The Demise of the US Auto Industry on FoxNews.com Strategy Room

FoxNews.com Strategy Room is an eclectic marketplace of ideas, especially when Eric Bolling is at the helm. Bolling’s academic background of economics and business, accompanied by a career that has included being a professional baseball player, one of the world's largest commodity traders, and years as a business news journalists (first with CNBC and now with Fox News and Fox Business) makes him something of an adrenaline addict and one of the most enjoyable TV hosts to watch.


Bolling is intelligent, eloquent, and passionate about his convictions, although they are not easy to label. He describes himself as one who is "center/right and believes in free markets." As a man who has made a significant part of his living as a commodities broker, his passions are both pragmatic and well founded.

When I was on the Strategy Room this week (Bolling hosts 3 PM EST hour) the show covered a plethora of issues early on, but slowly began to focus on the fact that the United States automobile industry is dying and seems to be doing so quickly. This is one of the most dominant topics in business news today.

Invariably these discussions lead to "what should the government do to solve this?" My answer to that is that government has been the primary reason the industry is in such a dire situation. You can go back decades to when Michigan became a close union shop state, making labor the primary customer rather the people who buy cars. This has led to Detroit paying over $70 an hour per employee compared to Japan's $40 an hour for employees in Southern states. Addressing the auto industry situation should include:

• Ending the controversial UAW "Job Bank" program . This program has paid tens of thousands to be idle at 90 percent of salary.


• Bring auto worker wages back to the real world. According to the Heritage Foundation, when it comes to salary and benefits, the average wage of all private sector employees is $25.36 and for American based Japanese auto plants (Honda, Nissan, Toyota) is $42.95 to $47.60 on average. The big three pays $70.51 (Ford), $73.26(GM), and $75.86 (Chrysler) per hour, per employee. These six digit wages for blue collar work demand a reality check.


• End the "30 and out" practice. The Detroit auto companies allow employees to retire with very lucrative packages at the young age after 30 years. If you start working at a plant at 20, you can retire at fifty. You can see where that can be costly. 60 or 65 should have to be the standard retirement age, which is what the market clearly demands.


• Seven week vacations need to be history. Detroit auto workers receive almost two months off a year. This is another pounding cost, on a very weak industry, that needs to change.


• Finally, they should require the companies to relocate to a right to work state. This would empower these companies to lower wages and make it easier to implement the other reforms listed above. Twentytwo states are Right to Work, 28 are not. It is more than a coincidence that all but one of the ten richest states are Right to Work, while the ten poorest are closed union shops according to the American Legislative Exchange Council. The threat alone could make the Michigan government come to its senses.

So how do I think the problems of the auto industry should be solved? This can only be done through markets, less government, more freedom, and plain old business sense. These are the kind of ideas that once made the automobile industry the envy of the world.

Kevin Price is Host of the Price of Business, the longest running show on AM 650 (M-F at 11 am) in Houston, Texas and on AOL Radio. His articles often appear in Chicago Sun Times, Reuters, USA Today, and other national media. Steve Moore of the Wall Street Journal calls Price the “best business talk show host in the country.” Find out why and visit his blog at www.BizPlusBlog.com and his show site at www.PriceofBusiness.com. You can also find Price on Strategy Room at FoxNews.com.

Bush Snubs Constitution, Congress, and Passes the Buck

In one of the most glaring examples of "keeping up appearances" in history, President George Bush has decided to single handily provide a bailout bridge to the "Big Three" automobile companies. It is intended to be a bridge that keeps them alive long enough to get to Barack Obama, who is expected to have a more friendly Congress available to do more. The current Congress and majority of Americans are rightly afraid that this is just another bridge to nowhere.

In a brief speech, the President made the case for going against the Congress and using money that was passed for bailing out Wall Street, to be shifted to assist the automobile industry.

He begins by pointing out that money shouldn't be given to the industry without accountability (as proposed by the automobile companies originally), stating that a "more responsible option is to give the auto companies an incentive to restructure outside of bankruptcy -- and a brief window in which to do it. And that is why my administration worked with Congress on a bill to provide automakers with loans to stave off bankruptcy while they develop plans for viability." This bill was rejected by the United States Senate. Bush notes "this legislation earned bipartisan support from majorities in both houses of Congress." There was not, however, enough "bipartisan support" to get this passed.

Bush goes on to say that "unfortunately, despite extensive debate and agreement that we should prevent disorderly bankruptcies in the American auto industry, Congress was unable to get a bill to my desk before adjourning this year." This is a nice euphemism for stating that the bill didn't pass. Period.

Bush states that "this means the only way to avoid a collapse of the U.S. auto industry is for the executive branch to step in. The American people want the auto companies to succeed, and so do I." Maybe some of the people he knows. Maybe his golfing buddies from Ford or tennis partners at GM. But I couldn't find a single national survey that supported such. Furthermore, the American people overwhelming told Congress to not pass this bill. Most were unhappy with the Wall Street bailout, someone needs to be held accountable for their business acumen (or lack of).

In spite of the political realities, Bush goes on to say that "today, I'm announcing that the federal government will grant loans to auto companies under conditions similar to those Congress considered last week." Remember, Congress "considered," but rejected this legislation. Bush is disregarding the will of the Congress, whose authorization should be necessary (according to Article I of the Constitution), and is making the $800 billion bailout for Wall Street into a giant slush fund for the Executive Branch.

The President stated that "these loans will provide help in two ways. First, they will give automakers three months to put in place plans to restructure into viable companies -- which we believe they are capable of doing." When I left Detroit in the 1970s, the automobile industry in that city was already on the ropes and Chrysler was seeking loans. The automobile industry has wasted decades trying to get its house in order. Now, Bush believes it will restructure itself in 3 months? It would be funny if the money wasn't real and he wasn't serious. Well, at least it is only around $15 billion. The second "way" this bill is to help will be "if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success -- and gives consumers confidence that they can continue to buy American cars." Does Bush honestly believe that Americans will ever have confidence in a company in Chapter 11? President Bush clearly needs a reality check.

Bush states that "because Congress failed to make funds available for these loans, the plan I'm announcing today will be drawn from the financial rescue package Congress approved earlier this fall." Translation: I will take money passed by this Congress meant for one purpse, for purposes that this Congress voted against. This is the arrogance of officialdom and a President behaving like an autocrat.

President Bush simply can't stomach the thought of the automobile industry going under during his watch. In an incredible attempt to protect his "legacy," this President is suspending his Constitutional responsibility, snubbing the Congress who is required in authorizing such expenditures, and is abandoning the will of the people. In an effort to "save face" he is leaving a very ugly memorial to his administration.

Kevin Price is a syndicated columnist whose articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media. Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

I've Heard of Cheap Deals, but this is Ridiculous

In spite of how pathetic Michigan's economy has become, it still raised my eyebrow when I heard that a house was being sold for $1. I honestly thought I had seen it all in the world of transactions until I opened up my Mediabistro ezine today.

Bistro reports: "Yesterday, after hearing about OpenGate Capital's purchase of TV Guide we wondered why the company would buy the struggling pub, writing, 'Honestly, it's a little hard to understand what OpenGate sees in the magazine, even if the purchase was for an absolutely rock bottom price.'"

"Well, it turns out that was 100 percent the case. Advertising Age's Nat Ives found out that the investment company bought the mag for a grand total of $1. Furthermore, Macrovision — which owned TV Guide — will give OpenGate a $9.5 million loan at three percent interest, a great deal in these uncertain times."

"But still, the magazine lost $20.3 million in 2007. What is OpenGate thinking? Its managing partner Andrew Nikou told Ives his company's thought process: 'The reason we acquired this business is simple. It needed additional investment. We're investing in this company to take it to the next stage.' Good luck with that, guys"

Essentially, TV Guide has devolved into a venture capital deal. It is clearly more than an idea, since it has decades of history behind it. But it has such a terrible track record to stand on and is back to square one in making a case for its continued existence. TV Guide has all the elements of a free rag, but they are still trying to "sell it" as a viable subscription publication. Thanks to the large number of cable and satellite services, it is very difficult for a print publication to provide thorough information on specific programming. That leaves the Internet. Meanwhile, all of the companies that provide programming (like cable companies) gladly tell you what is on their systems. Better than a magazine or a website, they do it through the remotes they provide. It is simply too simple to use any other means.

I don't see how there is a market for a TV Guide and don't think there has been a need for such in years. But old business models die hard. Just ask the US automobile industry.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.