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Auto bailout for who? Pt1

PAUL JAY, SENIOR EDITOR, TRNN: December’s $17 billion bailout of the US auto industry may have bought GM and Chrysler some time, but it remains to be seen what will become of the once-mighty Detroit auto sector in the long run. So what’s responsible for bringing the industry so close to the brink? And what solutions are being offered? Joining us is Sam Gindin, who recently retired as assistant to the president of the Canadian Auto Workers’ union, and now a professor of political science at York University in Toronto. Welcome, Sam.

SAM GINDIN, PROF. POLITICAL SCIENCE, YORK UNIV.: Good to be here.

JAY: So let’s go back. In 1979 Chrysler was in crisis and got, I guess, Bailout 1—or maybe there was one before. I don’t know. But a big bailout. And now we’re back in the auto industry in deep crisis plus the general crisis of the economy, ’cause I think even without the general crisis the auto industry would have been in a lot of trouble anyway. So give us the context. How did we get here?

GINDIN: Well, you’re absolutely right. I mean, in terms of the present moment, all the companies are in crisis. But what has to be emphasized is that GM and Chrysler and Ford were already in trouble before this crisis emerged, and the length of this crisis is going to affect very much about whether they survive. But the background of it is there’s a couple of things that I think are very important. One is that it wasn’t just a matter of them making dumb decisions, although you could blame them for that. There was actually a very conscious decision, going back to the energy crisis in the ’70s, that they would leave the small car market to the Japanese, that if they began to develop small cars themselves, they’d actually be competing with themselves, and it’s the bigger cars that are so profitable. So they said, “Well, let them have that part of the market.” What they underestimated [inaudible]

JAY: ‘Cause the profit margin is, in theory, bigger on the bigger cars.

GINDIN: It’s much larger on the bigger cars. Doesn’t take as much cost to actually build them, but, you know, the revenue’s so much higher. So one of the decisions was to just leave that part of the market, underestimating the potential of the Japanese to move up. And you have to remember that the Japanese didn’t move into the small car market because they were so smart and thinking about energy; it’s ’cause they couldn’t compete at the other end of the market with the Detroit companies. All they could come in and compete at was in terms of small—basically they were called “tin cans” at the time that were very cheap.

JAY: Now, in an article you wrote recently, you said that as early as after World War II the unions were pushing for smaller cars.

GINDIN: Well, there were two things that the unions were pushing for, going back to the late ’40s, early ’50s, that were crucial to what was going on. One was that they were arguing for a small, fuel-efficient, light vehicle, and that was also safe, and they were talking about using aluminum, etcetera. Of course, they were told that “Well, that’s none of your business. You’re just workers. You don’t know what you’re talking about.” And that was cast aside. The other thing that the unions were doing, which is very important to the story, is that they were arguing for national Medicare, a public health care plan, and they couldn’t get it. The companies weren’t interested in it, and so they ended up just negotiating a private health care plan, which the companies liked because it kind of locked workers into—it made it less likely the workers would leave, and it locked them in, and it gave them some control over workers: you didn’t want to lose your job because the health care was so important. And this is a very major part of the story, because this attempt to privatize the welfare state to the companies, ’cause it’s an insurance program, basically, the problem with it was that it worked fine if you were growing. As soon as you stop growing, you have all these retirees that you have to worry about, who you have to pay with health care, and then you’ve got an increasingly shrinking workforce. So just an example right now: GM has something like 480,000 retirees and surviving spouses and about 75,000 active workers, and that’s falling very fast. Toyota has something like—the last number I saw was 283 retirees. Not 283,000. Two hundred and eighty-three. So GM is saddled with this enormous load. And the more they try to be productive and lay off workers, it’s a fewer number of workers carrying this. So it’s those two things that I think have been very critical, the decisions that they actually made, because their shareholders were demanding higher profits, and this management they wanted to do that, to not move into different kinds of vehicles, and they kept postponing that.

JAY: Now, everybody knows, including GM, that at the very least capitalism goes through these cycles, and there’s going to be times of recession and layoffs and all of this. So, I mean, they had to know that this math was going to catch up to them.

GINDIN: The health care issue? Or the—?

JAY: All of it. Yeah, all of it.

GINDIN: Well, all of it. I mean, in terms of the small cars, for example, you know, we can all say, well, it’s pretty obvious the environment at some point is going to become an issue. But the reality is American oil prices have been low. They’ve been, you know, a half, often a third, of what they are in Europe, which reinforced buying the larger cars. Some people buy the larger cars because if you’ve got a small car and most cars are large, they don’t feel safe, etcetera. So there was a logic both ways. You could say, yeah, maybe down the road this is going to change, but meanwhile we’re really making the big bucks on these cars, and people are going to buy them as long as energy prices are contained, and we’ll adjust when the time comes. The problem was that when the adjustment came, you had this perfect storm. It was not just that the Japanese were there to take advantage of it, but you ended up in this other crisis that really made the adjustment so much harder. And it would have been a difficult adjustment anyways, which they’ve been going through for a long time. And on the health care issue, yeah, they’ve been trying to deal with it. So the question is: how do you deal with this? Do you start lobbying for a health care plan ’cause you say, “Hey, this isn’t going to make sense”? Or do you say, “Well, we’ll just shift the cost to the workers”? And that’s what they did in the last rounds of negotiations. They actually took this health care plan and said to the unions, “You administer it, and we’ll give you some money for it.” But of course that soon becomes, “We’re going to postpone some of that money.” And then, with this latest loan, one of the conditions of the loan is that the funding of the health care program at GM, which is now run by the union, more than half of it has to come from GM stock. So the point is that by not resisting that, what you’re basically doing is you’re taking GM off the hook for really pushing for a public health care plan, because GM’s kind of—you know, has an objective interest in a public health care plan and socializing the cost. But as long as the union’s ready to accept the costs of it, GM can get off the hook.

JAY: So is part of the blame for the crisis the workers themselves find themselves in the union itself for making these kind of compromises along the way?

GINDIN: Well, I think the problem with workers making these compromises along the way is that as long as you start making concessions—for example, the autoworkers in the last round of bargaining introduced the idea of new workers who would be paid half the wage of the existing workers and not get up to it, permanently. And once you start doing those things, you’re doing a couple of things. One is you’re basically saying, “Look, the problem is our fault. We’ve got to try to correct it by taking concessions.” So it ends up to be a diversion from actually talking about the big questions. Then you end up dividing the union and making people feel like, “We can’t fight anyways, ’cause we can’t even keep what we have.” So you’re weakening the ability to fight back, which makes it worse. I’ll give you a concrete example. I think that in the last round of bargaining, when GM said, “We can’t afford this health care plan anymore,” the union should have said, “Well, we understand that. That’s why we need a national health care plan. We’re not going to make a concession.” And GM would have accused the union of threatening to break the company because they’re not making this concession. And that would have meant that it was on the national agenda. It’s before an election. It would have been national news. And I think it was a chance for the union to say, “Look, this is affecting everybody now. All unions are going to see their health care eroded, and then eventually their pensions, after that’s done. And then there’s the 50 million Americans who don’t have health care. We’re going to make this the issue. And if people are going to start blaming us, we’re going to get out there and explain it. We’re going to explain that this goes beyond something you can solve in collective bargaining.” And I think it would have been a chance to start reviving the labor movement. But by just accepting those kinds of concessions, you accept blame, you don’t put other things on the agenda, and the company therefore can keep moving on by saying, “Okay, we’ll just keep pushing the workers until they don’t have health care.”

JAY: Well, in the next segment of our interview, let’s look at this bailout package that Obama’s proposing or beginning to implement, in a few days will be president to implement. And are they questioning any of those assumptions? Or is this more of the same kind of logic as you were just describing? Please join us for the next segment of our interview with Sam Gindin.

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Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.