Editor's Note: The following was written prior to this morning's announcement that the White House would authorize new money for loans to the automakers, but its long-term analysis remains appropriate. John Rummel is the organizer of the Communist Party in Michigan. Listen to our recent interview with Rummel here.
There have been various calls to let the domestic automakers fold. That bad decisions have led them to this juncture and if bankruptcy comes, so be it – why shouldn’t they be allowed to fail goes the argument.
However, it is estimated that over three million jobs rely on the workers at GM, Ford and Chrysler: These job are in the parts suppliers, at dealerships, in steel, rubber, and many more industries. The devastating effect on communities where these workers live – who rely on the purchasing power the workers bring – and the loss of taxes for local and state governments would bring about a huge crisis, affecting many millions. If a bankruptcy is allowed to happen, it would make the nation’s economic crisis even longer and deeper. No other country is allowing their auto industry to fail.
Bankruptcy will hit hardest at African American and Latino workers. Black workers are more concentrated in auto than other industries. (Making up 14 percent of the workforce as compared to 11 percent of the overall workforce). Auto has been a pathway to a better life for all working people. It has enabled those without four year college degrees to earn a living wage.
Bankruptcy for GM would be disastrous for the UAW as its contracts would be history and the company itself would have difficulty coming back. Suppliers would go out of business and no one would want to buy a car from a company that has gone bankrupt.
The parts suppliers provide parts to all of the auto companies and even Toyota has weighed in saying a bankruptcy would also negatively affect them.
It would also be a disaster for the Federal government as the Big 3 support hundreds of thousands of retirees. There would be huge costs in providing for their pensions.
The economy continues to flounder. Last month more than 500,000 jobs were lost. Michigan already has double digit unemployment, Detroit much higher. All states in the Midwest would be hard hit, but these jobs are throughout the country. Already, GM has announced a 50 percent production cut for the first quarter of next year – and will idle all 21 of their assembly plants, possibly until February.
It is a legitimate question to ask why money was so quickly given to the banks and insurance companies and not to the auto industry. There were no calls for banking or insurance executives to take cuts or any of their other workers. And even though labor costs make up only 10 percent of the cost of making an auto (and used to be much more) unionized auto workers are expected to shoulder the entire burden.
Senate Republicans have refused to support loans to the domestic auto producers and have conditioned their support on the UAW tearing up their contract and accepting the non-union wage rates paid at the foreign transplants.
That $70.00 hourly rate that the NY Times first published is dead wrong. Auto workers make $28 and their last contract opened the door for a two tier wage with new workers making $14 an hour. Wages can be even lower in parts. The $70.00 rate comes from adding the benefits received by hundreds of thousands of retirees to the wages of active workers – creating a false and totally misleading figure.
It is a dangerous development for representatives of government to demand that a labor contract be torn-up and that a union be forced to accept the same terms as non-union workers.
We are witnessing an all out attack on the UAW, and labor as a whole, led by the Republican Party.
As Dave Moore would say fat cats like Mitt Romney have no shame, a man whose wealth is estimated around 250 million, is talking about over-paid auto workers.
* Sen. Shelby, Corker and other Republicans want to punish UAW for their role in the 2008 election.
* Want to stop the momentum that is building for Change that came with the election of Barack Obama. In particular, they fear passage of the EFCA. An analysis of November’s vote pointed out if labor continues to work as they did in the 2008 election and if labor density went up by just a couple of points – Republicans would never win another election.
* They also think they are giving their non-union companies a competitive edge and this is likely motivating Alabama Senator Shelby whose state is now the 6th largest home to autoworkers in the country, almost all non-union. But their number one motivation is that they are anti-union.
* There also seems to be an element of racism by the Southern Senators opposed to aid and they are getting back at the union for its efforts to elect an African American, - this was said by a UAW official John W and I spoke with this past week.
* Barney Frank said it best “this is union busting.” He’s right and it’s an attempt to take labor and the class back 70 years.
We have to be clear: To solve the economic crisis we need to put more money, not less, into the hands of working people. Forcing the UAW to take cuts will increase the wage gap; it is a continuation of Republican trickle down economics that voters rejected in the November election; an economic policy that has helped to create the present economic crisis. It would lower the purchasing power of auto workers and would create a downward wage pressure on all workers.
It is good to point out that when workers wages were comparatively higher, when unionization was higher, autos and everything else sold well – labor costs are not the problem. They are currently at their lowest level ever – just ten percent.
Gettelfinger made a spirited defense of the union and autoworkers in his Friday press conference. He said while the union was willing to look at concessions it was not going to take the fall for the present state of affairs nor was it going to accept being singled out.
We do agree conditions should be placed on aid – just as they should have been placed on aid to banks and insurance companies.
UAW has called for conditions on aid to the Big 3
And it’s clear, conditions are necessary. Just days before GM first went to Washington; they said they wanted to use on billion in aid to retool a plant – in Brazil.
* The UAW has called for “tough limits” on executive compensation and for giving government an equity stake in the companies to protect the interests of taxpayers.
* Establishing a “Government Advisory Board” that will oversee the operations of the companies to insure taxpayer funds are expended in the United States.
* Calling for a long term plan bringing together that must “bring all stakeholders together to restructure operations and ensure long-term viability.” This plan should include commitments by the auto makers to retool facilities in the U.S. and to produce more fuel efficient vehicles.
These demands are good and worthy of broad support.
There are reports that the UAW may demand a seat on GM’s board in exchange for concessions. Have been down that road before but these are different times and such a position, in today’s new climate, could have a more struggle oriented aspect. In other words, this demand from the UAW could lead to more struggle, not less.
These conditions are good and we should support them but we can also make a case for public ownership. And in making this case for public ownership we are not opposing the shorter term solutions or reforms.
The worth of the companies has been estimated at less than the loans they are receiving. If the public provides the capital, why do decisions remain in private hands? Cerberus is one of the largest private equity and investment firms – surely has cash it could use.
It’s appropriate to ask if they are too big to fail, why aren’t they publicly owned?
In the 70’s we put out the call for public ownership of the auto industry. It was not premature but it may have been harder for people to visualize or see the need for than it is now. If it had been followed, we’d be in a different situation today.
A rule of capitalism is that companies grow or die. Profits are placed before the interests of people and before the interests of society and the environment.
* Emphasis on marketing SUV’s – creating demand for a product that made big profits, but overall was not in the best interests of the nation and eventually the workers – this is true whether those SUV’s are made by GM or Toyota
* Fought fuel standards and fought against the catalytic converter. – Regulation has worked for GM and Ford - in Europe. Canada and the US have the lowest fuel efficiency standards in the industrialized world.
* Exported capital and jobs. Even if/when bridge loans are given to the Big Three, the companies have announced there will be further plant closings and say they will permanently shed tens of thousands of their workforce.
* GM and Ford, and suppliers like American Axle use the lower wages in other countries to say they are not competitive. And while the auto companies complain about competition from lower wage countries, they in turn threaten their workers in Mexcio, Thailand, South America and elsewhere to accept low wages as a condition of work. In contract negotiations with 4500 employees at a Fords plant in Mexico this summer where the Fiesta is made. They gave an ultimatum to the union: except a two tier starting wage cut of fifty percent – bringing it down to $2.25 – or they would move production out of the country. Ford plans to import the Fiesta into the U.S. starting in 2010.
* Not only have the auto companies not worked to build mass transit, their history has been the opposite – they bought up bus and trolley lines for the purpose of ending them.
It should be said that there have been changes in product line-up toward more fuel efficient and hybrid cars. Companies have felt pressure to be more responsive to market and environmental concerns. GM has plans for an electric car, the Volt, and while plans are for it to debut in 2010, it will not be profitable for another eight or nine years – and the grid to recharge it will require a large public investment. But they may be late in developing this technology. A company in China is building an electric vehicle – a company Warren Buffet has heavily invested in – it is said to be two years ahead of both US and Japan in research and the battery is far superior. They plan to export to the US.
(In the era of globalization, many players can enter the game. If there is a need, someone will try to meet it. A company is faced with doing it yourself or if you don’t, it will be done to you. The company in China started out building batteries for cell phones and realized how the technology could be used in car manufacturing).
Ford is farther along developing fuel efficient cars but two of its best: the Ford Fusion is made in Mexico and the Ford Focus has approximately 50 percent of its parts coming from Mexico – we need fuel efficient cars produced here.
Ford and GM in particular – while closing plants at home have embarked on a global splurge to build plants abroad. GM has manufacturing operations in 32 countries around the world and is currently building a $300 million factory in Russia.
There are many joint ventures between all the domestic and foreign companies – and when combined with Free Trade Agreements make it possible to share production and downsize – enabling the companies to open more and more non-union plants, while closing those that are unionized.
Short note on Finance Capital vs. capital for productive uses. Sam Webb has written about the move of capital from the productive sphere to the financial that began in the 70’s and you can see the results in auto.
But it’s not as simple as GM and Ford are over here and finance capital is over there. GM has played both sides of the fence. GMAC, their financial side whose history was making it possible for dealers to purchase autos for their lots, moved away from a focus on auto financing for dealers and into the housing market. By 2005, before they sold controlling interest in the company to Cerberus, mortgage lending and insurance accounted for 57 percent of its income. Before the housing bubble burst, GMAC made a big push into sub prime lending and so-called Alt-A loans, those made to borrowers who did not provide full documentation of their income.
GMAC reported a $2.5 billion loss in the third quarter, bringing its losses in the past five quarters to $7.9 billion.
We have an economic crisis, but we also have a crisis of the environment and the two are interlinked, making public ownership even more important. We face global catastrophe and the profits before people and nature philosophy of such an important industry cannot be allowed.
The changes needed in infrastructure for cars of the future will need public money:
* Electric vehicles will require changes to power grid. Research into other forms power for cars such as solar will require public money, why leave in private hands?
* A “shakeout” in the industry is probably inevitable. There is duplication of models, too many dealerships, over capacity between all the auto companies combined. But we need industrial jobs and there are tens of thousands of skilled, unemployed workers who desperately need them.
Cities all over the country are looking at mass transit: from rail to subways, to buses. We should demand that unemployed auto workers in Detroit and Michigan are put to work building them.
We also need these workers to build infrastructure projects, affordable housing, a new power grid, hospitals, schools, rec centers and more.
Need the EFCA – to both raise union density but very importantly as a way to solve the economic crisis
Need National Health Care – it is a human right and it should be removed as a bargaining chip
Need some form of an international minimum wage to stop the whipsawing of workers between different countries.
We need to redirect money from military spending for research, development and the rebuilding of our infrastructure.
We need to get behind the Obama public works jobs program that can begin some of the projects needed and can begin to ease the crisis by putting money in people’s hands.
Finally, bankruptcy and the crisis it would cause, is not an option. We need to raise the issue of public ownership but this is not an either-or. The Republicans are out to handcuff, if not destroy, the union. This is not how we want to begin 2009. The case for bridge loans and the conditions on those loans raised by the UAW are good and deserve our support.