01.07.09
Auto crisis
RG mail
[1]The B u l l e t Socialist Project E-Bulletin No. 172 December
31, 2008
Saving the Detroit Three, Finishing Off the UAW: Learning From the
Auto Crisis
Sam Gindin
At the end of 1979, President Carter offered loan guarantees to
Chrysler to prevent the company’s imminent bankruptcy. The loans were
conditional on wage concessions of some 10% and the outsourcing of
half of Chrysler’s work. In August 1981 a newly elected President,
Ronald Reagan, ended a strike of 13,000 air traffic controllers by
firing the strikers en masse (the controllers’ union had ironically
been a supporter of Reagan in his 1980 presidential campaign). In
these cases, the American state was not just following the private
sector’s bidding, though corporations of course cheered it on; rather,
the state was leading the assault on workers’ conditions and rights.
The result was a redefinition of American labour relations for a
generation to come, with implications for workers everywhere. The
American labour movement proved incapable of mounting any resistance
through that period and assumed it couldn’t get much worse.
It just did. It was expected that the economic crisis, like past
crises, would intensify pressures for concessions from auto workers.
And it was understood that in responding to the loan requests from
General Motors (GM) and Chrysler, the American state would likely
reinforce that pressure. But the U.S. Treasury and the Bush
Administration went stunningly further. By formally linking UAW
conditions to those in the Japanese transplants, the union whose
independence had already been compromised through years of concessions
was pushed to effectively act as an agency of the state.
The loan conditions asserted that By no later than February 17, 2009,
the Company shall submit to the President’s Designee … [a] term
sheet signed on behalf of the Company and the leadership of each major
U.S. labor organization [essentially the UAW] that represents the
employees. Over and above the elimination of any layoff benefits above
customary severance pay something the union had already conceded the
terms called for a reduction in workers’ wages, benefits and working
conditions to match no later than December 31, 2009 levels that are
competitive with the average as certified by the Secretary of Labor at
the U.S. operations of Nissan, Toyota, and Honda. As well, the union
had to accept that at least half of each company’s obligations to the
union administered health care plan would now include company stock
(the full terms are available at
[2]www.ustreas.gov/press/releases/hp1333.htm).
While American unions were waiting for the inauguration of a new
president to bring them legislation that would make it easier to
establish unions, the current administration (with no dissent to date
from President-elect Obama) essentially declared, in a
standard-setting industry, that: You can have unions but you can only
have non-union outcomes.
There are a number of lessons to learn from this unfolding event and
we raise a few of them here.
1. Finance and Auto
The auto sector begged for $34-billion in loans and loan guarantees
and was conditionally given half that amount. Finance, on the other
hand, didn’t have to ask or commit and got $700-billion more than 20
times what auto asked for. Moreover, the total amount that the U.S.
government, and therefore American citizens, are now liable for as a
result of the attempt to bailout Wall Street is now estimated to have
reached a mind-boggling $8.4-trillion almost 250 times the monies
requested by the Detroit Three.
The difference in the treatment of the auto executives relative to
finance was not simply a matter of inconsistency. The first and
perhaps most obvious lesson of the auto crisis was to confirm that the
iconic status of the American auto companies is over. Finance received
the treatment it did because it was understood to have become a vital
public utility (though hardly a democratic one). Since the entire U.S.
economy now depended on the health of finance, and since Wall Street
was also so central to the functioning of the American empire, finance
had to be saved at any cost.
In contrast, while the Detroit Three were acknowledged as still being
important to the economy, they were no longer perceived as
indispensable. The U.S.-based industry’s notorious lag in responding
to the environment resisting stronger legislated standards on fuel
efficiency and pollution control, and focusing on larger, more
profitable vehicles ultimately cost the Detroit Three not only market
share, but credibility as a creative, dynamic sector. Moreover, with
Japanese transplants having spread outside the U.S. Mid-west, auto
production could no longer be identified solely with the U.S.-based
auto companies.
That the auto sector did get an instalment on the loans it asked for
reflected its lingering importance, but had as much or more to do with
the particular moment. The collapse of GM and Chrysler was deemed
unacceptable not just or primarily because of the impact on working
class communities, but because it would further aggravate business
confidence and the deepening crisis confronting finance and the
economy as a whole.
2. Foundations of the Auto Crisis
In contemplating what lies ahead, it is worthwhile to spend some time
looking back. After World War II the UAW, arguing from a different
logic and social vision than the corporations, called for a small,
fuel efficient and safe car. The companies totally rejected any union
input into the kind of car being built what did workers know? The UAW
also called for a public health care system. The union’s failure to
win these goals has come to cost auto workers and a good many
Americans dearly.
Detroit’s reluctance to make small cars more than a niche product was
not simply a matter of short-sightedness but of doing what businesses
are supposed to do under capitalism: maximize profits for their
shareholders. For companies like GM, developing a wider market for
small cars meant competing with itself selling significantly more of
the smaller cars translated into fewer sales of mid-size and larger
cars with their higher profit margins. That the Japanese companies
emphasized small vehicles was less a matter of their having more
foresight, than a practical response to the fact that they could not
then compete with the U.S. in other sections of the market. (In
hindsight, the U.S. companies underestimated the potential of the
Japanese companies to move upstream into the larger models.) The
American state’s commitment to cheap gas prices in Europe and Japan
have generally been at about three times that of the U.S. limited
interest in smaller vehicles and the U.S. companies were happy to
follow those market signals.
By the early 1980s, the import of Japanese cars was significant enough
to lead the American state to impose temporary import limits and give
the Detroit Three some breathing room to adjust. But the quantitative
limits pushed the Japanese to accelerate their penetration of the
larger car market and also to move directly into the United States. In
the consequent competition with the U.S. companies, with all sides now
on U.S. soil, health care costs emerged as one of the most significant
factors. The U.S. has been unique in having no public health care
system (in a sense, while European capitalism was legitimated via the
welfare state and public benefits, American capitalism offered private
mobility and private space cheap gas and high levels of
homeownership). The UAW’s attempt to offset this by negotiating health
care plans at the company level was reluctantly accepted by the
companies and they subsequently came to appreciate the degree of
control it offered (risking the loss of health care could limit worker
militancy). Bargained health care worked relatively well when
competition was less intense and production was growing. But with
downsizing, the contradiction of an insurance program fragmented
across companies was exposed.
GM, for example, now has 480,000 retirees and surviving spouses while
Toyota’s relatively newer U.S. operations include less than 300! It is
by dividing such costs among the active hourly workers (under 75,000
at GM) that the companies and uncritical journalists arrive at the
astronomical hourly labour costs so often cited. Such additional costs
relative to the transplants have accounted for the major part of the
Detroit-Japanese labour cost differential. If the U.S. had a
Canada-type health care system, the savings over a few years would
have exceeded the loans the companies have just received from the
government and they wouldn’t have to be paid back.
As the Detroit Three lost market share, they responded by improving
productivity, outsourcing and demanding worker concessions in the
workplace and in compensation. But to the extent that the companies
were successful, this came with fewer workers. Over the past two
decades, for example, competition in the auto industry led to a
doubling of productivity alongside a 25% decrease in the number of
jobs even with the addition of the transplants. Even as the UAW
accepted concessions (which were always sold in terms of job security)
the bleeding of jobs continued unabated. At the end of the 1970s, when
the concession era began, there were some 750,000 hourly employees at
the Detroit Three. Today, more than two thirds of those jobs are gone.
This sobering history provides a second lesson of the crisis the
solutions for the industry are just as likely to worsen the
circumstances of workers. Even if the U.S.-based auto companies move
more aggressively on fuel efficient vehicles as it now seems they must
competition will be as intense as ever and the Detroit Three may face
continued decreases in market share (and not all are likely to
survive); pressures to increase productivity will, as before, mean
fewer workers; and the auto companies may, in their own narrower
interest, simply import smaller vehicles rather than produce them in
North America. Corporate health costs are already being solved by
shifting more and more of the risks to the workers. And nothing in the
government or corporate plans speaks to the hundreds of thousands of
auto workers already laid off, the equipment and workplaces going to
waste, or the tens of thousands of auto workers to be laid off and
further workplaces idled as the Detroit Three get in shape to meet
their Japanese competition.
3. Hypocrisy and Class
During the U.S. primaries and presidential election, politicians
competed to self-identify as the champions of blue-collar workers and
their manufacturing jobs. Once the election was over, however, and
attention turned to the auto crisis, these middle-class heroes were
once again reduced to being over-paid workers. It’s worth elaborating
a bit on the response to auto workers especially compared to those who
contributed to, and were enriched by, the events leading to the Wall
Street and auto crises.
In the Wall Street bailout, only the compensation of the top five
officers of companies was addressed: limits on white-collar workers
and managers, many of whose compensation exceeded or approached
$1-million annually, were not even discussed. Secretary of the
Treasury Henry Paulson originally tried to avoid any compensation
limits; his discomfort was hardly surprising given that his yearly
compensation of $38-million before he came to Washington placed him at
the head of the Wall Street trough. The limits ultimately forced on
him by popular outrage were always of questionable significance, but
even so the Bush administration introduced a last-minute loophole that
lawmakers and legal experts say… has effectively repealed the only
enforcement mechanism in the law dealing with lavish pay for top
executives (Washington Post, December15, 2008).
At GM and Chrysler as on Wall Street, there were no compensation
limits on managers other than the very top echelon. The compensation
of the chief executive officers of GM and Chrysler would not be
directly limited as blue collar workers were, but any compensation
beyond $500,000 would no longer be tax exempt. But this alleged
restriction is hardly impressive. Currently compensation over
$1-million is not tax exempt and this didn’t prevent GM from paying
its CEO an average of over $11-million per year in the previous three
years and absorbing the tax losses.
Moreover, while studiously comparing the compensation of production
workers to their Japanese counterparts, no one asked or even thought
of asking how U.S. auto CEO compensation compared to that of the
Japanese U.S. executive compensation is about three times as high. Nor
did anyone raise historical comparisons between executives and auto
workers: if U.S. auto workers had the same percentage increase as GM’s
CEO over the past quarter century, their wages would be closer to
$280/hr than to $28/hr, a result that might have made auto workers
more amenable to a reduction.
And no one bothered to compare auto workers’ compensation over the
past quarter century with inflation and productivity. Factoring in
inflation, current auto wages are only about 8% higher than they were
in 1979 (an increase of about a quarter of 1% per year) while output
per hour has more than doubled. Over this period, workers also lost
some of their paid time-off. As for the fabled increase in negotiated
heath care costs (which, according to the industry, account for the
bulk of their cost disadvantage with the Japanese plants), this wasn’t
primarily the result of bargaining higher benefits but of the rising
payments, for the same benefits, to the private insurance industry.
(Interestingly, in the past, comparisons of auto worker compensation
were made with costs in Japan, but now that the high value of the Yen
has placed Japanese compensation at par with the U.S., no one seems
interested in this comparison anymore.)
But more than political opportunism was involved in making workers
into heroes one day and scapegoats the next. The hypocrisy took the
particular form of a class bias against working people. This is a
third lesson of the auto crisis: auto workers aren’t part of a ‘middle
class,’ a bland, safe and limited category that excludes a good
section of working people; rather, auto workers are part of the
working class a designation that exposes the reality of power
relations and workers’ second-class status within capitalism (it’s
called capitalism because it is capital that rules), suggests
qualitatively different interests, and points us toward clarifying who
is lined up against us and who is potentially there with us.
4. Their Weakness Versus Our Weakness
If we were surprised at the extent of the state’s response, it was in
part because the economic crisis seemed to have created a new
political opening. Over the past quarter century, while working
families and the poor endured the pressures and pain of neoliberal
sacrifices, permanent insecurity and growing inequalities, the
captains of American business had justified their feudal-era salaries
with government bureaucrats, politicians and much of the media joining
the chorus as being justified by the wealth and prosperity they were
delivering. In a remarkably compressed matter of months, these former
champions were however exposed as frauds legally in some cases, in
substance more generally. Corporate elites, the American state and to
some extent the capitalist system itself were suddenly on the
defensive and profoundly delegitimated; people no longer accepted so
readily the wisdom of markets or the authority of those in control.
Now, surely, dramatic and progressive social changes were on the
agenda weren’t they?
A fourth lesson of this crisis is that the delegitimation of those who
have structured our lives in a very particular way since the early
1980s has only created an opening a potential not the inevitability of
social change. As crucial as some degree of spontaneous resistance is
to any progressive change, even spontaneity needs a degree of
organization to be effective, especially if it is to be sustained. In
this regard, there is the greatest difference between us and them.
Finance may be in disarray, but economic elites in the U.S. and
elsewhere still have the resources, power and especially the
organizational support of the state to renew themselves. And as much
as business has been discredited, basic assumptions of the bounds of
possibilities persist (such as not going beyond the limits of private
ownership, markets and competitiveness) and this is reinforced by our
daily dependence on finance in all aspects of our daily lives jobs,
pensions, homes, cashing checks, spending, and saving.
As an oppositional force without the material, ideological or
organizational resources of the capitalist class, or the support of a
state committed to democratizing economic power, the issue for us is
to go beyond lamenting recent developments and use this moment to
build a capacity to affect the direction of society. That is, how,
starting with resistance, to develop an alternative vision,
alternative policies and an organizational capacity that can match
what we are up against.
5. Fixing and Also Restructuring Capitalism
There is more at stake in this crisis than how long it will take to
get the system running again and how much suffering will occur along
the way; the fixing of capitalism will come alongside its
restructuring in ways that affect future possibilities. A fifth lesson
of the crisis is therefore that such moments create openings and
opportunities for both sides, and. if we aren’t engaged in shaping
that restructuring in our favour, we’ll be paying for this lost
opportunity for a long time to come. The outgoing Bush
administration’s exploitation of the auto crisis to virtually destroy
the UAW as an independent social force is just one example of negative
restructuring.
There are a host of issues to think about in this regard. Since there
will soon be more auto workers laid off than working, why can’t
restructuring proposals include the conversion of the idled but
potentially productive tool and die shops, component plants, and
assembly facilities as was done in World War II when all auto
production was stopped but the number of jobs in these facilities
increased? This time, however, we can turn to making the socially
useful products we need (particularly all the modified and new
products that will be part of this century’s environmental
reconfiguration of how we work, consume, travel and live)? Why can’t
the crisis be converted into an opportunity to not only fix roads and
bridges but also revive manufacturing, provide manufacturing jobs and
sustain communities?
The emphasis on public infrastructure is positive not just because it
is today the only effective way to stimulate the economy, but because
it opens the door to doing things that should have been done long ago.
And this places crucial choices on the agenda. Will the American state
invest in more military expenditures or finally move to affordable
public housing for the poor and replace the disastrous promise that
the poor can get (and keep) homes through the marketplace? Will the
concentration be on roads or also on developing urban and inter-urban
mass transit? What input will communities have on what projects are
chosen? And how will the workers involved have a say in guaranteeing
decent working conditions and pay?
The privatization of the welfare state has failed even the minority of
workers who had health care and pension plans. As these benefits are
further eroded the base is being expanded for moving to public plans
that can spread risks across the nation and provide benefits to all
working families. The Great Depression witnessed the first
breakthroughs in achieving a social safety net; why can’t the labour
movement lead during this crisis (especially since there is so much
more wealth today) in securing and expanding health care, access to
needed drugs, dental care, unemployment insurance, adequate welfare
payments, and pensions and in the process revive its leading social
role? Rebuilding the physical infrastructure is vital; so is investing
in social infrastructure.
And if the financial system is really a public utility, why don’t we
democratize it? That is, can we use the crisis to move toward a form
of democratic regulation, including the nationalization of the
financial system, so that finance becomes an instrument for developing
control over the economy rather than a vehicle that undermines
democratic options by holding us hostage to the discipline of markets?
6. Defending or Changing the Union?
A final lesson relates to the UAW itself. The union has faced the
greatest and most complex of pressures, yet that doesn’t explain how
inept it has been in initiating any defence of its members. It has
been unable, and has seemed even unwilling, to attempt any
mobilization of its members. It has become isolated from the community
to the point of losing touch with even its own laid off members. It
has failed to bring forth the urgency, commitment, energy, and
creativity to unionize the Japanese transplants (to the point that
they, rather than the UAW, now set bargaining and workplace standards
an opening that the Bush Administration used to formalize that
transplant leadership). It has spoken to the need for single-payer
health care but refused to take the risks that might place socialized
health care on the agenda and subsequently retain bargaining space for
other issues; and as difficult as it is for unions to deal with saving
or creating jobs, its relative silence on putting forth any
substantive ideas is discouraging. Even as everyone is jumping on the
bandwagon of economic stimulus, the UAW hasn’t exposed the
contradictions of using the loan guarantees to establish standards
that undermine workers’ incomes and therefore the purchasing power on
which stimulus depends.
Three inter-related factors seem to have been crucial to the UAW’s
failures (and these apply as well to a good many other unions): the
union’s loss of organizational and ideological independence from
employers; the internal bureaucratization and erosion of a democratic
culture and practices; and the narrowness of the union’s responses
when what is so badly needed is an extension of activity across the
working class and popular groups.
The lesson here is not so much that the UAW needs a change in
leadership though this is obvious enough, but that its members must
rethink what kind of union they want, what kind of supplementary
working class organizations are essential at the municipal, regional
and national level might be contemplated, and what workers’ own role
is in all of this given that things are getting worse and there is no
someone to do it for them.
7. Conclusion: The Necessity of a Fight-back
We are living in one of those historical moments in which dangers and
new possibilities share the same space. The American state, determined
to renew American capitalism, has responded in the largest and most
radical ways: money dropped from the sky on the financial system, zero
interest rates, consideration of the most significant economic
stimulus since the Great Depression, and the high-handed audacity to
tell the union that once led sit-down strikes that they will
henceforth track the Japanese transplants. The question facing UAW
members and the labour movement more generally because of the
implications of a defeat of the UAW on this scale is whether workers
can develop the confidence to think as big and as radical as they are
thinking in terms of both how workers see the future and what needs to
be done to build the capacities to get there.
It must, in this regard, be understood that if concessions are simply
accepted, more will follow. As pressures continue on the Detroit Three
and with the companies noting that auto workers will accept cutbacks
even in their health care pensions may be next. The Japanese
transplants have kept their compensation and conditions at their
levels in large part to avoid the unionization threat from the UAW;
with that out of the way, what is to stop them from cutting back, as
the economic crisis worsens, on present commitments?
There MUST be resistance to the conditions the loan agreement imposes
on auto workers if only to show that the union still matters and to
keep a measure of hope alive. An obvious starting point if the union
is to retain any credibility is to assert that the conditions of the
non-union Japanese transplants are not the standards of the UAW. It is
also absolutely essential to reject the further transfer of health
care risks to workers; a health care fund linked to GM or Chrysler
stock hardly represents health security for workers and their
families. Autoworkers should instead insist that the incoming
President’s recovery plan replace the failed American health care
system with a public system for all Americans that is comparable to
the rest of the developed world. And with all the focus on
job-creation, the union should be mobilizing its hundreds of thousands
of laid off members to assert that the potentially productive auto
facilities already idled or about to be shuttered be converted to
useful manufacturing jobs that keep families working and communities
functioning. In the Great Depression, workers overcame their own
weaknesses and society’s barriers to develop new ways to struggle and
organize. Today’s workers need to start meeting, talking, debating,
preparing and discovering a comparable level of determination and
creativity.
Sam Gindin teaches political economy at York University, Toronto.
Further Resources
· Malcolm Gladwell, [3]The Risk Pool: What’s
behind Ireland’s economic miracle – and GM’s financial crisis? New
Yorker, August 28, 2006
· Gregg Shotwell, [4]Bailout an End Run around
Bankruptcy, MRZine, December 1, 2008
· David Leonhardt, [5]$73 an hour: Adding It Up,
The New York Times, December 10, 2008.
· Harold Meyerson, [6]Destroying What the UAW
Built, Washington Post, December 17, 2008.
· Bill Fletcher, [7]Auto Workers Must Fight Back!
Black Commentator, December 19, 2008.
· Tiffany Ten Eyck, [8]Auto Workers Told to Take
Concessions, Abandon Retirees, MRZine, December 20, 2008.
Also very worth browsing through:
· [9]Socialist Project
· [10]Soldiers of Solidarity (Gregg Shotwell)
· [11]Center for Labor Renewal
· [12]Labor Notes
· [13]MRZine
References
1. http://www.socialistproject.ca/bullet
2. http://www.ustreas.gov/press/releases/hp1333.htm
3. http://www.newyorker.com/archive/2006/08/28/060828fa_fact
4. http://mrzine.monthlyreview.org/shotwell011208.html
5. http://www.nytimes.com/2008/12/10/business/economy/10leonhardt.html?_r=1
6. http://www.washingtonpost.com/wp-dyn/content/article/2008/12/16/AR2008121602482_pf.html
7. http://www.blackcommentator.com/304/304_aw_uaw_fight_back.html
8. http://mrzine.monthlyreview.org/eyck201208.html
9. http://www.socialistproject.ca/
10. http://www.soldiersofsolidarity.com/
11. http://www.centerforlaborrenewal.org/
12. http://www.labornotes.org/
13. http://mrzine.monthlyreview.org/