Detroit Debacle

by Bill Onasch / November 2008

With new hires coming in at $14 an hour, and billions of tax-payer dollars available for retooling, you might think the Big Three would have a bright future. But they claim they are in imminent danger of collapse.

While some of this is hype—needed to justify even more help from the government and union—there is no question that the industry as a whole faces serious trouble, the Big Three more than the transplants, and Chrysler most of all. There’s no light at the end of the tunnel.

Chrysler’s current step-parent, owning 80 percent, is strip-and-flip Cerberus. This unsavory outfit—whose board includes former Treasury Secretary John Snow and former Vice-President Dan Quayle—desperately wants to move the smallest of the Three. The deadbeat dad who sold out to Cerberus, Daimler, recently listed the value of their remaining Chrysler stake as "zero."

Cerberus’s first choice would be to swap Chrysler to General Motors in exchange for total ownership of GMAC credit. Both sides are agreeable—but lack the cash needed to complete the deal.

Chrysler has also been in talks with Renault-Nissan but that appears to be going nowhere. Yet another option would be for both Chrysler and GM to file for bankruptcy.

All of these options are bad news for Chrysler and GM workers. If GM gets Chrysler it would be as the final flip-and-stripper, with tens of thousands of jobs lost. Chrysler workers wouldn’t fare much better with Renault-Nissan. And bankruptcy could lead to the abrogation of even the existing surrender UAW contracts. Even the VEBA, established to secure retiree health care, could be vulnerable.

Of course, there’s yet another option the bosses may offer—an additional big government bailout coupled with even more draconian concessions by the UAW. (The last IUE-organized GM plant has now been closed.)

UAW President Ron Gettlefinger has made his displeasure clear but said little else. When a reporter asked him about the possibility of reopening contract negotiations with the Big Three, he snapped, "next question."

Like most of the economy, auto is facing a crisis of overproduction. There is simply more production capacity than will likely ever again be utilized. This is just beginning to be "corrected" through plant closings and mass layoffs.

Traditional calls for reducing hours of work with no cut in pay to share the work are still valid. When the auto industry was organized wall-to-wall by the UAW, this would have been a realistic demand for collective bargaining. But today the majority of the industry is unorganized and the UAW segment is the weakest in the market. We can only expect to win such measures now by taking political power and implementing them by law.

And when the Big Three now, and the transplants later, abandon plants—such as those in Janesville, Wis., and Moraine, Ohio, just this past month—we should demand that the government take them over. Using the same skilled workforce, with union contracts intact, we could put them to work as part of a new public sector, making things we need—transit vehicles, wind turbines, PV and CSP solar power, and materials for green building construction and renovation.