Remembering Our Friends- Supporting the Autoworkers
I'll hopefully have time to post on why allowing the U.S. auto industry to die without help would be a catastrophic mistake, but let me note a more basic political issue for progressives, of helping the UAW save their members jobs. The United Auto Workers has been a stalwart ally of progressives for going on seventy-plus years, from helping build the New Deal to supporting progressive government for years (thanks for Michigan, guys!) Without going through the longer list, let me just remind folks of the central role of the UAW in the civil rights movement. No organization gave more financial and political support to Martin Luther King Jr.'s movement.
* Few remember, but before the famous March on Washington in 1963, there was a precursor march in Detroit, backed by the UAW, where 200,000 folks marched down Woodward Avenue led by King and Walter Reuther, head of the UAW.
* In D.C. Walter Reuther was the only white speaker at the March on Washington.
* And the UAW gave large financial sums, including paying bail money for countless southern civil rights activists thrown in jail, including the bail for Martin Luther King Jr. at Birmingham.
For an organization that was such a critical friend to other progressive movements for so many decades, anyone speaking out against saving the very livelihood and existence of that ally should be pretty damn sure of themselves before they question support for the autoworkers in their moment of crisis.
I can't say that I'm excited by the prospect of footing loans to companies that are suing California over its environmental regs. This is not about standing with the autoworkers, it's about not sending taxpayer money to Bob Nardelli and Alan Mullaly especially when we know that they're unlikely to pay it back.
November 19, 2008 10:30 AM | Reply | Permalink
Separate two issues-- this is not a debate over normal tax breaks or fuel emission standards or other areas where progressive friends can agree to disagree. This is about the basic survival of tens of thousands, possibly hundreds of thousands of unionzed autoworker jobs and maybe the UAW's very existence as a viable organization.
Of course any bailout should have enviro strings attached, but debating what conditions should be on the money is a separate issue from progressives having the back of allies in saving their jobs and their union.
November 19, 2008 10:40 AM | Reply | Permalink
I don't think it's just about enviro strings. If we really want to show labor that we have its back, we need to attach strings that will save labor from what happened to it during the Chrysler bailout -- Chrysler got cheap debt, Chrysler's execs made back all of the money they lost for that year when Iacocca and top level execs took a $1 salary and workers still lost salary and jobs.
You can't just hand money to Bob Nardelli and expect the arrogant jerk to do the right thing and call that "having labor's back." It's not the unions that are getting the money here -- it's a bunch of really misguided, overpaid, corporate execs who will no doubt use these loans to fund their own bonuses even as they send our allies in labor to the unemployment lines.
November 19, 2008 1:56 PM | Reply | Permalink
Oh brother. We have one person measuring the real cost hourly as between $71 and $76. it's time to change the automakers into something other than a benefit machine that makes cars on the side.
Bankruptcy will keep the jobs and shave the pay. Would you prefer that, or no jobs at all?
November 19, 2008 10:52 AM | Reply | Permalink
Shooter,
Mark Perry, the person you cite for your information, is not only wrong in his numbers, but a very interested party. First of all read this:
Thursday, February 01, 2007
From Detroit Free Press
The UAW is losing its edge in pay compared with non-unionized U.S. assembly plant workers for foreign companies, even as Detroit automakers aim for deeper benefit cuts to trim their losses.
In at least one case last year, workers for a foreign automaker for the first time averaged more in base pay and bonuses than UAW members working for domestic automakers, according to an economist for the Center for Automotive Research and figures supplied to the Free Press by auto companies.
In that instance, Toyota Motor Corp. gave workers at its largest U.S. plant bonuses of $6,000 to $8,000, boosting the average pay at the Georgetown, KY, plant to the equivalent of $30 an hour. That compares with a $27 hourly average for UAW workers, most of whom did not receive profit-sharing checks last year. Toyota would not provide a U.S. average, but said its 7,000-worker Georgetown plant is representative of its U.S. operations.
Honda Motor Co. and Nissan Motor Co. are not far behind Toyota and UAW pay levels. Comparable wages have long been one way foreign companies fight off UAW organizing efforts. . . . . .
The article goes on. The largest problem with the numbers Perry cites is that the Big Three no longer pay health benefits for workers and retirees since the inception of the VEBA (Voluntary Employee Benefits Association)because, after a lump sum payment, the UAW has assumed these costs. So adding benefits to wages from 2006 doesn't portray an accurate picture of the industry today.
Finally, Perry is strongly affiliated with the right-wing Mackinac Center for Public Policy in Michigan. Take everything he says about unions and the auto industry with a grain of salt.
November 19, 2008 11:20 AM | Reply | Permalink
Where then does the comparison of $47 for Toyota workers compared to $71--all in--for GM workers come from?
Is it bogus? Fuzzy math? Apples and oranges?
November 19, 2008 12:15 PM | Reply | Permalink
It is bogus. It adds legacy costs that have been incurred already to the current, marginal hourly cost for labor. It is, by definition, fuzzy math, and apples and oranges.
November 19, 2008 1:00 PM | Reply | Permalink
Tintin,
Well I tried to follow Perry's link to get more details on his numbers but it doesn't work. It seems that what he is doing is adding up all the wage and benefits costs paid by the auto makers, (which includes current workers and retirees) and dividing it by the number of current workers hours worked. So US workers do not see a paycheck that reflects the $74 dollar rate. US automakers have more retirees, greater pension contributions (I think, I'm no expert on the Japanese pension system) and, in 2006 before the VEBA, the added burden of health-care costs.
Another thing, his numbers might include all workers for Toyota and the Japanese auto makers, not just their workers in the US. Toyota must pay health care for its employees in the US, not for those in Japan. So comparing the pay and benefits rates of Toyota and GM workers in the US (not just the take-home pay numbers that the Detroit News cites) would further show comparable rates.
The point is that the contention that "over-paid" blue-collar workers are bankrupting the big three is just wrong. The UAW has signed concessionary contracts for the past 20 years, none more concessionary than the one signed in 2007. The reason why the Mackinac folks and their allies in Congress are calling for bankruptcy is so they can break the contract, further bust the unions and destroy a great ally of progressive causes, the very point that Nathan is making.
November 19, 2008 1:12 PM | Reply | Permalink
Well then if the auto guys are similar to the Japanese here in wage and benefit structure, then definitely, no bailout is called for. If they can compete here, so should the Detroit guys.
Or perhaps there is some other thing that hobbles American car makers?
November 19, 2008 3:14 PM | Reply | Permalink
Shooter,
I find it somewhat difficult to believe that you cannot think of other things that might be ailing the auto industry besides its wage and benefits structure.
Perhaps the problem with the US auto industry is the fact that management has been choosing to make cars that, especially recently, no one wants to buy.
And the thing is, this was a foreseeable problem. Even Business Week was wondering why GM was issuing a dividend in the late 1990s when they were profitable from vigorous SUV sales, when they should have been investing in designing and producing smaller cars that were more fuel efficient. Management is paid to think about shifts in the market. That they were not adequately doing this is not the UAW's fault
Federal assistance to the Automakers, as Josh has been stressing, should be seen as an opportunity to force management to retool and reinvest in products (whether they be cars, buses, or train cars) that will both help the environment and the worker.
November 19, 2008 4:20 PM | Reply | Permalink
Can I say lies, lies, and damn statistics. Here are UAW contract links:
Chrysler $29-$33: http://uaw.org/contracts/07/chrysler/hrly/chry_hr02.php
Ford $26-$33 ">http://uaw.org/contracts/07/ford/hrly/ford_hr02.php
GM $26-33 http://uaw.org/contracts/07/gm/gm02.php
You can add in health care costs and legacy costs of retirees and all sorts of other things to attribute costs to each worker, but the bottom-line is that auto workers are in no way taking home $71 per hour plus in pay. It's just rightwing myth-making.
November 19, 2008 1:05 PM | Reply | Permalink
Thanks Bruce, Jason, Nathan...
These folks are just liars. When folks are really trying to come up with an equitable and workable solution, it's just despicable that the folks in the know are throwing out bogus figures.
But what of the legacy costs? How can/should they be funded?
Obviously unjust to throw them overboard, but what should be done to make sure these folks get paid...and the companies survive?
November 19, 2008 2:36 PM | Reply | Permalink
I believe GM has fully funded its pension liability.I've heard some of the Right commentators complain that that's partly where its cash went.
And Waggoner quickly said something to that effect tonight on the New Hour.
I'm not saying this with certainty , I'm sure others here can comment.
November 19, 2008 9:48 PM | Reply | Permalink
Yes, GM's defined benefits pensin plan was overfunded as of 12/31/07.
November 20, 2008 9:09 AM | Reply | Permalink
Nathan,
That's like making an election day appeal for black voters to stand by the Party of Lincoln. This ain't the Reuthers' UAW anymore, and it hasn't been in a generation.
What purpose is this call for reflexive loyalty supposed to serve? If the UAW is right, it deserves our support, and if it's wrong, no number of past virtues can overcome that fact. As it happens, I have tremendous concern and empathy for workers in the automotive industry, unionized or not. But it's never been true that what's good for the UAW is good for America, just as it was never actually true of GM itself.
I don't think we can simply write off the domestic auto industry or the millions it employs. But devising a solution requires a focus on national, not parochial, interests. The golden age of industrial unionism is over. The UAW can choose to play an active role in radically restructuring its industry, slashing pay and benefits and conferring greater flexibility on management. In return, we ought to see even greater pay and benefit concessions on the part of management, and a renewed commitment to keeping manufacturing jobs at home, despite the short-term costs. And I certainly think that the public treasury will need to cement the deal by playing its own role - probably involving a taxpayer bailout of health and pension costs. If everyone's willing to do their part, these jobs can be saved. But if the UAW and its allies want to go back to the barricades, to invoke reflexive loyalty, and to brand anyone who advocates change an ungrateful traitor to the cause, there's probably no hope for the auto industry.
November 19, 2008 11:11 AM | Reply | Permalink
Methinks I agree, Fly. I am all for supporting the UAW, but not blindly.
November 19, 2008 1:19 PM | Reply | Permalink
Flyonthewall,
As I tried to state in a previous reply, the UAW has been signing concessionary contracts for years. It has agreed to a two-tier wage system where entering employees make much less than continuing employees. It has agreed management attempts to increase productivity, and now all auto analysts agree that American auto workers have "closed the productivity gap" with Japanese auto makers
The UAW makes no decisions about what to produce or how to produce it. They have given up huge concessions to management. What more would you have the UAW do? Why demand that unionized workers pay further for the mistakes of management?
The union can be faulted for not making a greater attempt to organize factories in the south to maintain density in the industry. But this is not a call for more cooperation with industry, (which you seem to be calling for) but more aggressive tactics.
November 19, 2008 1:31 PM | Reply | Permalink
"But devising a solution requires a focus on national, not parochial, interests. The golden age of industrial unionism is over. The UAW can choose to play an active role in radically restructuring its industry, slashing pay and benefits and conferring greater flexibility on management"
Wow. You are one of the most contributors on this website. Your posts rise to the top with the inevitability of Old Faithful. Do you really mean this? What does it mean that the "age of industrial unionism is over?" Do you really believe that the key to revitalizing the American auto industry is to slash pay and benefits? Really? What about the workers? What about their families? What about their communities?
I'm sure you have your reasons, and I'm sure they're very logical and rational and all of that. I'm just more interested in the notion that you might actually be reflecting the attitudes of the new progressive movement in this country. If that is the case, respectfully, because you are indeed very respected around here, I'm prepared to meet my maker in the form of a dinosaur.
November 19, 2008 10:13 PM | Reply | Permalink
Second sentence should read:
"You are one of the most popular contributors on this website".
November 19, 2008 10:16 PM | Reply | Permalink
Speaking for myself Bruce, I agree there has to be change, from all parties AND the government. The Big 3 make more vehicles per person North of the border than South of it, and universal health care is central to that.
But in no way is the MAIN way forward through slashing workers pay/benefits. Sure, some people resent seeing 3 new vehicles in the yard of of some autoworker's house. But there's a wide understanding that the well-being of those workers' helps their communities; that the autoworkers have stood strongly for progressive change here; put time, money & intellectual & PR effort into a wide range of our causes; and that solid paycheques for all is the aim, not a race to the bottom. They want to know the workers are WORKING, being productive, yes - but there's no desire to see them fail, from the 33 million people up here (who are being asked to pony up 14% of the Big 3 funds BTW.)
What a lot of us have felt for quite some time is that the leadership & middle management at those firms is... screwed. In the the 90's, the loss of hybrid tech to Japan was an appalling loss. I know some scorchingly brilliant engineers who went into the Big 3 to make the kinds of changes we all now want, but who got buried under the marketing geniuses, the finance boys, etc. Then to see the engineering students at UC Davis under Dr Andy Frank produce plug-in hybrid vehicles for a DECADE now, and Big 3 management paid no attention, while Toyota brought the knowledge back to Japan, it made you weep.
Finally, I'm Green as grass. So yes, what the Big 3 leadership has done on green issues, and the times the workers have chosen chrome over green infuriates me. BUT. The CAW never lost its progressive legs, nor its green legs - they've been a force for wider positive change. And for me, from what I've lived, I've got my own loyalty reasons. No, the top union boys aren't lightweights or even real pretty. But there are fights in this life that never reach the papers, and the weight - and the fearlessness - of the autoworkers has been a lifesaver for some of us little greens. There's a lot of big money in this world, and some nasty people out there. And I've seen the autoworkers back up some of those little people, little greens, so we got to live to fight another day. The weight of organized working people... matters, in wider ways than the $/hour & resentment-fuelled fights the media wants this to be.
November 20, 2008 3:37 AM | Reply | Permalink
Quinn:
You are a wise man and I appreciate your post. I understand folks feel frustration about "special interest groups" and how they can interfere with any chance for positive change in Washington. I cannot understand, however, how appropriate criticisms on the "progressive" side of the ledger about some things that some union officials have done or some positions that some unions have taken should then translate into what I see as a cavalier attitude about working people in this country and the continued significance of labor unions. It's a dangerous attitude, and sometimes it makes me think that all of this hullabaloo about who is in and who is out in Washington is nothing more than just another bloodsport we like to blather about. American working people are in trouble, big trouble, and anybody who thinks, all things equal, that a worker is better off in a distress situation without a union like the UAW is just simply wrong in my informed opinion.
I have to be careful here. I am probably the only person on this website who has appeared on behalf of the UAW in Bankruptcy Court and I really do understand the implications of attempting to make industrial policy in that forum. For that reason, I really cannot discuss what the UAW should or should not be doing, or the implications of bankruptcy, or the current bailout proposals. But I will say that there are millions of American workers and their families, not only members of the UAW, who are lucky that industrial unions like the UAW are still around and are not going away. Our progressive friends who speak and hope for change, change, change are in large measure hoping for good things and for a better future for all, but they make a huge mistake if part of their solution is to throw all of the babies out with the bathwater.
Thank you Quinn for trying to keep the record straight down here. We really can learn a great deal from our Canadian brothers and sisters.
Bruce
November 20, 2008 7:20 AM | Reply | Permalink
bslev:
Thanks for giving me a chance to explain myself, rather than jumping to conclusions. And let me say, right off, that I would never mistake the popularity of my posts for approval of my views. I like to think that people around here read my posts because they're cogently written, well-sourced, and informative. And, most of all, because the topics they address and opinions they contain aren't always predictable. I wish I could say the same of Mr. Newman. He has, alas, made it perfectly clear in his time at TPM that he regards his posting privilege as an opportunity for advocacy rather than for intellectual exploration or honest dialogue. He writes in support of organized labor, and if that sometimes requires arguments as tendentious as connecting Walter Reuther's support for Civil Rights with a cash infusion of $25 billion to the Big Three, that's a sacrifice he's perfectly prepared to make. (You'll note that Mr. Newman hasn't found the time to reply to my post, or to explain why his argument makes the slightest bit of sense, contenting himself instead with vigorous assaults upon straw men. I might point out that the Ford Foundation has done tremendous good in the world; a fact that doesn't make me want to help Ford screw its workers and maximize shareholder returns. Dialogue isn't exactly his forte.)
I have a gripe about your post. In your rebuttal, you truncated my quote. What I wrote, in full, is that "the golden age of industrial unionism is over." That's a critical distinction. I expect industrial unions will be with us as long as industry. But unions and industries tend to rise and fall in tandem, and for the foreseeable future, American industry won't come close to rivaling its post-war glory days. When an economic sector is burgeoning, unions are at their best, fighting to secure workers their fair share of the profits being secured by their employers using their labor. Witness the SEIU's recent successes in the service and health care sectors. The pie keeps expanding, and workers deserve their share; since they can't rely upon the beneficence of management, they have to fight to secure it. But as industries decline, unions find themselves in a tough spot. They're reluctant to surrender hard-won gains; they don't want to bear the brunt of the downturn alone, or disproportionately; and their members are hurt and angry at being made to suffer despite having held up their side of the bargain. So they tend to dig in their heels, a posture which, more often than not, hastens the decline of their employers.
Please don't number me among those who would pin primary blame for Detroit's decline on unions or workers. Its causes are far more complex. They include forces beyond Detroit's control (e.g., the carry trade keeping the Yen weak for the past decade), those that can be laid at the feet of current management (e.g., poor product selection and development) and those that date back decades (e.g., aging plants and infrastructure and legacy costs). But whatever its causes, the industry is in crisis. Absent governmental intervention, it seems certain to face an existential crisis in a matter of months, not years.
What frustrates me about the discussion of Detroit is that it tends to be framed in moral terms. Do the companies deserve a bailout? Can we lower wages and benefits without betraying our moral responsibility to families and communities? Who's at fault? Those are all interesting questions. But the only one I have the patience for, at the moment, is this: Can we find a way to set Detroit back on its feet again?
If we can return the Big Three (or however many survive) to sustained profitability, I have little doubt that the UAW will be able to use its considerable muscle to ensure that workers take home their fair share of the profits. If we can't, and the automakers fail, the contracts won't be worth the paper on which they're written. Is that fair to families or communities? Of course not. Layoffs are never fair to workers. And I don't mean to imply that workers alone need to change, or even that their reluctance to make further concessions is the primary obstacle to Detroit's recovery. I was careful to write that management would have to make "even greater" concessions than workers. Selling off their private jets and traveling commercially would be a splendid symbolic first step; slashing bloated executive pay packages would probably go even further. And I was clear that any solution will likely involve taxpayers kicking in huge sums of cash to relieve the companies of pension and health care obligations. But it will also involve a painful process of readjustment. Most UAW members still enjoy compensation packages structured to reflect an industry at its zenith; I challenge you to find an economist who believes that can be sustained.
In fact, even the UAW doesn't believe that the current compensation structure makes any sense; that's why it was willing, in union parlance, to "sell out its unborn," negotiating a second tier for new hires. I challenge you, or anyone else, to justify that decision in anything but pragmatic terms. If pay and benefits are unsustainably high, why should new workers alone labor for less? If pay and benefits can be justified, why settle for less for new workers? How does it make sense for two people, laboring side by side at the same tasks, to enjoy such radically different compensation? If you want to speak of obligations to workers, families, and communities, isn't the current contract a betrayal of all three? Let's be brutally honest. The last time it sat down at the table, the UAW decided to try to preserve what its then-current members enjoyed, even if that meant new hires would have to bear the brunt of the costs. I don't blame the UAW for that decision. But it's important that we recognize it for what it is - a group representing the pecuniary interests of those who vote its officers into power - rather than pretend it's something more - a living instantiation of social justice and the collective interests of the laboring classes.
I am a fierce believer that allowing Detroit to collapse would be an unmitigated economic disaster. But I want any intervention to be aimed at creating a sustainable, profitable, revitalized economic sector - and not at somehow returning an industry to the glory it enjoyed decades ago. I think that all American workers deserve a better deal, but I'm not willing to use public funds or leverage to help a few million of the best-compensated at the expense of the others. That's the argument I was trying to advance. That any bailout needs to be calibrated with the costs and benefits to the nation as a whole - to all of our workers - at the forefront. I think that calculus still rewards intervention. But I don't support it to reward the UAW, to further its interests, to protect organized labor, or to shelter its members. I support it because the economic well-being of all American workers, unionized or not, likely depends upon it.
November 20, 2008 9:18 AM | Reply | Permalink
"In fact, even the UAW doesn't believe that the current compensation structure makes any sense; that's why it was willing, in union parlance, to "sell out its unborn," negotiating a second tier for new hires. I challenge you, or anyone else, to justify that decision in anything but pragmatic terms. If pay and benefits are unsustainably high, why should new workers alone labor for less? If pay and benefits can be justified, why settle for less for new workers?"
Fair question and unfortunately I am in no position to answer your challenge as directly as I would like to. Let me say that in a general sense that I know of nobody in the labor movement who is a fan of any two-tiered structure, but still there is a world of difference between slashing bargained for wages and benefits that incumbent workers have already attained and relied upon, and providing a lower scale to workers who are newer and younger, AND who through bargaining now and in the future are able to expect to receive improved wages and benefits over time. That said, I submit, that it is better for any American worker to obtain his or her wage and benefit package through the democratic process of a ratified collectively bargained agreement. And I don't consider tough decisions in bargaining, without knowing the specifics of a given bargaining situation, even the implementation of a two-tiered system, to be a "sell-out" of anyone. That's your reference, not mine or anyone else who has opined in this thread, and you should assume ownership of it if you choose to use it.
November 20, 2008 9:58 AM | Reply | Permalink
FlyOnTheWall states
“If pay and benefits are unsustainably high, why should new workers alone labor for less? If pay and benefits can be justified, why settle for less for new workers? How does it make sense for two people, laboring side by side at the same tasks, to enjoy such radically different compensation? If you want to speak of obligations to workers, families, and communities, isn't the current contract a betrayal of all three?”
In this quote you are stating two things, one that is true and one that is not. First of all, you state that wages before the contract were “unsustainably high” before the institution of two-tier. This is not true. Blue collar wages make up 8% of the cost of a car, and even before the 2006-2007 concessions this was true. It is true that the two-tier wage was a true betrayal of the rank and file by UAW leadership. In many plants the vote on the contract was extremely close, with workers making the same argument that you are. The UAW is not a monolith, and although Gettlefinger did push through a bad contract, that means he wasn’t aggressive enough, not that the pay structure was too high.
When you state “I think that all American workers deserve a better deal, but I'm not willing to use public funds or leverage to help a few million of the best-compensated at the expense of the others” you buy into the logic that wages were the problem. Two-tier should end, but the new workers should be brought up to the level of the old. This is what sustains productivity, the life blood of industry. You should know that It should be understood that even before the 2007 agreements UAW workers then were some of the most productive in the world, producing value added worth $206 per worker per hour. This is far more than he or she was earning in wages, even when benefits, statutory contributions and other costs are included. The margin of difference in labor costs with non-union Toyota before the transformative agreement of 2007 was already then just $250-$300.
The point is workers not only should not give more, but they should regain what they have lost over the past 20 years. This is not just a moral argument. It makes good business sense.
November 20, 2008 11:53 AM | Reply | Permalink
Letting the Big Three go into bankruptcy is not the same as allowing them "die". Let's consider the options more realistically, shall we? We either bail them out, or we don't. I just heard UAW President Ron Gettelfinger tell the committee that the "auto manufacturers are burning through their cash reserves at an unprecedented rate". So we're supposed to pour more cash down the whirlpool? To what end?
Let's all step back and consider what would happen if the auto industry were to declare bankruptcy. They would be forced to restructure. Which is precisely what they NEED to do. The reason they're so desperate for a bailout is because that's the last thing they WANT to do. They want to do this their way, and they want to take us down with them.
I rarely find myself agreeing with Republicans, but in this case, I do.
November 19, 2008 11:23 AM | Reply | Permalink
This is a good point. At least in bankruptcy some trustees can address the whirlpool of cash problem...
November 19, 2008 2:01 PM | Reply | Permalink
I can't believe I'm saying this, but maybe we should nationalize the auto industry as an experiment to see if nationalization is really as bad as we have all grown up thinking it is. What if all our conventional wisdom is wrong and nationalization could actually work? Given that we're about to either lose the industry altogether or bail it out at massive cost, the risk of trying something even more radical doesn't seem quite so significant. The consequences of failure at nationalization aren't much worse than the consequences of failure at the other alternatives, so maybe we use this disaster as an opportunity to try something different and daring?
November 19, 2008 11:25 AM | Reply | Permalink
I don't know about that, Purple State. I'd be more inclined to go for a bailout with strings, including stronger government oversight and intervention, and cooperative participation in a national green energy initiative.
But maybe it is time for President-elect Obama to think about changing his approach to health care reform? If the costs of benefits, esp. health benefits, are a serious drag on the flexibility and competitiveness of the auto industry, then maybe it's time to for progressives to make a renewed pitch for removing the health care burden from companies, and for going to a more nationalized health care system?
McCain wanted to wreck the employer-provided health care system too. But he then wanted to throw everyone - strong and healthy, weak and sick alike - to the mercy of the private health care market, with an equal tax-administered subsidy in their pockets.
November 19, 2008 11:42 AM | Reply | Permalink
Indeed, it looks like we're starting to hear more noises from Team Obama suggesting that they are going to use the global economic crisis to "throw long and deep" and produce an economic plan that is substantially bolder in several areas than what was proposed during the election.
http://www.huffingtonpost.com/2008/11/19/rahm-emanuel-challenges-c_n_144887.html
Could Emanuel be signaling to these CEO's that a big national health plan is coming, and that it is going to benefit them greatly in the end, but that the Obama administration will need them to get off their free market-loving asses and get out there to support it?
November 19, 2008 11:54 AM | Reply | Permalink
I'm not really sure health care costs are the main problem for Detroit (I think health care costs contribute to Detroit's problems, but they're not the primary issue). That said, health care costs are something we need to address pressingly as a nation and if the problems in the auto industry get Obama and congress moving on that huge issue then there's a silver lining to the auto industry's demise.
November 19, 2008 10:02 PM | Reply | Permalink
The reason Sony was profitable is because they didn't care what their product was initially. They sold innovation and still have a great model that makes a ton of money.
If we have a drastic restructuring of national priorities toward green energy, who's to say these companies even need to make cars? We certainly don't need to nationalize any industries, which won't be palatable to a vast swath of the American electorate with the possible exception of public utilities and some sort of national health care insurance.
We should let these companies restructure under bankruptcy laws and ensure they emerge from restructuring with a sustainable and strategic role manufacturing the American renaissance. That may include cars, mass transit and alternative energy components.
The unions need to find a new line of work. Just like health insurance companies unless we turn that into a non-profit industry like the German system, which is what makes the most sense in terms of getting something radical done that most Americans can support.
We need to be about boldness within the confines of our fractured mosaic. The assembled pieces may not come together to form a perfect Nirvana for the left or right, though that picture could still be a progressive future.
November 19, 2008 12:32 PM | Reply | Permalink
I was opposed to the banker bailout, I am supportive of these loans to the Big 3 if there are strings attached.
The trouble with letting any of the companies just go into bankrupty is they won't just reorganize. They will most likely liquidate.
If you were going to buy a car, would you buy a Toyota who you suspect will be around in two years, or a Ford who might be gone in 2 months, taking your warranty with them?
And shooter, your numbers are completely bogus. If I offer you $25 an hour, that is what you would expect, that is what you would be taxed on. I could argue that if I averaged in your 1 week of sick pay (40 hours), your holiday pay (80 hours), your health insurance ($400 a month or more), the taxes I pay on you including unemployment, state, etc. I could say that by my giving you $8 an hour is actually $25 because that is MY cost.
The $24 an hour guys are not making $70. The $12 an hour guys aren't making $60, no matter what your RW study says. If you want to argue that $12-$24 an hour pay with bennies is exorbiant that is your perogative.
November 19, 2008 11:42 AM | Reply | Permalink
They should declare bankruptcy first. Then we can talk about assistance. They need to declare bankruptcy.
November 19, 2008 11:44 AM | Reply | Permalink
PS: One thing I think we should all consider when we talk about bailing out corporations is the behavior of AIG. I think they provide a glistening example of just how unprincipled and self-interested our Captains of Industry can be. They were given taxpayer assistance in order to allow them time to sell off unprofitable assets. There was NO OTHER reason to lend them the money. And yet, they have sold off nothing. Instead, they used the money as a line of credit to expand and continue their failing business. These people are not only mind-numbingly stupid, but they're criminals. When AIG finally fails (as they most certainly will) we will throw them in jail, and we will pick up the tab for our own stupidity.
November 19, 2008 11:43 AM | Reply | Permalink
I fail to see the connection between MLK's civil rights marches and the bailout. This is one of the most nonsensical articles I've ever read at TPM.
November 19, 2008 11:57 AM | Reply | Permalink
I think the oil companies should bail out the automakers. After all, it was they who made the biggest stink to inhibit the big three from moving to more eco friendly designs in the first place. We could have had electric, hydro electric, for quite a while now.
I say let the oil companies fit the big 3's bills. Or let the automakers go the way of all outmoded inventions - right up there with betamax, typewriters, rotary dial phones - and let more innovative companies replace them. (Ones that don't owe their first born to the oil companies)
November 19, 2008 12:19 PM | Reply | Permalink
Hear, hear! On another thread (Jon Taplin's) I suggested that we tax the oil companies and give that money directly to the auto manufacturers. Makes a lot of sense to me.
-- ARG
November 19, 2008 12:43 PM | Reply | Permalink
This warranty-fear thing sounds like a crock to me. Anyone who takes over those assets is going to want to take over the warranty service too, just as a way of not getting permanently hated by 30 or 40 million current owners. And a government program to continue the warranties (think FDIC) in the event of failure would cost what, a few billion over five years?
November 19, 2008 1:07 PM | Reply | Permalink
I'm wondering who you are directing this post towards. Since it's here my guess is that it's the people that read and participate in left leaning blogs. For the most part those people understand the disaster that losing one to three million jobs in THE major production industry of America means.
Sure there are the concerns about the massive mismanagement that has been the core of the American automotive industry for too long and those concerns will likely be ignored by any bailout, if it should happen. As is characteristic the calls for destroying what's left of the union contracts seem to be dominating the current public dialog, such that it is. Still, the left blog world is just about irrelevant, if the recent actions of Obama are any indication and those actions moving forward from Obama's disgusting FISA shiv to America and Americans in favor of corporate and government malfeasance.
So where's Obama in this? With the financial bomb Obama was right there in the center of the action. Obama may have been part of the changes that included meaningless "oversight" provisions, but then that's the key isn't it, in meaningless oversights? They're intended to provide bullshit cover for enabling malfeasance (see AUMF). Democrats are all upset at what Treasury has been doing, even though it was Democrats that enabled them to do what they're doing.
Again, where are Obama and the Democrats? Upchuck Schumer famously and loudly (as only Upchuck can do) "gulped" over the financial fiasco. But in the face of the potential loss of millions of manufacturing jobs to the American economy and costs on the order of hundreds of billions of dollars of losses to that economy Schumer's digestive system seems to be quite copesetic. Hey! It's not as if these common American workers are the heart and soul of the American economy like hedge fund managers.
This is why it's the Democrat Party and not the Democratic Party. They're a bunch of Reagan Republicans at heart. Reagan being a role model for Obama isn't just in a narrow sense of how to appeal to a broad scope of Americana. It seems very much to be how to screw a broad scope of America.
Hope dreams.
November 19, 2008 2:00 PM | Reply | Permalink
I aimed the post at many of even some of the commentators who (a) are buying the rightwing spin on the workers somehow deserving their fate because of high salaries and (b)that bankruptcy is some kind of solution, yet that's exactly what the rightwing wants since it's only in bankruptcy court that union contracts can be torn up.
But it's a general point that $25 billion is not a lot of money given a $2 trillion annual budget, yet there's a lot of commentary acting as if this is an obscene amount for one of the few programs discussed that will concretely help real working people if done right.(Yes, the last is a caveat, but that should be the discussion, not whether to do it at all).
November 19, 2008 2:13 PM | Reply | Permalink
Don't we spend about $25 billion every month for the Iraq bailout?
November 19, 2008 9:54 PM | Reply | Permalink
"I fail to see the connection between MLK's civil rights marches and the bailout. This is one of the most nonsensical articles I've ever read at TPM."
I think the long and short of it is that if the Democratic government is seen as colluding in killing off the UAW, then the Democratic Party as currently configured is DOA until the DWM is really and truly dead. If I were a (stupid, racist, trogoloditic) white working guy in the midwest, I would never vote for today's Democratic Party without some sort of influence counteracting the constant upchuck from the ivy media--this election cycle really opened my eyes. And, no, I don't think "the demographic shift" is coming all that quick.
OTOH, I'm not too thrilled with the current Democratic Party. Maybe it's time for something entirely different.
November 19, 2008 2:20 PM | Reply | Permalink
Saving the national auto industry would only be a question in the USA or Britain. No other major, manufacturing country would have any ideological problem with it at all. The French, the Germans, The Japanese and the Koreans wouldn't doubt for a minute... that's why they still have car industries. Britain, which shares the same worshipful attitude toward the "free" market as the US does no longer has a car industry. it is all in foreign hands by now.
I truly believe nationalization of the car companies followed by closely supervised restructuring and then a profitable re-privatization into American hands would be a better answer than bankruptcy.
The United States is drowning in its ideology, which is going to drown the people of Detroit like Katrina drowned the people of New Orleans.
November 19, 2008 2:51 PM | Reply | Permalink
How annoying... For the first time in over six months, I find myself in nearly complete agreement with you.
While I agree that management shouldn't be making ludicrous salaries while their companies go down the drain, the fact is that due to the credit crunch no one is buying cars. Of any kind. It's just that the American Big 3 have more cash flow problems than the others.
I also think most people hideously underestimate the cost of bringing a car to mass production in this country-- the byzantine set of laws and regulations means that once you've spent the money to develop a car, you now need to spend millions more to get it certified for production.
There's got to be a reason why there hasn't been a successful new car company since the Depression (the previous one, as I firmly believe GM closing down will trigger a new one). Saturn sort of counts, but GM spent billions launching that division, only to ignore what it's original concept and lessons were.
November 20, 2008 12:42 AM | Reply | Permalink
FWIW ,in Germany GN's Opel has been voted the
"Car of the Year". I don't suggest that will or should heavily influence anyone's position. Just a fact not mentioned above.
November 20, 2008 4:31 AM | Reply | Permalink
Newman is absolutely right that some of these allegedly progressive commentators “are buying the rightwing spin on the workers somehow deserving their fate,” and I thank him for fighting back. The snobbery and gloating of some of these fat mouths is astonishing. As a Chrysler retiree wondering if his VEBA will last, I am amazed at how they blithely privilege mental over physical labor. I am a professional educator as well as a 31-year Chrysler veteran, and I can tell you a bad day in the classroom is better than a good day on the assembly line, where I earned and deserved a lot more money. If you want a taste of the alienation and insanity of the line, see www.autoplant.info.
November 19, 2008 3:33 PM | Reply | Permalink
25 billion to save 3 million jobs and an entire region's economy seems like small change to me.
The gov't has over 45 billion in the failed Bear Stearns already. How many jobs has that saved?
The RW wants/craves bankruptcy to break the UAW and to dump out of pensions for union members.
All these new additions will in turn break the PBGC (Pension Benefit Guarnaty Corp.) which pays out a portion of pensions for retired members.
In the environment the economy is in, I fear a Chapter 11 would quickly turn into a Chapter 7, but the RW won't care.
November 19, 2008 4:25 PM | Reply | Permalink
The problem with saving the hostages (the workers), is that we will actually be rewarding the kidnappers (the CEOs and management layers). Did you hear the crickets chirping on the Hill today when the 'Big 3' CEOs were asked if they would be willing to work for a $1 salary a la Lee Iacocca?
Top management salaries at GM and Chrysler are multiples of what they are at the Japanese car companies (Toyota's CEO makes less that $1M per year). Time for 'management' to face the music of globalization; pay cuts are for everybody, and labor has already taken theirs.
I say, give 'em the loans under major restrictions. If Wagoner and Lutz really care about the auto industry, they can work for low salary with a bonus paid on paying the loan off. Call me cynical, but I don't think they would go for it. At least, this would rip the face off the charade that 'we' are letting the automakers go under.
November 19, 2008 11:27 PM | Reply | Permalink
Certainly auto management should be penalized for leading their companies into these dire straights.
The credit crunch is unprecedented but management bonuses were paid in the past based on results that were a windfall from good economic times so the opposite should happen now. That's capitalism and if you live by that sword you die by that sword.
There's no reason whatsoever that the workers should be penalized. Nothing they did contributed to this. The Times has likened GM's situtation to that of British Leyland but among other differences,Leyland's crisis was preceeded by a period of strikes,slow downs and "working to rule". Nothing like that has been true in Detroit.
I'll comment more on my blog.
November 20, 2008 4:43 AM | Reply | Permalink
While I can understand the virtue of sometimes leading with the political--and understand that we can't just surrender to the market--what's missing here of course is the fact that there are now huge, tectonic, structural, incredibly powerful economic shifts at work, most of which bode ill for this industry. And many of the self-identified "progressive" posts I've seen tend to say things like "we have to bail them out, but of course we'll attach strings" on things like the environment, executive pay, etc. Yet this isn't a problem that can be fixed with a wad of cash and a few bits of legally-attached guidewire from Washington, even if we trust the latter to know what it is doing in an incredibly complex (and politicized) landscape. You might as well attach string to restrain a rolling boulder.
We don't need string. Curbing executive pay and finally installing CAFE standards, as pleasing as they are, don't address the fundamental problem, which is that for whatever host of reasons (mismanagement, hubris, short-term thinking on the part of the company and the unions) our automobile industry has been steadily losing market share here in the US, and is now stuck (on top of that) with a product line that nobody really wants.
My heart may love the idea of good jobs, but these have to be working companies, and not just job banks. And any bailout needs to imagine how they will someday work economically--which, unfortunately, is rather difficult.
November 20, 2008 7:22 AM | Reply | Permalink
I agree with the sentiment of honoring and supporting those who fight for the working class. The health of our country depends on attaining the comfortable life, and a stable family life to develop a new batch of advanced workers.
Why supporting the working class has anything to do with the auto industry and the Big 3 in particular really escapes me. Is our National pride and ego making us live in some fantasy world. The Big 3 are failures - they could not adapt - they lost. The American auto industry was once the leaders of the industrial center and driven by the auto workers and something to be proud about. They have lost their status and it is time to once again create industries that others have to follow. The Congress already offered money to the Big 3 to promote new technologies, and that is the right thing to support. An additional 25 Billion can be better spent supporting the workers by investing it in new technologies and not industries where we have to compete with less educated and cheaper work forces - we will always lose. Is the American Inventive spirit gone? If we don't continue to have leading industries that are reliant on the superior ability of the American workforce, we are screwed. Industries don't care where their plants are, just where their headquarters are. Our national identity needs to get over the sacred idea of the American Car.
November 20, 2008 9:38 AM | Reply | Permalink
I have a very simple question:
How should the automakers deal with the pensions which currently drain the system? We can zero out executive compensation across the board and that is peanuts in comparison.
The pensions are created much of the burden on the current system. The pensions are a Ponzi scheme based on unlimited growth -- which is, quite obviously, a fallacy. Therefore the system is certainly going to break down at some point.
We probably just reached that point.
I am not sympathetic to arguments that say "I did my time" any more than I am to arguments that "I paid into Social Security, so I am entitled" because I know that that particular Ponzi scheme won't be around for me.
I would be particularly interested in Bruce's ideas here. I know he must have thought about this issue more deeply than the rest of us (given his vocation). I see no way around system failure whether you decide not to bail out today, or whether you decide to bail out today but not to bail out tomorrow. Given that logic, it seems the best approach is to absorb the pain as soon as possible.
November 20, 2008 1:12 PM | Reply | Permalink
PS I am not for bailing out Wall Street either. I see little difference in bailing out one industry over another, or one set of unfortunate employees over another. In the end, we are simply running up more credit card debt that will be due soon.
At some point, families realize that they have to foreclose, they simply can't keep running on credit.
We as a nation need to get to that point and then figure out how to reboot from there.
November 20, 2008 1:15 PM | Reply | Permalink
I don't know of anyone who does not worry about the employees, especially the employees of GM, but GM is gaming the system.
Today, Reuters reported that GMAC (the financing service for GM) has applied to become a BANK, so that it can apply for "bailout money". Tell me how that is not "gaming the system" and I will reconsider my view that GM should move to bankruptcy.
When the Big3 testified - they talked about all the downsizing that had done (to employees) but very little of ACTUAL plans for the future...GM may have a car in 2011...MAY HAVE!
Look at the LA Auto show website and see what cars are going to be introduced in 2009...
This (unfortunately) cannot be a sentimental decision but an economic decision.
November 20, 2008 7:14 PM | Reply | Permalink