state that Ross and Paul pointed their fingers at as one of the thorns in the heels of the Big Three. Alabama has committed roughly $1 billion in incentives over the last 15 yeas to four automotive OEMs: Mercedes-Benz (German), Honda (Japanese), Hyundai (Korean) and Toyota (Japanese). Together those four automakers have paid their workers roughly $18 to $20 billion in wages during the same time frame. And that doesn't count what the 250 parts suppliers those four automakers brought with them to Alabama have paid in wages in the last 15 years.

So, did Alabama make a sound business deal by committing $1 billion in incentives to four automakers who have returned a minimum of $18 billion back to the people of that state? The answer is very clearly, yes. It is amazing to us that Ross and Paul can even argue that case.

Again, what is ironic about Ross' and Paul's accusations is that incentives paid to automakers in the South, both foreign and domestic, are performance-based. The returns have been enormous for the South's economy, on average about 20-1 in ROI. But right there, on CNBC the evening of November 7, 2008 are Ross and Paul accusing the South of giving "subsidies to Asian automakers" while at the same time they argue for a government bail out of Detroit. What?

It is too early to determine if a possible bail out of the Big Three can be considered a subsidy. Yet, there's one thing a bail out of the Big Three cannot viewed as and that's an incentive, or at least how we view corporate incentives here in the South. Why? Because of all their posturing and pleading this week in front of lawmakers, the CEOs of the Big Three did not once say that if they received the $25 billion bailout how many jobs they would create. You know why? They are not going to create any new jobs with the loans they are requesting.

I realize what Detroit has proposed to the federal government is what they call a $25 billion loan. That’s fair and should be strongly and carefully considered by lawmakers to determine if it is in this country’s best interest. Under the right circumstances, loans to prop up the Big Three are probably in this country’s best interest. But that is beside the point here.

The question is this: If Detroit gets some sort of bailout, loan or whatever you want to call it -- and they will at some point -- and then they go belly up later down the road, what will the bailout really be? That, my friends, is called a subsidy.

So, back to the CNBC show and Wilbur Ross and Scott Paul: What Ross and Paul accused the South of doing is completely off base, calling incentives to great corporate citizens such as Nissan, Toyota, BMW and Mercedes subsidies. Again, if Ford, GM or Chrysler wants to create jobs and invest in the South they will receive an equal amount of incentives as the foreign automakers have received. Yet, what Ross and Paul support is a bailout of Detroit, which really could easily become a subsidy if it doesn't work. How ironic.

mike@sb-d.com

Editorial

"And that's Great!"

CNBC's Michelle Caruso-Cabrera Gets It

By Michael C. Randle

I don't do many live television news shows. I am not a regular on any cable news network, even though I was told by CNBC that they will have me back, in spite of my inexperience.

A live television show is so much different and difficult than others I have done where the interviewer is in the room and you can look at his or her eyes and even body language, such as in a studio environment. The few television news shows I've done on CNN, PBS and MSNBC was just that; talking to a reporter in the room.

With the CNBC show on November 7 titled "Auto Industry Civil War," I was in a studio in Birmingham with one camera man, one camera and a single earphone. In fact, there was no television monitor and I really had no idea who I was speaking to. I found out later that two or three reporters including the show's host Scott Cohn were in CNBC's New Jersey-based studio. CNBC reporter Michelle Caruso-Cabrera was outside on some downtown city street, who knows what studio billionaire Wilbur Ross was in and Scott Paul was in a Washington, D.C. studio. I didn't even know that, or who the people I was talking to were until I watched the show after I did it. It was akin to a telephone conference call with five people who you have never been introduced to (much less know their names), yet you are having this heated discussion with them with a camera in your face. And all of that on live international television? It's a tough gig for a dude who communicates primarily by key strokes.

One person who helped me through that live interview on CNBC was the cable news network's Michelle Caruso-Cabrera. Cabrera seemed to get it. After Wilbur Ross and Scott Paul (see previous editorial) blamed the South for Detroit's woes, Caruso-Cabrera said, "You know what guys, let's not blame the Southern states here. That's the beauty of America is that we have state competition. And if the Southern states give better deals to the automakers, good for them. You don't blame the Southern states, you blame Michigan. Because Michigan, when they were having trouble, what did they do? They raised taxes; they passed laws that were super union friendly. I was raised in New Hampshire and you know why? Because the taxes are lower there and they wanted to escape what they called "Taxachussetts." And when "Taxachussetts" figured out they were losing population, what did they do? They lowered taxes. This is a good thing" (the South's success in the automotive industry), Caruso-Cabrera said during her first take on the soapbox.

The show continued with the six of us arguing about whether or not the South is to blame for the problems that have enveloped the Big Three. It ended with a last word from me (albeit done by someone who is new to live television arguments), where I tried to explain that the South does not "subsidize" industry. Nope, states in the South give incentives to corporations based on their performance at creating jobs and investing in infrastructure. Not only that, those incentives are available to GM, Ford and Chrysler and any other company that wants to create jobs and invest in the South. And a half-a-second after I finished talking, Michelle Caruso-Cabrera said "And that's great," Scott Cohn said, "We've got to go," and the show was over and a commercial began.

mike@sb-d.com

Editorial

Big Three on the Brink

Do We Bail Out Detroit or Not?

By Michael C. Randle

Should the U.S. government bail out Detroit? The nonstop coverage of the issue continues as lawmakers on Thursday, November 20 decided to delay a bailout vote until next month, or whenever officials with GM, Ford and Chrysler can show lawmakers in Washington just what they would do with the money to make themselves viable again. I am sure you have read and heard so much about the subject that you just want to hurl. Regardless, we'd like to chime in briefly. If there is a government bailout -- and we believe there will be at some point -- here is what we would like to see happen.

* A bailout of Detroit will not cost $25 billion, it will cost much more, especially if the economy does not turn around by the spring quarter of 2009. If the federal government does step in like it did with Chrysler in 1980 and Lockheed in 1971, it must demand more for its money. The bailout of Chrysler in 1980 did not really change the company at all. In fact, after bailing out Chrysler, the company was left with the same management team, union contracts, as well as the same pension and health care legacy costs. And that occurred, by the way, when the Big Three had a 75% share of the U.S. car market. Today, the Big Three's share of the U.S. market is no better than 43 percent. That being the case, a bail out of Detroit must be looked at more carefully.

* It is critical that Detroit somehow becomes more competitive if they are approved by the U.S. government for loans that will certainly be closer to $50 billion than $25 billion. That is more easily said than done. It is estimated that it costs Ford, GM and Chrysler about $7,000 more to produce a single vehicle here in the U.S. than its does Toyota, Honda or any of the foreign automakers with plants in the U.S. That is a significant cost disadvantage and is the primary reason the domestics are in the shape they are in now. For example, GM has paid out $103 billion in legacy costs since 1994. Somehow, smart folks are going to have to get together and find a common ground on how those costs can be reduced or the federal government's bailout will only delay the inevitable.

* Obviously, only bankruptcy can eliminate much of the legacy costs associated with the Big Three and bankruptcy is an option, but one that will create chaos in the market. So, is it really an option? Regardless, there must be ways that Detroit can be more competitive from a cost standpoint.

* Again, whatever money goes to the Big Three must be in the form of loans, not subsidies. If Detroit does become more competitive and the market improves, there is a good chance those loans can be repaid.

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