Dead Moose on Auto Bailout Table is Legacy Costs

I find it almost unbelievable that even though most working Americans know that the "Dead Moose" on the auto bailout table is the legacy cost for retired workers, the mainstream media and most of the "discussion" in the congressional hearings is about sub-par quality and lackluster cars, demand shift and uncertain energy policy, the financial meltdown and the global slowdown.

Every car the Big 3 make carries "legacy costs"—the costs of providing healthcare and pensions to scores of retired workers. For every Big 3 auto worker, there are about 10 dependants, which are defined as retired workers and their families.

According to David Cole, Chairman of the Center for Automotive Research, "when the international car companies came to the U.S., the move stuck the domestics with a very large disadvantage related to legacy costs. And that's $2000 a car." That two grand must be built into the sticker price of any new car and truck. And that's money on top of developing, producing and marketing a car—costs that Honda, Toyota and others don't have. It makes competing difficult for the domestic automakers, "like playing basketball with a bowling ball," according to Cole. GM's per-hour labor rate for car assembly is about $75 per hour, compared to $40 to $45 for other car companies. That particular disadvantage, says Cole, will be "gone by the end of next year," when a new labor agreement goes into effect.

The gig is up. It's time for the UAW to stop living in retirement fantasyland and join the real world with the rest of us.