Column on auto industry draws responses

By DAVID MOON, Moon Capital Management, LLC
December 21, 2008

I've written about and poked fun at politicians, industry captains, fat people, skinny people, Alabamians, investment advisors, republicans, democrats and one of my brothers-in-law. (I've had five, so you guys try to figure out which one.)

My columns on the business aspects of college athletics have generated the most letters, many in passionate disagreement.

Not any longer. If you want mail, write a newspaper column about the automobile industry.

Many of the comments and questions regarding last week's column were repetitive, so I'll address them here, rather than respond individually.

To those who agreed with my support of economic Darwinism as it relates to the U.S. auto industry, thank you and congratulations. Obviously you are well-informed, soundly grounded and extremely intelligent. You are drawn to great writing and recognize an author with modesty.

Now onto the fun stuff.

The point of last week's column was that a federal government bailout of the U.S. auto industry makes much political, not economic sense.

Most of the letters of criticism I received actually helped make the point. They disagreed with my conclusion by making political arguments, not economic ones.

One writer told me that the Detroit automakers made contributions to aid victims of the 9/11 attacks, unlike the foreign automakers. As a result, GM, Chrysler and Ford deserve our help.

That is a political argument, not an economic one.

Another writer provided a list of general economic woes that have plagued the U.S. since the start of the Bush presidency. Additions to the national debt. Lost jobs. A decline in the stock market. And besides, a $15 billion auto bailout is equivalent to only six weeks worth of spending in Iraq.

This is not an economic cost/benefit analysis of why a $15 billion infusion into the auto industry makes sense. It is an argument of why it makes political sense.

Many writers questioned the labor costs referenced in the column. Here are a few comments, along with my sources.

I must not have been clear, because several readers mistakenly believed that I wrote that the average wage of a UAW worker is $73 an hour. Not true. That is the average labor cost. In the next paragraph I noted that the $73 figure includes insurance, retiree benefits and the jobs bank program.

The average GM cash wage of $37 an hour in 2006 is incorrect. The General Motors Media handbook (available on the GM website) reports the average cash compensation for hourly employees in 2006 as $39.68 per hour.

I stand corrected.

As a couple of letter-writers pointed out, the most recent UAW contract calls for certain new hires to make $14 an hour. The auto makers, however, aren't hiring new workers, so that is almost irrelevant.

I wrote that the average wage in the U.S. is $28 an hour. That statistic is based on September data from the U.S. Department of Labor.

Finally, in a short email, one writer simply called me stupid. His email had a grammatical error in every sentence.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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