The Big Three auto companies and the United Auto Workers (UAW) are lobbying Congress for $25 billion. The Democrats and the incoming Obama administration say they want to negotiate this.
The auto industry which employs 3 million Americans in auto plants, parts factories, and dealerships nationwide, affects over 10 million people when their families are included. If its allowed to go bankrupt or collapse, which some commentators now consider as a serious possibility, it would devastate the lives of workers, retirees, and communities across the country. Its effects would be most immediate in Michigan, Ohio, and Indiana.
At a time when the government is almost daily stepping in to pledge tens of billions of dollars to bail out giant banks like Citibank for their criminal financial practices, politicians have failed to provide $25 billon to restore a viable auto industry.
Bail out who?
The big questions to be decided are: Will this be another bailout to the owners, managers and CEOs of an industry that they have run into the ground? Or, will the funds be directed to drastically overhaul the products coming out of Detroit, and create a new environmentally-friendly transportation industry for the future, while protecting living wage jobs and providing job security for the existing workforce?
It’s clear the automotive industry is facing a massive crisis. October sales for Ford fell by 30%. At GM sales fell a whopping 45%, making October GM’s worst sales month since 1979. GM also announced that they were burning through billions in cash reserves each month and would be bankrupt in the first half of 2009. Ford and Chrysler are reportedly not far behind.
According to the Washington Post: Economists estimate that a rapid auto industry meltdown could cost up to 3 million jobs — perhaps sending the jobless rate as high as 9.5 percent. It could also result in a bottomless psychology of panic” (11/16/08).
This crisis is many years in the making. Over the past decades, the Big Three gave up the majority of the market for small, fuel efficient cars to other manufacturers. Rather than changing with the times and orienting towards more environmentally-friendly technologies or even trying to build more public transportation, they concentrated on more profitable minivans, SUVs and giant pick-up trucks. However, with fuel prices having hit a record high over the summer, the market for these big gas guzzlers has collapsed. Additionally, the financial crisis has made it more difficult for consumers to borrow the money to buy a car.
What this means for auto workers
Since 2006, tens of thousands of jobs in the auto industry have been lost. According to The New York Times: “The downsizing has been harsh. More than 100,000 jobs have disappeared since January at the automakers and their suppliers” (11/17/07). In many cases, new hires are only making half as much as the older employees they work next to. There have been massive attacks on retirement benefits, including healthcare benefits for retirees.
Now, in more and more cases, retirement benefits are being paid out not by the company, but by the union through the Voluntary Employee Beneficiary Association (VEBA), a union-run trust fund which pays out retirement benefits. It is a real catastrophe that the UAW has taken on this role. Unions exist to represent workers’ interests. Running funds like VEBA can put the union leadership in a position of cutting retirees benefits. Who will stand up for those workers and retirees, when the cuts are coming from the union leadership?
We have to see what is behind the present plan for a bailout. The last bailout in the auto industry was of Chrysler Corporation in 1979. In this deal the UAW leadership agreed to an estimated $203 million in concessions for the workers. This then paved the way for major concessions in wages and benefits for workers in other industries.
In an excellent article by Dan La Botz called What’s to be done about the Auto Industry?
he writes: The union [UAW] relegated itself to the role of the Big Three’s junior partner, then sidekick, and finally hanger on. Fearing to mobilize the members and summon them to struggle, the UAW turned to the Democratic Party to solve its problems. Now we will see what the Democrats do. It will likely be the Chrysler Bailout of 1979 all over again, only writ larger: that is, save what can be saved of the auto companies, let workers go, shred the contract and lower wages.
The comments from former Bill Clinton Commerce Secretary Bill Daley, now an Obama economic transition advisor, should be a warning that a Chrysler-like deal might be the most likely outcome. On NBCs Meet the Press he said: “They have to do it The responsibility is on the auto industry and the unions to come back with a plan.”
When you see the word bailout it means: Either take voluntary concessions or go into bankruptcy. From the point of view of industry executives and politicians there would be a certain advantage of declaring bankruptcy. The companies could legally get out of some of their contractual obligations to workers. The steel industry was the model of this approach, which had a devastating effect on jobs and communities which relied on the steel industry.
Attacks of this type, and attempts to transform the role of unions, are a part of the new business model of the automotive industry. They are trying to make workers pay for the crisis the current corporate ownership and their system has created. They hope to come out of the crisis with a workforce that has little if any benefits and low wages. The situation is already at the point where the wages paid by non-union plants are at a similar level as the new hires at unionized plants
The underlying logic of their system is disastrous for working class people. For the last 40 years the Big Threes corporate ownership have followed one policy maximize short-term profits. Thats what Wall Street demands, thats what investors demand, and thats how the capitalist system operates. The executives of GM, Chrysler and Ford put all their eggs into the basket of the recent short-term sales winner – SUVs. When consumers didnt want to buy them, they added thousands of dollars in incentives. The profits they made were invested in financial companies and partnerships with foreign auto companies. Along with this was a sharp attack on wages and benefits of auto workers. Now they suddenly find themselves in a mess.
If the industry collapses, it will cost an estimated 250,000 auto jobs, plus an additional 1.5-2.5 million jobs that depend on autoworkers. This will have a devastating effect on an economy that’s already facing the highest unemployment rate in 14 years, with some economists predicting unemployment to hit 9-10% next year.
In the areas of the Midwest, where the industry is centered, there will be massive job losses, mortgage foreclosures and the destruction of entire communities. Millions of working families will see their lives devastated.
Where was the UAW in all this?
The failure of the UAW leadership to present an alternative to the corporate agenda that eventually threatened to destroy the auto industry has been a key problem.
William Serrin in his book The Company and the Union (1973) writes:Already by the 1950s the UAW leadership was trading off wage and benefit gains for workers in exchange for allowing management to introduce automation and take greater control of workers on the shop floor. The line sped up, but the workers had little recourse. Rebellions by black workers in Detroit and Appalachian workers in Lordstown and Cincinnati in the 1960s could not break the union’s partnership with management. General Motors and the UAW had become partners, while the UAW and its members were partners no longer.
The shocking short-sightedness of the UAW leadership also failed to expand the gains won in wages and benefits by auto workers to the wider working class.
William Serrin again describes this issue well: “Today, the UAW does little to attack the many problems workers face in American society: racism, the tax system, sex discrimination, highway safety, factory safety, housing, environmental pollution. It was the sons of the working class that were being claimed by the war in Vietnam, but the UAW did not attack the war until attacking the war was acceptable, even popular Since the UAW didn’t care about the rest of the working class, the rest of the working class came to resent what it saw as the privileges of UAW members.”
While the UAW was moving into a closer and closer partnership with management, auto workers saw their living standards and hopes for the future shattered. Hundreds of thousands of layoffs, attacks on health benefits and pensions have been their reward for hot dangerous work in the brutal conditions that still dominate the auto plants in 2008. Only by recreating a fighting union based on control by its membership can auto workers expect to successfully fight back.
What to do about the auto industry?
The auto industry can’t be allowed to collapse. At the same time, simply putting tens of billions of taxpayer dollars in the hands of the people who drove the industry into this crisis also doesn’t make sense. The auto-industry executives shouldnt be entrusted with any public money.
This crisis shows that the auto industry can’t simply continue with business as usual. The only way to save the good-paying union jobs is to bring the auto industry into public ownership under democratic control and management. Decision-making should not be left in the hands of the corporate ownership, or the Democratic or Republican politicians, or government bureaucrats. It should be run by a board consisting of union members, environmentalists, elected representatives of local communities where the plants are located, and the government.
A plan should be drawn up to retool the plants to provide for the transportation, energy and infrastructure needs of the coming decade. A portion of productive capacity should be redirected to plan and produce more environmentally-friendly cars and public transportation, including buses, light rail, high-speed trains and wind turbines, etc. New fuel technology should be integrated into the production system.
To turn around the economy we cant stop at just bring the auto industry under public ownership. The financial system clearly is not geared towards serving the interests of the vast majority of society but the needs to the millionaires and billionaires. By bringing the big banks under public ownership, funds could be directed to build new environmentally-friendly industries to provide for the long-term needs of society not a few billionaires. This is the only way to secure a decent future for working people.