Obama Brags on Saving Detroit--But Auto Industry Bailout Came on the Backs of Working People
President Obama is, as AP puts it, “wearing his decision to rescue General Motors and Chrysler three years ago as a badge of honor” on his re-election campaign. It saved jobs and working communities, brought the US auto industry back from the brink. In January, US auto sales were up 11 percent over a year ago, and a proud president was cooing to the college students of Ann Arbor, Michigan:
“The American auto industry was on the verge of collapse and some politicians were willing to let it just die. We said no.… We believe in the workers of this state.”
You’re going to be hearing a lot about the deal that saved Detroit in the next few months, not least because likely opponent Mitt Romney was against it. Then Governor Romney wrote in the fall of 2008 that if the big three auto companies received a bailout, “we can kiss the American auto industry goodbye.” Romney bad; Obama good; Big Three back. The Deal with Detroit is gold dust for Democrats. Reality is a bit more complicated.
For one thing, it was Republican President Bush, not the Democrats’ Barack Obama, who originally decided not to stand by as the auto makers died. The deal saved an industry—US cars are still being made in the US—but it came at such a high price that in many ways it’s a whole new industry. The American auto industry that built middle-class lives as well as cars—that one we kissed good-bye, and it may be a while before we see it back again.
To review: in the fall of 2008, President George W. Bush announced a $17 billion loan, split into $13.4 billion at once and another $4 billion in February. The billions for Detroit were tied tight with all the string that had not been attached to the trillions simply given away to Wall Street. The Treasury never forced the financial industry to hand over majority shareholder control in exchange for access to the Troubled Asset Relief Program. No CEO of AIG or Bank of America or Well Fargo had to shrink a wage or skimp on a pension. (Far from it, the Government Accountability Office found that the “standard agreement between Treasury and the participating institutions does not require that these institutions track or report how they plan to use, or do use, their capital investments.”)
Big bucks for the Big Three, by contrast, came with all sorts of ties—mostly around the neck of the United Auto Workers and their members. When the deal was finally worked out, under Obama’s “Car Tsar” (a man with zero manufacturing experience but oodles of admiration from NY developer Steve Rattner and Lawrence Summers), the worker’s concessions amounted to a slash in all-in labor costs from around $76 per worker-hour in 2006 to just over $50. Abandoning decades of principle, the UAW approved a two-tier wage structure in which new hires start at $14 per hour—roughly half the pay and benefits of more senior line workers. To top things off, Treasury demanded— just one more teeny thing—a strike ban. The pièce de norésistance! Under the government’s agreement with the companies, any strike by workers is grounds for forfeiting the loan.
The timing couldn’t be more poignant. Seventy-five years ago, in the winter of 1936–37, it was a strike at General Motors that won the first victory for the 1-year-old UAW, and won for organized labor the respect that made it possible to negotiate for those middle-class automakers’ lives. Late on December 30, 1936, autoworkers in Flint occupied a General Motors plant, launching a strike that, within less than a month, involved 135,000 workers in thirty-five cities across the country. When the union called for support in early January, 150,000 people showed up at Detroit’s Cadillac Square in a show of solidarity.