Labor Advocate Online
What To Do With the Big Three?
Bailout? Bankruptcy? Nationalization?
by Bill Onasch
November 18, 2008
A few weeks ago, 25 billion dollars of federal assistance was approved for the Big Three automakers to retool their product lines, shifting from gas guzzlers that are not selling at any price to more fuel efficient vehicles. But General Motors, Ford, and Chrysler say they are essentially broke, and cannot meet day-to-day expenses. With the support of the UAW, the companies are asking for additional emergency help, to the tune of another 25 billion, to keep them solvent until they can make the needed transition to less thirsty, presumably more marketable vehicles.
There is precedent for bailout in the American auto industry. When Chrysler was on the brink in 1979, congress passed the Chrysler Corp. Loan Guarantee Act. It included loans of 1.5 billion dollars, and helped extract concessions from suppliers and the UAW. The government had an oversight shadow board of directors to monitor a “realistic and feasible” recovery plan. Chrysler’s new “K” cars were a success, and the company repaid its loans early, with the government actually earning over 300 million dollars from its investment.
But the present economic crisis, and the growth of the Japanese, Korean, and German owned “transplant” market share, makes it hard to inspire the same confidence in such a Big Three realistic and favorable recovery today.
Still, House Democrats are offering support–though with some as yet not fully specified conditions. There is talk of imposing further concessions on UAW workers such as eliminating the Job Bank, Supplemental Unemployment Benefits, and restrictions on plant closings. Investment bankers are urging even more, talking about reducing the company payments due to the VEBA established for retiree healthcare (some payments have already been deferred with the union’s agreement), making current workers pay more of healthcare costs, and even outright wage cuts.
But even this odious scenario is becoming increasingly less likely. Its approval by the Senate, not to mention signature by the lame duck President, appears doubtful at this point. Assuming that the companies have not exaggerated too much, and really can’t stay solvent until a presumed friendlier Senate and White House is in place in January, what are the options?
Bankruptcy, at least for GM and Chrysler, seems to be on the inside track. Recent experiences in the steel, airline, and even auto parts industries, tell us bankruptcy could transform crisis in to disaster for Big Three workers. Bankruptcy judges have the authority to abrogate union contracts–even such surrender deals as the UAW negotiated last year.
New threats could be expected. Will the bankruptcy be chapter eleven–a reorganization–or chapter seven–dissolution of the company? The Teamsters recently claimed a victory when Interstate Bakeries backed off their liquidation threat in exchange for a reorganization that imposed draconian concessions on the remaining union workers.
Companies go under all the time–especially today. Why is the future of the Big Three such a big deal? For starters, there’s just their enormous size. Counting those involved in supplying parts, transporting finished product, selling the vehicles, etc, it’s estimated that a collapse of the Big Three would trigger the destruction of three million jobs in the USA, and an untold number in Canada, Mexico, and other countries as well. Most of these jobs are relatively well paid. Also, lost tax revenue would quickly mount in to the hundreds of billions. That’s why it’s a very big deal indeed.
A Third Way?
Clearly the only two broad options currently offered by the bosses and politicians--bailout with conditions or bankruptcy--are like the option of a migraine or impacted tooth. Should we propose a new, third option–such as nationalization?
Nationalization can mean different things in different circumstances. We have seen so-called “partial nationalizations” over the past three months of Freddy, Fannie, and AIG. Such nationalizations are a sham, a way of, as Paul Krugman put it, socializing loss while privatizing profit. Amtrak is another phony nationalization that accompanied the abandonment of most passenger rail traffic in the USA.
Perhaps an even more relevant example of nationalization to avoid is what happened in the British auto industry. Like Obama’s declarations about the Big Three, Baron Wilson of Rievaulx, just known as Harold when a Labor prime minister during the Sixties and Seventies, thought the collapse of the British-owned auto industry would be a disaster. Through a series of bailouts and nationalizations 14 car, truck, bus and construction equipment companies were ultimately brought together in to British Leyland.
The last time I visited Britain I had a chance to chat some with Alan Thornett, who worked at Cowley, the historic center of British auto production, for 24 years, 20 of them as a well known leader of the Shop Stewards Movement. He related how conditions under nationalization became steadily worse until the Thatcher regime pulled the plug. Despite speed up and other attacks on the workers BL still couldn’t successfully compete in the market. Much of British Leyland simply closed down while profitable sectors were sold off to “foreign” buyers. Today there is no British-owned car industry.
So we know what to avoid. Before exploring other variants of nationalization to save those three million jobs we should think through what we want those workers to be doing. Like Britain already faced thirty some years ago, the underlying crisis in American auto today is of overproduction, over capacity. Nationalizing the Big Three to keep them in competition with the “foreign” owned transplants would almost certainly lead to no better results than British Leyland.
And would we want to subsidize a public policy of promoting car growth in the midst of the global warming crisis? Do we really want more cars in a country where registered vehicles already outnumber licensed drivers?
I believe we should save the jobs, and industrial capacity of the Big Three, by making them the pioneer component of a new public sector dedicated to a green restructuring of our economy. Far from demanding give-backs we should keep union contracts intact, and guarantee continuing wages and benefits during conversion and necessary retraining.
Instead of the law of the “market,” which has led us in to both the present economic and global warming crises, this kind of nationalization would utilize scientists, environmentalists, and elected worker representatives, to participate in the planning and managing.
Converting the auto industry to other production is not unprecedented. In preparing for a presentation at a conference scheduled in Kansas City April 3-4 (details to be announced soon) I reviewed the World War II experience. In 1942, car production came to an abrupt halt, not to be resumed for four years. No auto worker was outcast and starving as a result. The union contracts were kept in place and the workforce grew. The twin crises the working class faces today requires, in my opinion, similar bold action though with a different objective–to save the planet, not destroy it.
The idea for such nationalization is not new either. It was once widely promoted and accepted in this country by working class leaders such as the great Eugene Debs. With everything in the system around us seemingly going to hell, it’s time for American workers to reclaim that long suppressed heritage.
The webmaster of the kclabor.org website is a paid-up member of UAW Local 1981—the National Writers Union. During the 70-80s, while employed at Litton Microwave’s Minneapolis operations, he was elected to various positions in UE Local 1139, including Shop Chairman and Local President. In 1980 he took a union leave from the plant to work on a successful UE organizing drive at a Litton runaway plant in Sioux Falls, South Dakota. When Litton began shutting down its four Minneapolis plants Onasch was selected to be a worker representative in a Dislocated Worker Project administered by Minneapolis Community College—where he became a member of the Minnesota Education Association. Returning to his home town of Kansas City in 1989, he soon began a 14-year stint as a Metro bus driver. During that time he published a rank and file newsletter, Transit Truth, chaired a union Community Outreach Committee that organized public protests against cuts in transit service, helped organize a privatized spin-off at Johnson County Transit, and served a term as Vice-President of ATU Local 1287. He has also been involved in US Labor Against the War and the Labor Party since those organizations were launched and represents Midwest chapters on the Labor Party Interim National Council.
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