The CEO’s of Chrysler, Ford and GM are still hoping for movement from the US Congress on the $25B bailout of the auto-industry. The Real News asks Jim Stanford and Justin Fox about public control of this sector. Jim Stanford from the Canadian Auto Workers Union says that if the companies are “bailed out” by Congress, they will need to guarantee better efficiency, and regulation from a federal level is a possibility.
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What to do with Detroit? Pt. 2
GERALDINE CAHILL, TRNN: Thanks for joining us again. In the studio I have with me Jim Stanford from the Canadian Auto Workers, and on Skype we have Justin Fox from Time Magazine. The two gentlemen are here to talk about the proposed bailout for the auto industry, and so far we have discussed what the dire situation is for the auto industry, the proposal to perhaps declare bankruptcy that Justin has proposed, what the ramifications of that are. What I’d like to talk about in is the possibility of some public control, some public funding or public shareholding situation for the auto industry, something that in North America, certainly, hasn’t taken place before. So perhapsï¿½I don’t know how you would like to respond to this, Jim, whether there’s any proposal on the table for some public control over the auto industry, even in Canada. And then, Justin, if you could respond to that.
JIM STANFORD, ECONOMIST, CANADIAN AUTO WORKERS UNION: Well, I’ll tell you one thing, Geraldine: this would be a good time to nationalize it if you wanted to, ’cause you can sure pick them up for cheap.
JUSTIN FOX, COLUMNIST, TIME MAGAZINE: It’s cheap.
STANFORD: Clearly, if government is going to participate in restructuring the industry and trying to move it forward, they’re going to demand a quid pro quo, they’re going to want to see the value for what they put in, and that can come in various forms. Already, under the energy bill, where the $25 billion in the US has been approved, that is conditional on that money being invested in American facilities and to create American jobs, and, frankly, I think that’s quite legitimate. Our perspective in Canada has been that the Canadian governments, both the federal government and the government of Ontario, should be there on a proportional basis, doing its bit in order to get a proportional share of the investment in jobs at the end of the day, ’cause for GM and Ford and Chrysler, they’ve been operating continentally for 40 years; it doesn’t make sense to kind of take a big knife and try and cut off the Canadian plants, which are some of their most efficient plants. So you might as well try to solve the problem on a continental basis. Now, the question I think you’re getting at is: how do you guarantee the public interest in that? And part of that has to be that you’re going to ensure a viable plan going forward, that you’re not just throwing money at these companies, and then they’re going to declare bankruptcy in six months anyway; secondly, that they’re not going to take the money and run in the sense of putting them into operations in other countries. And there’s various ways you could do that. You could tie it to particular investments; you could tie it to a particular product or job targets. One thing they did in the 1979 restructuring with Chrysler was they gave the government an option to buy shares. It was a share option that if the company returned to profitability, they could buy the shares and either hold them to keep an equity investment, or what they ended up doing, which was just exercising the options and making money off of the fact that Chrysler could now succeed, and so the options had value. So both the US and Canadian governments that assisted Chrysler in ’79 made hundreds of millions of dollars of profit off of that exercise. Or you could also see government staying on as a permanent shareholder. Volkswagon, which, Justin, I think, was the world’s most valuable traded corporation for a couple of days two weeks ago, has a significant public ownership share from the state government in Germany, and it’s done very well. So I think all of those options are on the table. Clearly the government has to make sure the public interest is protected, and more importantly make sure there’s a viable plan, ’cause I’m not in favor of a bailout if a bailout just means throwing money at the problem and hoping that that solves it, ’cause it won’t.
CAHILL: And finding ourselves perhaps in the same position six months from now. Justin, what about you? How do you respond to the idea of some ongoing government control?
FOX: The legislation that’s in front of Congress right now, there are some strings tied to it, but not very serious. They just didn’t have time to really plan out anything like Jim was just talking about. I mean, the Chrysler deal in ’79 was in a way a sort of bankruptcy lite. I mean, creditors had to give, workers had to give some, and shareholders, well, they’d already given a lot. So it was this way of dealing with some of the things you deal with in Chapter 11: reduce your debtsï¿½.
STANFORD: Without actuallyï¿½I’ll finish your sentenceï¿½without actually going into bankruptcy protection.
FOX: What’s going on in the US right now and in financial markets globally is dramatic enough and severe enough that I think there is some case for structuring some sort of rescue plan. I do think that with what’s been talked about on Capitol Hill this week, all they’re really talking about is try get them some money to get them through till January 20, when we have a new administration that’s more in the mood to sort of figure out something long-term and isn’t about to leave office.
CAHILL: Right. So the idea of some level of public control to you isï¿½.
FOX: I’m uncomfortable with it for really long term, but I’ve got to say a lot of these things Jim’s saying, you know, ten years ago I would have said, “That’s crazy. We’re doing great in North America without any sort of support for our auto industry, and we have all these great new industries coming up.” And there is an issue with all these countries around the world supporting the auto industry. That’s one of the reasons we have a certain amount of global over-capacity in the auto industry. But, I mean, this is a different age, and I do think there’s some arguments to be made. I mean, in the US we go to great lengths to protect our sugar growers, which is absurd, and we do nothing for our automakers. So I don’t know. I’m uncomfortable with the idea of long-term ownership, and I just have this feeling we’d mess it up if we tried it. But some shorter-term, helping-them-reorganize sort of figuringï¿½. And I guess to me the biggest thing is figuring out a way in the US to help them deal with these retirement and retiree health care commitments that they’ve made, because they made them after World War II. This was public policy in the US, to encourage big companies to take on these really big commitments. And no one thought then that GM, which was then, you know, the greatest, most dominant company on earth, would ever not be the greatest, most dominant company on earth. And so it was planned pretty poorly. I think there are other countries have also messed up retirement planning in big ways by not setting aside any money for it at all. What we do is we use it very inconsistently. I’ve got to think, and I would hope, that one of the big things Congress and the US will be talking about over the next four years is both some way to get health care so it’s not so completely tied to the employer, and second of all some way to create a supplemental retirement system beyond social security that’s, you know, funded by people putting money in but is something more than the kind of haphazard system we have right now in the US.
CAHILL: M-hm. But it certainly seems like there’s a lot of restructuring that can be done right across the board, and I think obviously the new president-elect, Obama, will be busy, perhaps, working forward over the next four years and perhaps longer. Who knows? Jim, any final words on this matter?
STANFORD: No. I think Justin’s final comment there was bang-on, frankly. I think we’ve got to look at other ways of structuring our high-value industry so they are sustainable on an ongoing basis, ’cause we can’t leave it up to the Wal-Marts and the fast food outlets to provide our jobs in the future. We’ve got to have high-value, high-productivity jobs to have strong communities, and we’ve got to find a way to fund them on a sustainable way, both environmentally and economically.
CAHILL: Yeah. Of course, this little discussion really has only just touched the surface of all the issues involved. And perhaps we can talk again, perhaps after the bailout if it goes through, or if it doesn’t go through, perhaps we can have another talk about the ramifications following that. But I do thank you both for your time. And thanks to you for watching. At The Real News we will continue to provide you with more information on North America’s auto industry as decisions are made. As always, we encourage you to spread the word among friends and colleagues about our programming, and, if possible, to donate and keep us growing.
Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.