As the Big Three executives return to Congress to plead for new loans to bail out the auto industry, political debates erupted again this week over whether or not the federal government has managed the economic crisis adequately. Should taxpayer dollars should have been used to prop up the profits of Wall Street banks, while allowing the US economy to collapse further by refusing to prevent the failure of any one of the major auto companies?
The newest reports suggest that there is little congressional support for passing a bailout package for auto using funds from the massive $700 billion boondoggle passed in October. For their part, however, Democratic leaders have asserted that bankruptcy for the automakers is not an option.
Republicans have blamed workers and unions for the crisis in auto, ignoring the fact that the credit crunch has led to a decline by 37 percent in new auto purchases by consumers over last year. The credit crunch, of course was not caused by union workers, but rather a systematic deregulation of the housing market that allowed big Wall Street banks to push ill-advised loans and repackage them as securities.
Earlier this month, for example, former Republican presidential hopeful Mitt Romney argued in an op-ed in the Wall Street Journal that the industry, which employs 250,000 workers directly and indirectly as many as 3 million people across several industries in several states, should be allowed to go bankrupt regardless of the consequences to those workers and their families. He specifically blamed the United Autoworkers (UAW) and the efforts of the workers over the decades to boost their wages and benefits and to provide retirement security for retirees.
In the rush to blame the workers first, some anti-union pundits have floated an erroneous notion that autoworkers earn more than $70 per hour, and that has caused the financial ruin of the companies.
Union advocates have debunked this point repeatedly. The highest paid union workers in auto earn less than $28 per hour in wages, or about $57,000 annually. That is only a few thousand higher than the national median wage for all Americans.
So how to do they arrive at a $70 figure? The claim is that benefits total about $42 per hour per worker. But that is nonsense. Benefits average out to about $10 per hour per worker. In other words, the cost of the highest paid workers is about $38 per hour per worker, comparable to other profitable industries. (There is a growing number of second-tier workers who make half this amount.)
What isn't comparable is the decisions and choices of the highly-paid executives who run the auto companies. For example, the persistent refusal to invest in the production of hybrid vehicles for more than a decade and to fight higher fuel economy standards. The result is that foreign-owned companies that saw the market for environmentally-forward cars are out-competing them. (Though it should be noted that after a slow start Detroit produces the most hybrid and high fuel economy cars. GM, in fact, is set to produce an electric hybrid that can go 40 miles without using a drop of gas in 2010.)
In a press conference earlier this week UAW President Ron Gettelfinger also listed massive subsidies, totaling billions of dollars over the years, state governments have given to foreign-owned auto makers to open plants in their states. "So we can support our competition but we can’t support an industry that is in need?", he wondered.
Foreign-owned companies also have another huge advantage, remarked Leo Gerard in an interview on MSNBC's The Rachel Maddow Show. Japan, South Korea, China, and European countries have national health care systems subsidized by their governments. In other words, he said, companies do not pay the bulk of the cost of health insurance. This gives auto companies in those countries a decided financial advantage.
"One of the problems we have with the Big Three automakers is that they're providing health care to almost a million lives," Gerard commented. "They're providing health care in a society where we competing with all the other companies that make cars in other countries who have health care provided as a right of citizenship."
Despite these facts, the UAW expressed a willingness to work with the companies and Congress to make a bailout more appealing. Gettelfinger pointed to the hypocrisy exposed by the ease with which Congress swiftly aided the big banks. "It just seems odd to us that we can help the financial institutions in this country and that we can offer incentives to our competitors to come here and compete against us but at the same time, we are willing to walk away from an industry that is the backbone of our economy," he remarked.
Gettelfinger hit on the true cause of the crisis in auto. "Consumers cannot get loans that have reasonable interest rates on them, and if we cannot get people in the showrooms to buy automobiles, we have got a huge problem – we have got a huge problem in this country," he pointed out.
The UAW also called for several conditions attached to any proposed auto bailout. The bailout agreement should include an equity stake for taxpayers. The companies should reduce executive salaries and put off paying dividends to shareholders. The agreement should also ensure that taxpayer dollars be spent exclusively on auto production in the US. (There were indications that GM wanted to use bailout cash to re-model one of its Brazilian factories.) The bailout should bring the workers, the companies and the taxpayers to the table to create a plan for re-tooling the production facilities to put out more fuel-efficient cars and create new jobs. Finally, the plan should provide ways to continue to provide for the health and security of retirees.
Michigan native filmmaker Michael Moore sounded off on the issue for his own part on the Dec. 3 episode of MSNBC's Countdown with Keith Olbermann. Moore blasted the hypocrisy of Washington insiders and Wall Street bankers quick to bailout out the financial industry with no questions asked, while treating the Big Three like "errant school boys." The congressional hearings on the Wall Street bailout, Moor laughed, looked like a gathering at a "cigar bar." The only person missing was the photographer from Cigar Afficionado magazine.
Moore also questioned the validity of giving General Motors the $18 billion it is seeking when its common stock is worth only about $3 billion. "Why would we give them $18 billion when they're only worth $3 billion?", he asked.
"If we're serious about fixing the transportation problems in this country and all of the other problems that surround it, like the lack of oil and the running out of oil under this planet that's going to happen in our lifetime our in our children's lifetime, we have to really treat this like a crisis," he said.
"This new president and this Congress has to say to the Big Three, I'm sorry but this car thing isn't working out. We're running out of oil. So you need to build hybrids, electrics, and we need mass transportation so you gotta build trains and subways and light rail," Moore continued.
The proposed $34 billion bailout must come with these conditions, Moore added. "If we're going to give you $34 billion we're gonna own your ass."
See the clip with Moore here (it begins about 1:34 into the clip):
