The Ideological Battle Over the Auto Overhaul Heats Up

I wanted to draw your attention to two statements about an auto bailout to show where this is going to go ideologically. First, Richard Shelby:

The financial straits that the Big Three find themselves is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force. The financial situation facing the Big Three is not a national problem, but their problem. I do not support the use of U.S taxpayer dollars to reward the mismanagement of Detroit-based auto manufacturers in such a way that allows them to continue and compound their ongoing mistakes. [my emphasis]

Note his emphasis on "competitive" structures of doing business–and paying labor.

What Shelby doesn’t mention, of course, is that Alabama is a right to work state. Shelby also doesn’t mention that Alabama is home to Honda, Toyota, Hyundai, and Mercedes plants. Shelby also doesn’t reveal that many of the cars those manufacturers make in Alabama, without unions, are precisely the kind of behemoths critics attack Detroit for making–only these have foreign nameplates: M-Class SUV, GL-Class SUV (a new model), Pilot SUV, Santa Fe SUV, plus engines for Tacoma and Tundra pick-ups and Sequoia SUVs.

In other words, Shelby isn’t opposed to car companies that are stupidly committing and recommitting to SUVs. Rather, he’s just opposed to car companies that make SUVs with union labor.

Meanwhile, here’s Jennifer Granholm’s spin supporting a bailout.

Beyond the massive job loss, beyond the potential collapse of an entire economic sector, Congress and the Bush administration need to provide immediate assistance to the auto industry because America’s energy independence is a critical national need. And the U.S. auto industry is the sector to lead the way to that energy independence.

How? The car you drive will be the storage unit for your energy needs. Your home, your car, your appliances can all be powered through the advanced battery that will sit inside your plug-in electric vehicle. Today, most batteries come from Asia, and much of the oil comes from the Middle East. It is a national-security, energy-security imperative to produce advanced batteries and next-generation biofuels here at home.

[snip]

Supporting the automotive industry through the current crisis and steering a clear transition to a low-carbon future will create millions of middle-class jobs that are vital to a strong economy while reinvigorating American technological superiority.

What’s more, the Department of Defense Science Board Task Force has determined that reducing military fuel demand a national defense priority. According to the Defense Department, our military’s dependence on foreign oil increases risks, degrades operational capability and compromises mission success. Advanced battery technology and electric military vehicles would reduce fuel demand and cost, afford tactical flexibility and decrease operational risks.

No mention, of course, of the auto executives past bone-headed decisions. Not even a mention, incidentally, of the legacy costs that really make the difference between Shelby’s constituents’ SUVs and Granholm’s.

Granholm’s not going to succeed, of course, in papering over all the problems of the Michigan auto industry, precisely because there are real questions about whether the industry is capable of delivering on Granholm’s promises that the behemoths can lead the country to an energy efficient future.

The Big Two and a Half’s need for a cash infusion is real. But so is the fight between those states with domestic auto manufacturers and those with foreign manufacturers, each fighting for a competitive advantage for their state’s employers.

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44 replies
  1. randiego says:

    What a joke. We can spare $15 Billion a month in Iraq, we can give financial companies a $140 Billion tax windfall, and we can bailout AIG with what – $200 Billion – but $25 Billion to keep our manufacturing base is a big problem.

    As you said, this is about the Unions. Whole damn country going to hell and they’re STILL trying to fuck the middle class.

    Keep the big 2.5 afloat, but put strings and oversight on the money. Figure out a way to make the loans contingent on solving the marketing/management problems and help them solve the legacy cost dilemma.

  2. CasualObserver says:

    EW, here’s a third ideological statement that could be added to your list above, from Jane Hamsher:

    This is about union busting, pure and simple.

    While anti-union sentiment is involved, it is not “pure and simple” union busting. It’s not ‘pure and simple’ any one thing. People suggesting bankruptcy (referring to Hamsher’s post) are not trying to kill the ‘domestic’ auto industry, impact hundreds of thousands of workers and devastate large portions of the american midwest just so they can kill the unions.

    Somehow, we need to view this debacle with clear eyes, to the extent that is possible.

    • archiebird says:

      Absolutely. Today at the YMCA they had Fox News on and in big letters across the screen “ARE UNIONS TO BLAME FOR THE AUTOMAKER MESS?” I believe Paulson even came out and said the union members make too much money.

      • PJEvans says:

        But it’s okay to pay 7 and 8-figure salaries and bonuses to executives who have run their companies so badly that they need bailouts.

        I wish Paulson had a clue why people are ticked off.

    • emptywheel says:

      No, actually they are.

      There’s an argument being made by a lot of people–including the Republican party generally, not least since so many of the new auto states are Republican–that we don’t need a domestic industry anymore. And it almost always involves an anti-union argument.

      Obviously Shelby is not making an argument exclusively about unions–he’s also interested in retaining the advantages his manufacturers have. But many Republicans see this as exclusively a union issue, ignoring the other legacy costs involved as well.

      • CasualObserver says:

        EW,

        imo, Hamsher’s post– “Union-Busters Want GM To File Bankruptcy” is an example of the ideological battle you mention above. Sure, anti-union sentiment is there among republicans, but it doesn’t seem reasonable to paint all those considering or recommending the Bankruptcy process as being ‘purely and simply’ union busters.

        • emptywheel says:

          No. But the argument she pointed to is.

          There is a great deal of discussion about a potential bailout that solely focuses on this. And you gotta give it to Republicans. They got soundly beaten last week. Still they may well accomplish something they’ve been trying to do for decades.

          • CasualObserver says:

            EW, she pointed to a NYT article. Are you saying that the sources cited as recommending Chap. 11 in the article are all union busters?

            I don’t mean to get mired down in this. But if we want to clear away ideology, then by all means let’s do so.

            • emptywheel says:

              Here’s the passage:

              [N]ot everyone agrees that a Chapter 11 filing by G.M. would be the disaster that many fear. Some experts note that while bankruptcy would be painful, it may be preferable to a government bailout that may only delay, at considerable cost, the wrenching but necessary steps G.M. needs to take to become a stronger, leaner company.

              Although G.M.’s labor contracts would be at risk of termination in a bankruptcy, setting up a potential confrontation with its unions, the company says its pension obligations are largely financed for its 479,000 retirees and their spouses.

              The assumption in that passage is that GM must go through “wrenching but necessary steps” to survive–and then includes busting the union but excludes busting the white collar pensions.

              Yet the article doesn’t then identify this as a question–rather, it presents the bust the union step as a presumed necessity–without revealing that that is just the view of one (or several) experts, and up for debate. Also, it doesn’t talk about how GM’s bankruptcy (and UAW bust) woudl turn into a union bust throughout the industry.

              • CasualObserver says:

                I don’t know enough about the bankruptcy process to argue this with you. But I can point again to GM burning through 2 Billion cash a month, and at current rate will be dead within 2 or 3 quarters. Its stock is now a penny stock, and I believe (not sure on this) their paper is considered junk.

                They are asking for huge influxes of public money. It is entirely unclear that the company can improve itself while that public money is burned through. In this context, it is appropriate to look at all the options available, including bankruptcy. I believe in unions, and I benefit every working day from progress made by union members, sometimes paid for in blood. But the issue of what to do with GM can’t be viewed through just that one lens.

                • emptywheel says:

                  My gripe is not with discussions of bankruptcy or not. My gripe is with discussions of bankruptcy which fairly transparently want it solely because it’s the difference between a bailout or not.

                  • CasualObserver says:

                    So…do you have a preferred course of action on what should be done–based on what is known so far?

  3. archiebird says:

    I’m sorry, but I live in Michigan and I don’t think Granholm is capable of fixining ANYTHING! When I heard this morning that Obama is contemplating making her a oversight Czar to the auto companies, My husband and I said “OH BROTHER!” Not, “Oh Good idea!” or “She’ll get things done!” I can’t understand why Obama’s even keeping her around. Sorry, I’m a little bitter. I realize she has the obstinate Repug Senate to block her every move, but I’m sorry NO LEADERSHIP.

    • emptywheel says:

      Not just Granholm. Bonior is involved (and he is competent). And this guy:

      Dan Tarullo, a Georgetown University law professor and a top Obama adviser on trade, has been appointed to lead the auto-company transition efforts, according to Rep. Sander Levin (D., Mich.), a key lawmaker involved. Obama aides said Mr. Tarullo is one of a number of advisers assigned to the issue. Michigan Gov. Jennifer Granholm and former Michigan Rep. David Bonior have been given prominent seats at the table.

  4. archiebird says:

    During the 90’s we had a Repug governor by the name of Engler. He did not push the automakers to invest, instead he let the automakers rest on their laurels and pocket all the profits instead of investing in R&D. Engler gave away the state. He broke up the DNR and divided it into 2 separate entities (Which has made our parks a mess and broke) and the DEQ stretched so thin they can’t get anything done. Not to mention he left Granholm a 2 billion dollar deficit and sold the farm to the insurance agencies.

    • bmaz says:

      What do you mean Engler “let them” do whatever. the governor might have a bully pulpit to some extent, but he or she doesn’t run the automakers. I fail to see the singular focus on the governor position here.

      • archiebird says:

        Well, my thought process on the whole thing is–and I know I’m probably gonna get hammered here–threaten to, or implement new taxes, in order to MAKE them do the right thing. R&D would have created new high tech jobs in the state back then, and now. Instead of Michigan sort of, having all their eggs in one basket with IT being all about the automakers/manufacturers. Investment into R&D also would have been a little easier on the environment.

        • archiebird says:

          I mean Engler should have threatened/implemented new taxes on the Automakers to make them do the right thing. Engler rested on his laurels, and did not lead. He let Michigan be Automakers, only automakers, and nothing else, instead of diversifying from our manufacturing base. Now Granholm can’t attract a business to relocate here in Michigan to save her life.

        • bmaz says:

          Fair enough; an honest answer. I wasn’t at odds with your position on the lapses of big auto; just what the governor’s role in it was. Maybe there is something that could have been done with either taxes or incentives; don’t know if that would have done the trick or not, but could have helped set the tone.

            • bmaz says:

              Heh, welcome, and stick around; you’re doing quite fine. Sometimes a tough crowd, but an extremely fair and passionate one and one that always welcomes intelligent discourse. (On the other hand, I am still here, so it is not all intelligent).

  5. LabDancer says:

    As matters stand, the ideological choice is being made by Paulsen.

    I might feel a tad better about the “one president at a time” idea if the number was also a minimum. At this point, the White House is among the places there’s no need to visit to negotiate a resolution.

  6. archiebird says:

    I’d like to talk to some of GM’S CEO/Chairpeople and ask them how they like their Republican Brother in the White House Kicking them to the Curb?

    How do you like me now?

  7. TobyWollin says:

    Shelby’s comments are pretty ironic, given the record of Southern States in basically BUYING auto manufacturing jobs. One example…why, Alabama and Hyundai Motor:
    Public Incentives: 145.8 million dollars, including site improvements, transportation improvements, training incentives, tax incentives and misc. incentives.
    Private Incentives: 18.8 million dollars for electrical improvements, natural gas improvements, rail and telecom.
    Incentive dollars per job: $126,400.

    For a 40 hour workweek, at $126,400, that’s $60.77 an hour.
    Companies used to look for the best place to site a plant – they looked for all of these items – IN PLACE — now, they realize that they can basically get a state, which may not have a highly educated or trained workforce, or rail, or transportation facilities or anything else..to pay through the nose to get them there. Yes, they will tend to only look at “right to work states” first, but states like Alabama and Mississippi have learned that if they want those jobs, even with cheaper labor costs, they have to basically subsidize the cost of the labor to get the manufacturing facility there in the first place. Considering that the workers’ wages and whatever benefits they are getting is ON TOP of that $60.77 an hour that the incentives are costing — the labor is not that much less inexpensive. The issue really is that management doesn’t want to have to deal with any organization that will stand between them and their labor force.

    • readerOfTeaLeaves says:

      Just want to note how much I admire this comment.
      I’ve seen the same head-up-the-ass, blind stupidity in my part of the U.S.

      The Chamber of Commerce people (almost all of them very nice people and well intentioned) get to puff up about their ‘new jobs’ and too few media reports or informed parties put out the ACTUAL costs.

      FWIW, last night on Hardball, Tom Friedman almost inadvertantly put a huge part of the responsibility for the auto policy dysfunction on the lobbyist nexis in DC that further entrenches existing interests and protects them from pressures to change.

      Market, schmarket.

      It is worth noting, however, that Shelby’s constituetents won’t be very well able to purchase the cars they make. Guess all the tax-protected will have to buy 4 apiece to even out the numbers.

  8. earlofhuntingdon says:

    A “Right to Work” state means a “Right to Fire” state. It’s a marketing misnomer, a confusion of fact and fancy, like mistaking a painting about outlaws running from the law for a painting about missionaries bringing the faith to pioneers. The phrase suggests that the law is an employment agency that gives everyone a job who wants one. In reality, such laws are passed by employer-influenced legislatures, and makes every worker vulnerable to the unsupported whims of his or her employer.

    “Right to Work” laws allow employers to fire without notice, without cause, without compensation. Use italics or quotes whenever you use it.

    • CasualObserver says:

      “Right to Work”

      “Clear Skies”

      “Patriot Act”

      “Compassionate Conservatism”

      “Clean Coal”

      This is what happens when they let marketers into government and poltical campaigns.

  9. earlofhuntingdon says:

    This is hilarious. A few days ago, we had a discussion here about holding auto companies and their top executives liable for their mistakes in management. We urged departing from the HP/Carly Fiorina model — take the money and run — and demand that company executives be stripped of power and compensation as one of several requirements for gubmint cash. After all, even McCain’s Navy never lets a captain who runs his ship aground make admiral, no matter how slight the damage, no matter who on board let it happen. It’s all about leadership.

    But why diss auto execs, when their financial counterparts, who make nothing more tangible than pain for the many and ecstasy for the few, are being allowed to skate with their pockets spilling cash. AIG just got exposed holding another luxury confab for its “managers”.

    Sadly, that’s no different than the Democrats not investigating ANY of this administration’s wrongdoing, or allowing Kneepads Lieberman to remain in the Democratic Caucus. (Letting him remain chair of Homeland Security would be like Washington letting Benedict Arnold remain a general.) Accountability, it seems, like poverty, is only for the masses.

    How can we expect a Democratic Congress, which glories in being cuckolded by Democrats and Republicans alike, demand accountability from mere bidness people? Only if it comes from the top — Mr. Obama — and only if enough voters make him do it.

  10. grassroot says:

    Wow. It’s hard to decide which of these arguments (Shelby’s and Granholm’s) is more wrong-headed. The “the U.S. auto industry is the sector to lead the way to that energy independence”? Puh-leeze!

    Is anybody going to consider what the public’s interests and goals are in exchange for our bail-out billions?

    My modest suggestions: we must preserve our industrial base and unionized workforce, but direct them toward useful and sustainable goals — that does NOT include perpetuating car culture and overconsumption.

    As a progressive, I have a strong predeliction toward supporting unionized labor, but I draw then line when unions distort public policy in destructive and unsustainable ways for their members’ short-term benefit. The California prison guards’ union comes to mind, pushing state policy toward more incarceration, longer sentences, and more prisons.

    The UAW is trying to lead us down a similar dead-end path. We need a heart-to-heart — we will strongly back you, but you must be more far-sighted.

  11. earlofhuntingdon says:

    “Right to Work” laws long pre-date the Rovian takeover of government sloganeering. We’ve had them since unions became legal and started making effective, peaceful demands on employers, and started confronting strike breakers with their own techniques.

    Advocates for a GM bankruptcy very much have labor costs on their mind. A bankruptcy filing was once something top execs considered a death knell for their own careers, as well as their company’s. For two decades, at least, it has been a standard, aggressive tactic for use by companies in trouble. It’s the bidness version of the Senate’s “nuclear option”.

    Current bankruptcy laws are very anti-labor. Few of the resources they depend on are shielded, unlike many that benefit management. Labor contracts can be thrown out, benefits can be gutted, retirement pay-outs curtailed. It’s an enormous big stick with which to beat concessions, the quid pro quos for which managers often discarded later.

    “Labor costs” are also shorthand, a convenient barrow into which to dump material labor costs and many other costs, including management’s own mistakes. Those include costs CFO’s have long-deferred in sometimes mad attempts to meet market forecasts and so that they and their management peers could collect their bonuses.

    Bankruptcy judges are often quite good, but mega-bankruptcies are forced reorganizations of complex businesses, with the public bankruptcy process as the stage. The real drama is backstage, in the machinations and meetings among the playwrights, directors and star players — the lawyers, executives, creditors and gubmint.

  12. Downpuppy says:

    Claiming their pensions are largely financed when their balance sheet shows them $40 billion short is, in itself, a good reason that their (soon to come) bankruptcy trustee should radically trash the entire corporate hierarchy. Its at that point that a bailout would make sense – although the long, sad Leyland story hardly offers hope.

  13. bmaz says:

    There is one more consideration that has been largely overlooked, and that is the Volt. If the Volt is truly a viable car, that can be sold cheap enough for the masses to purchase, that is a factor to be considered in how to address the GM problem. My inkling is that it is generally viable, but behind schedule and a little more expensive than it should be. Bob Lutz can shepherd game changing vehicles in the automotive market, he knows how to do that, but the whole thing may be a couple of years too late.

    • CasualObserver says:

      Bob Lutz can shepherd game changing vehicles in the automotive market, he knows how to do that, but the whole thing may be a couple of years too late.

      What is really sad about this is that GM had a truly fabulous electric car, on the market, over 10 years ago–the EV1. Great documentary film on it. Had they kept that car, further developed it, they arguably might now be exporting tons of them to europe, japan, china…

      http://www.sonyclassics.com/wh…..ctric.html

      • bmaz says:

        I had this battle with someone the other day. the EV-1 was a horrendous pile of shit. Just terrible. I drove one for about half an hour one day. There was no aspect of it that was well executed. That electric car needed to be “Killed”. And it was not just that the battery technology was lacking (although it absolutely was), simply everything was crappy. It was like an electric Pinto with crappy batteries.

        • CasualObserver says:

          There was no aspect of it that was well executed. That electric car needed to be “Killed”. And it was not just that the battery technology was lacking (although it absolutely was), simply everything was crappy. It was like an electric Pinto with crappy batteries.

          In other words, it was like everything else GM sold? (except the engine sounded funny…)

          bmaz, have you seen the film? It’s rentable via the usual suspects. The people who leased them (GM never sold the car) apparently loved them tremendously–they fought tooth and nail to keep them, and GM nearly had to kidnap the vehicles away from the leasors.

          But even with your experience, consider what GM could have done with them over the course of 10 years.

          • bmaz says:

            It is not that I don’t like the idea, but that was a bad project. Yes the people that had them loved them; but the only people that did were all Ed Begley granola types that would have driven in a torture chamber to say they drove electric. It was electric, but as a car, it was not so good. First off was the weight; probably twice as much as would be acceptable for the circumstances. And the batteries were about half the weight; they were a problem. But above and beyond that, my recollections were about how crappy the lateral stability (roll) was, how mushy and non-compliant the suspension was, the steering was horrid and had terrible driver feedback (was some kind of electric contraption) and the braking feeling was bizarre and catchy, not to mention barely adequate.

            To me, they never should have produced that car; should have kept prototyping until they had a better vehicle. So I agree that they could have done better in ten years. But, by wasting all those tons of money on producing the thing and subsidizing the leases, GM chased good money after bad. If they had not have fucked around with the EV-1, they might have developed and put out the Volt five years or more earlier than they are. bThat is the tradeoff I see. I think we both seek the same end, I just see the EV-1 as a nightmare, ill conceived, that obstructed the good end.

            • CasualObserver says:

              I think we both seek the same end, I just see the EV-1 as a nightmare, ill conceived, that obstructed the good end.

              I was assuming that the Volt was a better EV1, using lessons learned, but I know nothing about the Volt. They may not have learned anything, as the EV1s were taken out into the desert, crushed, and shredded.

              Anyway, yes, by all means–I’d love to see Detroit produce incredible cars that beat the pants off foreign manufacturers.

              But in the meantime, I’m driving a civic 4 cyl. that transports 4 comfortably and gets 34 mpg overall milage, ulev.

              • bmaz says:

                Yeah, I think their grave is here in Arizona somewhere. There is one still around town somewhere I understand; don’t know who has it.

  14. archiebird says:

    Ya Know, I was thinking about the Union busting Whitehouse and GM bailout money going head to head. Who knows how bad the Automakers situation really is. If W. vetoes Congress’ emergency session bill, maybe GM can get a priavate sector loan from Gates, Buffet or Kerkorian. Just until January 20th, that is. By the way, that “Right to Work” thing got shot down pretty bad. I think the counter slogan was, “Right to Work FOR LESS” Anyways, people saw through that real quick.

  15. Downpuppy says:

    To clarify, these are the 9/30/08 liabilities to ex-employees:

    Postretirement benefits other than pensions 33,714
    Pensions 11,500

    Bankrupt, the PBGC would most likely be on the hook for the 11.5B; retirees would likely be screwed for the other benefits.

  16. klynn says:

    Those states fighting the bailout can ante up and pay the unemployment insurance for the other states that will suffer… That includes the states the house the subcontractors of the big 2.5…

  17. earlofhuntingdon says:

    EW is correct. Union busting is a meme as nearly as old as manufacturing. Doing it would lower certain costs, but it would be more emotional satisfaction than anything else. It wouldn’t fire lousy managers or replace passive, sleepy boards of directors. It wouldn’t lower managers’ claims for excessive compensation. It would change out no bad paint plant designs, no woefully complex and vulnerable sourcing chains. It would induce no banks to lend and reduce no vulnerabilities to domestic or foreign competition. Big Auto needs systemic changes as much as Big Finance.

    Bankruptcy reorganization, as now permitted for big companies, is just a big stick to use against suppliers, lenders and unions, and which allows management to stay in place unchanged. For the industries most likely to benefit from Hank Paulson’s unquestioning largesse, replacing their managers is probably the first thing needed to improve their prospects and that of their employees.

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