20 December, 2008

Why Bush's Bailout of the Auto Industry Fucks Up Some Cunning Con Plans

Bush flashes Cons the middle finger, bails out the auto industry:

Senate Republicans can block congressional action, but they can't, oddly enough, prevent their friend at the other end of Pennsylvania Avenue from bailing out U.S. auto manufacturers.

President Bush on Friday announced $13.4 billion in emergency loans to prevent the collapse of General Motors and Chrysler, and another $4 billion available for the hobbled automakers in February with the entire bailout conditioned on the companies undertaking sweeping reorganization plans to show that they can return to profitability.

Mr. Bush made his announcement a week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.


The rescue package comes in the form of government loans, but the money comes with all kinds of strings attached, including a March 31 deadline for company restructuring. Among the conditions are requirements that the companies cut their debt obligations by two-thirds and, in a move that will make the GOP happy, renegotiate the contract with the United Auto Workers to make compensation packages more competitive with foreign manufacturers with plants in the U.S.

So, are Corker, Shelby, and DeMint getting what they wanted, by forcing American workers to get paid less? That depends on how this shakes out -- the NYT explained that Bush's plan makes the requirements "non-binding, allowing the automakers to reach different arrangements with the union, provided that they explain how those alternative plans will keep them on a path toward financial viability."

Considering how well Bush does with even binding agreements, I think the automakers can consider this pretty much free money. Corker et all tried to hold out for the entire pot and ended up walking out clutching nothing but their underpants.

Now, you may wonder why Corker and his ilk are so dead-set on union busting. It's not just the normal anti-union pathology so many Cons and their conned followers display. No, there's a larger strategy here, and it has a lot to do with the way unions force other companies to pay decent wages:

The foreign nonunion auto companies located in the South have a plan to reduce wages and benefits at their factories in the United States. And to do it, they need to destroy the United Auto Workers.


UAW President Ron Gettelfinger realized that the existence of the union was under attack, which is why he refused to give in to the Senate Republicans' demands that the UAW make further concessions. I say "further" because the union has already conceded a lot. Its 2007 contract introduced a two-tier contract to pay new hires $15 an hour (instead of $28) with no defined pension plan and dramatic cuts to their health insurance. In addition, the UAW agreed that healthcare benefits for existing retirees would be transferred from the auto companies to an independent trust. With the transferring of the healthcare costs, the labor cost gap between the Big Three and the foreign transplants will be almost eliminated by the end of the current contracts.

These concessions go some distance toward leveling the playing field (retiree costs are still a factor for the Big Three). But what the foreign car companies want is to level -- which is to say, wipe out -- the union. They currently discourage their workforce from organizing by paying wages comparable to the Big Three's UAW contracts. In fact, Toyota's per-hour wages are actually above UAW wages.

However, an internal Toyota report, leaked to the Detroit Free Press last year, reveals that the company wants to slash $300 million out of its rising labor costs by 2011. The report indicated that Toyota no longer wants to "tie [itself] so closely to the U.S. auto industry." Instead, the company intends to benchmark the prevailing manufacturing wage in the state in which a plant is located. The Free Press reported that in Kentucky, where the company is headquartered, this wage is $12.64 an hour, according to federal labor statistics, less than half Toyota's $30-an-hour wage.

If the companies, with the support of their senators, can wipe out or greatly weaken the UAW, they will be free to implement their plan.

Did that make your eyes pop? It certainly did mine. We've been hearing so much about this supposed wage disparity between the foreign car companies and our own Big Three that I hadn't thought to look at the wages. It's interesting, to say the least, that the disparity actually turns out to be on the foreign side.

(And if you really want your eyes to explode, go have a gander at the rest of that article and see where wages for the auto industry are in relation to the financial industry.)

All of it boils down to the typical contempt Cons seem to have when it comes to blue collar workers. They want to break the unions so that the fat cats on top can pay (even more) miserable wages to their workers, and so that other companies can join in the gang rape. They tried to win it all, and lost big - Obama's going to be the one handling any restructuring after the loan money runs out, which, after his appointment of Solis as Secretary of Labor, has got to have the anti-union brigade wetting themselves in terror. You can tell they're terrified just based on the anti-union screeching going on in the WSJ's pages.

I love it when Con plans gang aft agley.

1 comment:

Cujo359 said...

Part of the reason people don't grasp this situation is the (sometimes deliberate) confusion between pay and labor costs. We've seen examples of reports where the reader is left with the implication that auto workers at some U.S. plants are making $73/hr. This isn't true. It's the total cost of labor, and a very extreme case of such cost, in fact.

The total cost of labor includes anything associated with labor - insurance, pension plans, health care and other facilities (like offices and rest rooms), and extra labor involved in managing the labor force. Often, that latter cost is a very significant differentiator. It is in my business.

Foreign manufacturers' pay scales have been similar to their U.S. counterparts since they've been here. It now appears that they no longer want to pay this much, since they're now competing with China and India.