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End of the Road: Is the Auto Industry Dead?

With U.S. car makers billions of dollars in the red, jobs vanishing and factories closing, the industry's problems may be insurmountable.

Editor's note: As politicians in Washington debate the future of the U.S. auto industry, we are reposting this article from the September 2006 issue of Labor Notes . It spells out the how the Big 3 got into the mess they are in today, and what the UAW -- together with the rest of the labor movement -- needs to do to get us out.

In the 1980s Chevrolet proclaimed itself the "Heartbeat of America." Today many would say that the American auto industry qualifies for life support. Last November, General Motors (owner of the Chevy brand) announced that it was cutting 25,000 jobs and closing up to 12 factories by 2008.

The news came one month after auto parts giant Delphi declared bankruptcy, promising to shutter at least a dozen plants and cut as many as 24,000 jobs in three years time. Ford completed the grim hat trick in January, revealing a plan to cut 30,000 jobs by 2012.

Just months before, GM and Ford had convinced Solidarity House, headquarters of the once-mighty United Auto Workers, to make $1 billion in concessions to help pay for retired auto workers' health benefits. Detroit is abuzz over the additional give-backs the Big Three auto makers (GM, Ford, and DaimlerChrysler) are likely to wrest from the union in next year's contract talks, and the rank-and-file hear no tough talk -- let alone action -- from their leaders.

On the face of it, the industry's problems seem almost insurmountable. Collectively, U.S. car makers are billions of dollars in the red and foreign competitors continue to gobble up the Big Three's market share. America's auto giants boost their bottom line only by selling gas-guzzling trucks and SUVs, and cars would be moving off the lots even slower were it not for thousands of dollars in incentives used to sweeten each sale.

In the face of these pressures, it's no surprise that analysts from the Motor City to Wall Street are convinced that this is the end of an era in the auto industry. There is no alternative, these experts lament. Today's auto workers will have to make do with less or kiss their jobs goodbye.

For over a century the auto industry has been an anchor for the U.S. economy and a trendsetter for corporate America. What does the current upheaval mean for workers? Announcing the company's bankruptcy, Delphi's CEO Steve Miller signaled what was at stake: "I want you to view what is happening at Delphi as a flash point, a test case, for all the economic and social trends that are on a collision course in our country and around the globe."

The auto industry paid out a living wage for millions of working-class people. Is Detroit about to call an end to that life?

What's Good for GM ...

Times weren't always so tough in the Motor City. On the heels of World War II America's auto manufacturers were the undisputed titans of industry. Although UAW President Walter Reuther began his tenure with visions of government-provided pensions and health care for all Americans, that drive was blunted when the union achieved, at the bargaining table, a private welfare state for its members at the Big Three.

In addition to private insurance and 30-years-and-out retirement benefits, they also received "supplemental unemployment benefits" to cushion the blow when the cyclical nature of the industry brought about layoffs -- a step toward Reuther's social democratic dream of a guaranteed annual wage. Besides their 3 percent annual raises to compensate for productivity improvements, auto workers also received cost-of-living increases, and, as the decades rolled on, tuition and legal services were added as well.

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