Auto Bailout Makes Workers Pay: But Will It Save the Industry?

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The rapidly declining sales of cars and trucks have put the future of the U.S. auto industry and its workers into question. The current crisis and government bailout is now threatening to destroy the decent living standards that the United Auto Workers (UAW) spent years struggling to achieve, and to establish a precedent of driving union work standards to non-union levels.

Sales at the Big Three (Ford, GM, and Chrysler) dropped in October, November, and December by 30-50%, making 2008 the worst year for the U.S. automakers in decades. The mainstream media most frequently blames poor management decisions at the Big Three for the crisis.

There’s no doubt that investing in SUVs, which provided huge short-term profits, instead of more fuel-efficient small cars for the past few decades has now made the situation dramatically worse for the American companies, not to mention the environment.

But sales have also fallen dramatically for the Japanese companies Toyota and Honda. Toyota has even announced that it expects to lose money for the first time since the 1930s.

The entire global automotive industry is facing a major crisis of overproduction and overcapacity, which stems from the anarchy of capitalism. In the pursuit of profits, each auto company tries to produce as many vehicles as they can, regardless of what people need or can afford.

Now, with record job losses and tighter restrictions on credit, it’s unlikely sales numbers will return to their previous levels anytime soon.


After announcing they were nearing bankruptcy, the CEOs of the Big Three asked for a government bailout. Yet while $700 billion was handed over to the banks with hardly any conditions, the $17 billion auto bailout came with harsh conditions for workers. UAW activist Gregg Shotwell describes it as “chump change for fast-track union busting.”

The final terms of the government loans signed by Bush call for reducing wages and benefits to the non-union levels at Honda, Toyota, and Nissan by the end of 2009, cutting more jobs and closing more factories, eliminating company-funded unemployment benefits, moving from set-benefit pensions to 401Ks, and allowing the companies to make half of their required payments into the union-run retiree healthcare funds (VEBAs) in company stock.

These new attacks will come on top of the historic concessions that were given up by the UAW in 2007, which included cutting wages for new hires in half and putting the responsibility for retiree healthcare on the union, as well as plant closings and the loss of tens of thousands of jobs.

Concessions have never saved autoworkers’ jobs. They are simply a way to make workers pay for the mistakes of their bosses and the crisis of the for-profit system. As Shotwell put it, “The only thing lower wages guarantee is increased competition for more lower wages.”

That’s not to say that we should let the auto industry be destroyed. Without a bailout, it is likely that the Big Three would collapse, resulting in the loss of up to 3 million jobs according to some estimates.

While the bailout avoids this doomsday scenario – for now – it does nothing to solve the fundamental problems of the auto industry. It will not stop, and in fact calls for, massive attacks on autoworkers and a new round of mass layoffs and plant closings.

The hundreds of thousands of autoworker jobs, as well as the millions of family members, local businesses, and communities that rely on them, should be saved.

Instead of closing factories, we should be demanding to convert them to socially useful production. There is a dire need to transition to a sustainable, environmentally-friendly transit system. Such a system would shift the focus toward efficient and inexpensive public transportation on trains and buses, as well as fully-electric cars.

This would not only prevent job losses but would actually create many jobs. Instead of government handouts to the inept CEOs, the UAW should be demanding nationalization of the auto industry under democratic control by autoworkers and the public.

Role of UAW Leadership

Unfortunately, the UAW leadership has agreed to make major concessions without even attempting to mobilize autoworkers to defend themselves. For the heads of the UAW, as well as the leaders of the Democratic Party who claim to represent our interests, it’s not a question of whether autoworkers will take more cuts; it’s a question of when.

Because they accept the logic of competition, which is the driving force of capitalism, the UAW believes that making the Big Three more profitable is the only way to save the industry.

If wages and benefits are cut at the Big Three, it will put pressure on the other auto companies to follow suit. Two years ago, when they were still making billions of dollars in profit, Toyota was already calling for cuts in labor costs. Without a union to oppose them, it will be easy for Toyota to match any cuts at the Big Three.

In addition, the UAW leadership’s failure to resist concessions will further weaken any attempts to organize workers at the non-union foreign transplants, an essential task for the union.

Any concessions accepted in the automotive industry will set a precedent, which will accelerate the race to the bottom as other industries attempt to achieve the same concessions. They will say “Autoworkers took cuts; our workers need to take cuts.”

Workers Need to Fight Back

The only way autoworkers can secure a decent future for themselves and their families is by organizing a fight-back. The UAW should be mobilizing its membership for a fight, reaching out to local communities, the labor movement, and the wider working class for solidarity.

While the UAW leadership was on its knees negotiating major concessions in Washington, the workers at Republic Windows & Doors were becoming heroes to many Americans by standing up for themselves and occupying their factory, the very tactic that made the UAW strong in the 1930s.

Imagine what would be possible if the UAW had taken a similar approach. They could have drawn on the massive anger at the rich and the Wall Street bailout. They could have pointed out the hypocrisy of wealthy congressmembers criticizing how much autoworkers make (see box), and demanded no concessions and the development of a green manufacturing infrastructure to save jobs and the environment.

But for any fight-back to take place, it will require rank-and-file activists organizing in their factories and communities against concessions and job losses. Only a movement from below, demanding a better future for autoworkers and society as a whole, can win this fight.

Are Autoworkers Overpaid?

Much of the media focus during the bailout debate was on how much money UAW members earn. There were exaggerated claims of autoworkers making $73/hour, which the companies used to turn public opinion against the union. But starting wages at the Big Three are now at $14/hour, below the average rate at the Japanese companies.

In order to come up with $73/hour, analysts added up not only workers’ wages but also pensions of current retirees, family healthcare costs, and other benefits. Then they divide this by the number of current workers.

The non-union Japanese companies didn’t start manufacturing in the U.S. until the 1980s, so they have very few retirees (currently, Toyota has less than 300). Fewer retirees plus the dramatic rise in healthcare costs explain the difference in labor costs between the American and Japanese companies.

But even with these higher costs, all labor expenses (including pensions and healthcare) make up less than 10% of the cost of a new car. Further, labor costs have declined dramatically in recent years. GM, for example, now produces the same number of vehicles as it did in 1992 with one-third as many workers!

The real problem is that most American workers don’t make enough. In fact, the root cause of the current economic crisis is that workers can’t buy back what they produce. Despite productivity rising over 60% across the entire economy, wages have declined for most workers over the past 30 years. We should be fighting to raise all workers’ living standards, not blaming those who can still make a living.

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