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Motown blues or Detroit green?

Barack Obama announced earlier this month that he will not accept the restructuring plans put forward by the management of GM and Chrysler, giving them two and one months respectively to make another, more drastic proposal if they wish to receive the billions of dollars in government loans they are applying for. The White House report targets both the management and the union for criticism, yet the media has focused on the need for workers to make concessions in order to allow for the development of a viable auto industry, with little attention paid to the vision being put forward by management. Senior Editor Paul Jay visited Detroit, Michigan to find out how workers are responding to this situation.

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Story Transcript

GM Headquarters

Detroit, Michigan

PAUL JAY, SENIOR EDITOR, TRNN: As General Motors goes, so goes the nation. That’s what used to be said about American manufacturing, while some people are saying the current Obama plan is trying to breathe life into a dying corpse. If so, what does it mean for the future of American manufacturing? And is there a way to breathe new life into a whole new vision for American auto and American manufacturing? President Obama said he’ll not see the US auto industry go down on his watch, but he laid out his government’s tough response to the recent proposals from General Motors and Chrysler, who are applying for further government loans to keep them out of imminent bankruptcy.

BARACK OBAMA, US PRESIDENT: Each company has submitted a plan to restructure. But after careful analysis, we’ve determined that neither goes far enough to warrant the substantial new investments that these companies are requesting. And so today I’m announcing that my administration will offer GM and Chrysler a limited additional period of time to work with creditors unions and other stakeholders to fundamentally restructure in a way that would justify an investment of additional taxpayer dollars.

JAY: The White House rejection makes equal targets of both the workers and management, suggesting that workers must concede on more of their benefits, while chastising management for unrealistic business forecasts and a lack of vision for a competitive product. This brought about what amounts to a firing by the White House of General Motors CEO Rick Wagoner, immediately replaced by his hand-picked successor, chief financial officer Fritz Henderson. Despite this, the US media has identified the workers as the central obstacle to competitiveness. Take the line of questioning from NBC’s David Gregory during his Sunday morning interview with GM’s new CEO, who’s asking for $16 billion in government loans to add to the $13 billion received in December.

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DAVID GREGORY, HOST, NBC’S MEET THE PRESS: Well, let’s talk about how you can do more. How many union jobs are there in a typical factory for General Motors that have nothing to do with producing an automobile?

FRITZ HENDERSON, CEO, GENERAL MOTORS: Well, actually, every job we have a factory has something to do with producing an automobile.

GREGORY: In some factories, you have a shop steward who’s responsible for appointing—whether it’s a civil rights chief foreign education person, these are all union jobs that don’t have anything to do with producing the car. You have told health-care managers and executives over 65 that they no longer get health-care benefits; they have to revert at that point to Medicare. Is it time for union workers to accept that same limit?

HENDERSON: David, but provision of health-care to our hourly employees will basically vest to the responsibility of a VEBA trust, effective January 31, 2010. The VEBA trust will be responsible for determining the level of benefits, and I can’t really forecast, if you will, what decisions they are going to make.

GREGORY: But do you think that’s the kind of cut that the union should have to accept?

HENDERSON: Not for me to say, David.

GREGORY: Do you really expect this president, given how strongly supported the years by the unions, do you really expect him to take a step that would hurt the unions? What is the message to the union now? Doesn’t it have to be "Those days are over"?

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JAY: To tell us what they think of President Obama’s plans, we’re now joined by Tiffany Ten Eyck, who writes for Labor Notes, based in Detroit, and Frank Hammer, who used to be president of a transmission local for General Motors in Detroit. Thanks for joining us.

TIFFANY TEN EYCK, LABOR NOTES, DETROIT: Thank you.

FRANK HAMMER, FMR. PRESIDENT OF UAW what would isLOCAL 909, GM: Good evening.

JAY: So, Tiffany, what is your take on Obama’s plan? And what do you make of the argument that people watching this are going to say? Autoworkers have had it relatively good in terms of being—especially when compared to unorganized workers. So why shouldn’t auto workers make these kinds of concessions if that’s what it takes for these places to survive?

TEN EYCK: There’s a real myth right now that autoworkers make a tremendous amount of money, that there’s a greedy autoworker. We’ve been hearing in the media that autoworkers make something like $70 an hour. And these statistics are completely inflated.

JAY: So what’s the facts?

TIFFANY: Right now, an entry-level autoworker, because of concessions, comes in and makes $14 an hour. That’s not the kind of money that you need to make to make it on an assembly line of work right now. You have autoworkers who might be making $50,000 a year who right now are being told by the general public and by the media that they’re greedy for making a middle-class wage.

HAMMER: The 10 percent of the expense of a car is what’s attributed to labor costs at the max. So the idea that autoworkers are the cause of the company’s problems, I think, has been one of the most major forms of misinformation that has gone out to the public, that it somehow seems that autoworkers are too expensive. On the contrary, it’s by virtue of the fact that we made the wages of an autoworker at $28 an hour that has enabled us to buy the vehicles that we make. The autoworker that works at the Mexican GM plant cannot afford to buy their car.

JAY: Now they’re saying that the auto industry in Detroit has to be competitive with the auto industry in the southern United States or non-unionized plants.

HAMMER: Okay.

JAY: So what is the case [inaudible]?

HAMMER: Well, one of the things that makes GM less competitive than Toyota is that Toyota are relatively new plants. Toyota, Nissan, Mercedes, they’re all within the last 10, 15 years. They have no retirees to speak of, so they don’t have the so-called legacy costs, whereas General Motors is a company that’s been around 100 years—of course it has costs. Toyota and all the other companies don’t have those problems as of yet, but they will in a matter of time.

JAY: One of the big pieces of his proposal is that somehow he wants the auto industry to get rid of what they’re calling the "legacy debt."

FRANK: The legacy cost that they’re talking about is primarily the health care of retirees, which has become extremely excessive by virtue of the fact that the companies have been buying out all these workers and putting them into retirement, whereby they can get younger workers at a lower wage, so that the exiting workers were making approximately $28 an hour and the new workers that are going to be coming in are going to be paid half that, are going to be paid $14 an hour. Well, to expedite that process, they’ve swelled the ranks of retirees to the point that it is genuinely a burden on the company. And there was a solution that the UAW and GM had agreed to, starting in 2005, reaffirmed in 2007, that both parties, both the company and the union, would seek to have health insurance on a national scale, lifting the burden off the companies and generalizing it to the society as a whole to include non-insured, and that way relieve General Motors of the burdens that other companies—. For example, Toyota, or whether it be Volkswagon, they have national health insurance in those countries. They can compete on a more level playing field.

JAY: Or Canada, for that matter.

HAMMER: But what happened is that even though they agreed to do that, they walked away from that agreement, both parties walked away from that agreement, and instead agreed to shift the burden from General Motors onto the UAW in the form of this independent trust. And even though the president, Gettelfinger, promised when they did this that it would be good for 80 years, here we are 18 months later and the thing is in the trashcan and nobody’s making any effort to make a guarantee how long this will serve the retirees and their health-care needs.

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RONALD GETTELFINGER, CHIEF PRESIDENT, UAW: Now, what we did in ’05 and ’07, we reduce the company’s liability by 50 percent when we put those VEBAs in place then. So now to take that and reduce it even further by accepting stock, which is passing risk on to us, was a major move on our part, and we believe it was the right thing to do.

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JAY: The the so-called voluntary employees beneficiary association (or VEBA) plan saw the union take on retiree health-care benefits in return for $40 billion cash from the companies. In February, the UAW agreed to accept 50 percent of Ford’s debt to them in the form of company stock. This promise of health care for retirees then, is that under threat, do you think, in these Obama proposals?

HAMMER: Absolutely. The funding of it is being threatened, because if half the retiree health-care costs are going to be based on how well the stock is doing for General Motors or for Ford or for Chrysler, well, that’s just gambling on health care, and that’s what that’s doing.

TIFFANY: Particularly when we talk about bankruptcy. Bankruptcy is constantly on the table in this debate, and bankruptcy is the quickest way for a company to get rid of all of its obligations to workers, which would mean an already underfunded plan covering health care would be essentially gone at that point.

JAY: And bankruptcy is on the table, as was confirmed by GM’s new CEO on Meet the Press on Sunday.

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GETTELFINGER: Well, The administration basically said the same thing. It may very well be the best alternative. As I look at the situation, we need to accomplish a set of goals, and accomplishing those can’t be compromised. So if it can’t be done outside of a bankruptcy process, it will be done within it.

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JAY: So what’s at the root of the problem?

HAMMER: They have not made enough changes to anticipate the new economy and to anticipate the changes in energy, and so they’ve sort of been lagging behind. While Toyota was marketing a Prius, General Motors was still insisting on trying to make money off of Hummers.

JAY: Now, people say the unions went along with all this. There was very little from the unions opposing these kinds of strategies.

HAMMER: In my experience, the UAW has been, unfortunately, playing the role of enabler in an attempt to defend autoworkers and their livelihoods. So I think the UAW resisted looking at things in terms of new energy and converting the auto companies into a more green direction for fear that this would be a calamity. Well, the calamity is what we’re facing now.

JAY: At a time when the Obama administration is spending billions of dollars to create jobs, current auto industry restructuring plans will lay off thousands more workers. at a time when President Obama is calling for a bold vision of a new, green economy, many autoworkers say these restructuring plans will destroy much of the capacity to manufacture a new, green, North American transportation system. We’ll explore that question in the next segment of "Motown Blues or Detroit Green".