End of the Road: Is the Auto Industry Dead?
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Hemorrhaging money and with no end in sight, last year Detroit's automakers took desperate measures to become smaller but more profitable companies, with Delphi declaring bankruptcy and GM and Ford putting 55,000 jobs on the chopping block. Since that time, they have all been singing the same tune, blaming their troubles on the generous wages, pensions, and healthcare of their unionized workforce.
In a move whose irony cannot be lost on executives, Detroit has redirected decades of consumer frustration with American automakers for their lackluster designs and poor quality into widespread resentment of rank-and-file auto workers for their company-paid health care and pensions. The auto makers have tapped into middle America's deep-seated anxiety and insecurity with a not-so-subtle message: "If you don't have a pension or any hint of job security, why should they?"
The scale and speed of these changes has left the UAW flat-footed, struggling to get a hearing-much less formulate a strategy-in its fight to save some of the last good manufacturing jobs in America.
So Who Cares?
Cynics might argue, who cares? The UAW represents fewer than 400,000 auto workers in an industry of more than a million, and the concessions the companies are clamoring for will simply bring their wages and benefits closer to what the market will bear for less-skilled workers anyway. Besides, manufacturing is so 20th century. Aren't we a post-industrial economy with a future in services and high-tech jobs? America can design and engineer stuff and let the rest of the world build it (think X-Boxes and Ipods).
This mindset misses most of what's important about the crisis in auto. Downsizing isn't accountants shuffling numbers around on a spreadsheet; the lost jobs are concentrated in specific communities, such as the already devastated Flint, Michigan made famous by Michael Moore in his first film, Roger and Me.
Cuts of this magnitude will reverberate throughout the Midwest, leaving a lasting economic and social hangover. And they will not be confined to auto, as other companies follow the Big Three's lead.
High tech companies can't fill the void. Google, for example, has just announced plans to open up shop in Michigan. But Google employs less than 6,000 people worldwide, a drop in the bucket compared to the 70,000 jobs this round of auto restructuring will destroy.
How could the auto industry right itself without devastating workers and communities? Execs have shown themselves curiously unwilling to campaign for one measure that would save them billions of dollars per year: single-payer health insurance.
GM is the largest private purchaser of healthcare in the country, providing coverage to 1.1 million people. Last year the price tag was $5.3 billion, which, as CEO Rick Wagoner is fond of pointing out, is more than GM pays for steel. Half of those covered are retirees, and the company claims to provide healthcare to 1 percent of America's seniors.
The Big Three say that such "legacy costs," which also include pension benefits, are choking their business, obscuring the fact that all three auto makers have pension and retiree health funds flush with cash--healthy for the foreseeable future. If health care is such a heavy burden, why not join the movement for a far cheaper national health care plan? Canada's single-payer system makes it much less expensive to do business there and has spared most Ford and GM plants north of the border from the ax.
But despite promises to the UAW to pursue "universal coverage" in exchange for the union's $1 billion in concessions on retiree health care last fall, GM's CEO didn't even mention national health care in testimony before a June Congressional special hearing on the nation's healthcare crisis. Either free-market ideology is trumping good business sense, or paying for benefits is not such a burden after all -- or the employers don't mind having a propaganda hammer to use against the union.