Senate Republicans Kill Detroit Rescue

by Bill Kavanagh:  A plan to provide bridge loans to the Big Three auto manufacturers died last night in the US Senate, taking with it many remaining hopes for saving millions of American auto jobs

Republican Senators insisted on draconian wage concessions by the United Auto Workers as the price of any loan package— and wanted them enshrined in new contracts by March.  These terms would have eliminated all remaining gains left from decades of collective bargaining by the auto union.  The Republicans demanded total wage parity with nonunion workers employed at foreign auto factories located in their home states.  The anti-union stance of the Republicans and the UAW’s refusal, after making numerous concessions, to agree to their demands produced the death of a legislative deal to enact bridge loans before the Christmas holiday.

Now, the only available cash to keep Detroit running lies in the hands of the Bush Administration, which has so far been unwilling to provide it from the Treasury funds allocated earlier this fall to save the financial system.  It looks like General Motors could go bankrupt sometime before the beginning of January without a bridge loan and Chrysler is also in imminent trouble.  The parts manufacturers, which rely on all three Detroit automakers, would go down as well.  Ford, in need of parts and other supporting auto businesses, would be next, along with the closing of foreign auto plants in the South.

There’s some hope that GM and Chrysler could hang on until the new Democratic Congress and Senate convenes in early January, if the Bush Administration fails to spring loans out of an unwilling Treasury Department.  But it's difficult to predict whether the auto dominoes will fall before help arrives.  This is a crucial moment in the American economic crisis— and in the history of American labor.  If the Big Three begin to fail, it will be very likely that the pieces of the industry’s interlocking puzzle will come apart extremely rapidly.

If, on the other hand, there is sufficient government help and Detroit survives the current crisis, the coming changes in “card check” legislation will probably result in a huge labor power shift.   The likelihood of unionization of southern auto plants run by foreign companies would increase enormously under the new legislation.  The hardball being played between the Southern Republicans and northern union labor would take a rapid turn.  Wages would remain low for the foreseeable future in the collapsed economy, but once conditions improved, the percentage of the workforce represented by unions would be far greater.

Meanwhile, the American economy, or what’s left of it, hangs in the balance.

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NOTE— It’s worth remembering that none of the current talk about cutting wages for workers was brought up during the bank bailout debate.  The real issue  for rescue critics seems to be whether an industry’s workers are unionized or not.   Since the difference in auto prices attributable to labor costs— between the Japanese auto companies and the American companies— is only about $800 per car, labor costs clearly aren’t critical to American corporate competitiveness.  Yet, they were the main issue for most key Republicans in the Senate, whose power base relies on keeping the auto plants in their home states nonunion.

There’s also a factual disconnect about hourly labor rates discussed during the Senate debate.  Several Senators have used a figure of $73 per hour to describe UAW labor rates. The actual UAW rates vary, from $14 per hour for new workers at the Big Three to $33 per hour for skilled trades workers.  The Republican $73 per hour figure includes not only adding in benefits, but also adding a hefty additional total of ALL current retirees benefits from contracts of years gone by, divided by the number of current workers (a much smaller workforce).  Somehow, this figure made it seem as if current workers were rolling in clover at a huge hourly salary— which none of them are actually drawing.  

(For more detail, read Jonathan Tasini on recent UAW concessions to keep the Big Three viable. On auto labor vs. southern Republicans, I recommend Daniel Howes’ column in this morning’s Detroit News.) 

Comments

[Jaime F Penuela]

Senate and Congress should take the same pay cut to help the economy