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Clock Running Out for Detroit Automakers

Administration’s Tough Talk in Stark Contrast to Bank Bailouts

by Adam Price |
April 2, 2009
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San Jose, CA - On Monday, March 30, President Obama took a tough line with General Motors and Chrysler, which had asked for billions more in aid from the government. GM CEO Wagner was forced to resign, and GM has 60 days to submit a new business plan with more cost cutting. Chrysler was given 30 days to sell a stake to Italy’s Fiat. Otherwise, said Obama, the car companies will go into bankruptcy. To help the companies through this restructuring, the government will be guaranteeing car warrantees and payments to parts suppliers.

What the administration is demanding is even deeper cuts in workers’ wages and benefits, after autoworkers have already made recent concessions and suffered thousands of job losses. Many more dealers will be forced to close, causing more layoffs. Analysts of the automobile industry say that up to one-third of auto parts suppliers could be forced to declare bankruptcy in the next few months, possibly disrupting production at Ford, Toyota, Honda and other companies with car plants in the United States.

With the unemployment rate in Michigan the highest in the nation at 12% in February (compared to 8.1% nationwide), this plan to make the auto companies ‘viable offers even more pain. The unemployment rate has risen 4.6% in Michigan in the last year alone, as the car companies’ troubles have caused ripple effects throughout the state’s economy. Michigan has one of the highest foreclosure rates outside of the housing bust states like Nevada, Florida, Arizona and California.

For years, right-wing critics have tried to blame the United Auto Workers (UAW) union for Detroit’s problems. But the real blame is on the auto companies’ management, which saw the North American market as a cash cow. For years they built big cars and took the profits to build up their overseas business. GM is the largest carmaker in China, while Ford just opened a brand-new car plant in Russia.

The right has also tried to blame the workers’ wages and benefits. But union concessions have brought UAW workers’ wages down to the level of nonunion workers at Japanese and European car factories in the United States. But this did not help Detroit; instead it is encouraging a ‘race to the bottom’ for workers’ wages.

Chrysler, Ford and GM do have substantial retiree health benefit costs. While the newer Japanese and European car plants have almost no older workers, the Detroit has to pay for their retirees’ health insurance. But the real problem is not the retired auto workers who have health insurance, it is the U.S. for-profit, private health insurance industries that leaves 15% of our adults without coverage. If the United States had universal government health insurance, the Detroit auto makers would not have this burden.

The tough line that Washington is taking with Detroit’s automakers is very different from the government’s treatment of big banks. Citigroup has received three times as much bailout money as GM. But their CEO remains. Citi faces no deadline for a turnaround plan, no demand for wage cuts and no demand for Citi’s bondholders to take a hit.

Once again, Washington and Wall Street are putting the burden of the crisis on workers. We need to fight the ongoing giveaway to big banks and financial speculators and demand that the government provide health insurance for all.

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