The potential GM bailout doesn’t have a sugar daddy to fall back on like Delphi had, unless the tax payer steps in. Before we do a little history would help.
GM took on $2.1 billion of unfunded hourly pension liabilities and assumed about $6.8 billion of Delphi’s post-retirement benefit liabilities. GM, Delphi’s former parent, has taken on billions of dollars in financial obligations for the parts maker. However, in a regulatory filing, GM said Delphi is unlikely to emerge from bankruptcy protection in the short term and may not be able to emerge at all. Delphi had many suitors during its early bankruptcy.
Delphi's bankruptcy began in 2005. Its bankruptcy opened the floodgates for the buyout crowd. Cerberus entered into negotiations with Delphi and in 2007 Cerberus dropped out of the bidding. Cerberus dropped partly because of the hard stand its workers are taking. To obtain UAW agreement for the 1999 spinoff, Delphi agreed to match the pay of GM factory workers. This averaged $73.26 per hour in pay and benefits last year. Most longtime Delphi workers have since taken buyouts. The union has agreed that unskilled workers hired since 2004 will earn $27 an hour and $42 by 2011. Cerberus told the union it wouldn't pay that much, since it's double the pay at other U.S. parts companies.
The UAW needs a little tough love. It derailed the Cerberus deal at Delphi. Today GM suffers a loss of about $2,000 per vehicle sold. On the other hand Toyota whose employees are not part of the UAW earns a profit of about $1,200 per vehicle sold. If GM was able to operate with labor prices near Toyota’s it would have pocketed an additional $29,715,200,000.
If there is going to be a bailout the heads of the UAW, the Big 3, Treasury, the Fed and a few members of congress need to sit in a room and find a way to restructure employees pay to look more like that which Toyota has. As painful as it might be for me a resident of Michigan where the auto industry began, a bailout would only buy GM a little more time before it went into bankruptcy anyway.