Big Three Look for More Aid, Boost Production Offshore

3-18-09, 9:26 am

As poor business decisions and the deepening recession forced the US-based Big Three automakers to seek a financial bailout from the US government totaling $25 billion last year, production in other countries by those car makers outpaced US production, according to recent analysis by the Economic Policy Institute (EPI).

Big Three vehicle production in the US fell by 24 percent, while production of light vehicles in production plants in Mexico owned by those companies grew by about five percent. Currently, Ford makes about one-third of its North American cars in Mexico. GM and Chrysler produce substantially fewer cars than Ford in that country, the EPI analysis showed.

Initially, the Big Three had sought $34 billion in taxpayer loans to avoid bankruptcy. Media reports indicated that General Motors had made plans to use some of the bailout to boost its production in Brazil. Since 2005, GM has also pushed over $3 billion offshore into Mexico to begin producing a new line of cars.

The final loan deal with the three companies contained requirements that the money be used to salvage US-based operations. Given that other major corporations have blocked public scrutiny and skirted government conditions imposed on recipients of bailout funds, most observers are skeptical that the Big Three will be different.

The situation raises new concerns about what the automakers have planned for additional bailout money. According to EPI, '[a] pressing worry is that GM and Chrysler will use new government loans to catch up to Ford in the offshoring race instead of investing the funds in US-based production.'

The Economic Policy Institute analysis concluded that 'these facts make an 'Invest in America' requirement an essential component of any further government assistance for US auto companies.'

An alternative solution to the crisis in auto offered by Republicans during the congressional debate over loan deal, especially Republicans like Sens. Bob Corker of Tennessee and Alabama's Richard Shelby, was to let US auto manufacturing collapse. Refuse assistance, they demanded, and let the companies go bankrupt.

Shelby and Corker are from states that host and heavily subsidize automakers whose corporate headquarters are in other countries. Those companies have donated quite a bit to Corker and Shelby over the years and would love to see the Big Three substantially weakened or simply disappear.

More importantly, as both Shelby and Corker unabashedly made perfectly clear last winter, their main role as US Senators representing multinational corporations like Toyota, Hyundai and Nissan is to block efforts by the workers in their states to organize unions in those foreign-owned auto plants to boost wages, benefits and job security.

Corker even introduced an amendment to the final bailout package in the Senate that would have shifted the financial burdens of the Big Three onto the workers by forcing a massive cut in wages and benefits as a condition of the bailout. (Corker knows that by gutting the wages of autoworkers and the 3 million other workers who depend indirectly on US-based auto would wipe out a huge chunk of potential consumers for the Big Three.)

Shelby, who, according to media reports in Montgomery, Alabama, used the controversial congressional earmark process to use US taxpayer dollars to subsidize Hyundai's operations in his state, also fought the auto bailout vigorously in order to deal a blow to US manufacturers.


Both Corker and Shelby also oppose the Employee Free Choice Act, which would remove barriers to organizing a union in foreign-owned auto plants. If such a law were passed, competition between all of the auto companies would move to parity in terms of labor costs without harming the standard of living of American working families.

While the business decisions of the Big Three automakers – in terms of where and how to make vehicles – have led to the crisis in auto, the extremist plan to kill US auto manufacturing is decidedly the worst option.

Bailout funds, at the very least, should come with the condition that they should be invested in US-based production and in boosting the wages and benefits of workers here.

The best solution has two parts: 1) use the bailout resources to buy taxpayers a controlling interest in one or more of the companies to force all privately-owned automakers to compete with a publicly-owned and subsidized automaker, then 2) pass the Employee Free Choice Act and level the playing field for all workers to receive the same quality level of wages and benefits.