Crunch Time for the Big 3
There is a paradox at the heart of the proposed bailout of the auto industry. The rescue would have no chance of passing without the muscle of the Big Three's unionized workforce. Yet you can't turn around without hearing someone trash autoworkers for the terrible crime of trying to earn a decent living.
The CEOs of Ford, General Motors and Chrysler, having blown their plea for help last month, deliver their revival plans to Congress today and face their big test later in the week when they defend them. Democratic congressional leaders desperately want to help an industry that accounts, directly or indirectly, for some 3 million to 5 million jobs. But House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid were astonished at how unprepared these corporate titans proved the last time.
By flying into town on private jets and offering few answers to their congressional interlocutors, the big shots suggested that they didn't understand that people begging for taxpayer money owe a certain deference to their potential benefactors. They must have thought they were running Citigroup.
The auto companies are having trouble securing help precisely because members of Congress are overwhelmed, even appalled, by the hundreds of billions of dollars they have already shoved out the door on behalf of the finance industry. One of Pelosi's top lieutenants referred to the phenomenon as "bailout fatigue."
Yet the auto industry will almost certainly be tided over precisely because the economy is in such turmoil. The dominant view in Congress is that the country can't afford to risk the financial and human calamities that bankruptcy by the Big Three would inevitably trigger.
Assuming the CEOs have done their homework, are reasonably humble and arrive in Washington by less ostentatious forms of transportation, Democratic leaders are likely to push for one of two forms of aid.
The House and Senate leadership is inclined to give the industry the full $25 billion it seeks. But a top congressional aide said it is not yet clear that a bailout that large has the votes to pass both houses, let alone get the backing of President Bush, who would have to sign the bill. Plan B would involve passing enough assistance to keep the companies solvent until President-elect Barack Obama takes office. Obama -- who carried Michigan by more than 800,000 votes and swept the rest of the industrial Midwest -- has strongly signaled that he would support a properly structured bailout.
But "properly structured" is in the eye of the beholder, and if this bailout happens, it should reflect the core reason it will pass: Long-term economic growth depends on a well-paid middle class (and that definitely includes autoworkers) with real purchasing power. If saving our auto industry means moving GM workers ever closer to Wal-Mart wages, the bailout isn't worth doing.
A hideous class bigotry has disfigured this debate.
The failure of the Big Three is regularly attributed to the high wages and benefits earned by members of the United Auto Workers union, and it's true that the Detroit-based auto companies operate under heavy "legacy costs" for retirees' pensions and health coverage negotiated during the industry's fat times.
But the blame-the-workers-first cant ignores the fact that if the Big Three had designed better cars, they would not have lost as much market share to Toyota, Nissan and other competitors. The unions did not prevent management from producing a better product -- and I say that as someone who has enjoyed driving Saturns for the past 15 years.
It's also nonsense to say that the UAW has been indifferent to cost issues. The last auto contract included so many givebacks, on top of revisions in an earlier pact, that Ron Gettelfinger, the UAW president, was threatened with a rank-and-file rebellion. He told a House committee last month that because of "these painful concessions," the gap in labor costs between the Detroit-based auto companies and the "foreign transplant operations," as he called Toyota and the others, "will be largely or completely eliminated by the end of the contracts."
Appearing Sunday on CNN, Gettelfinger signaled that his union was prepared to make further concessions. So the burden this week should be on the CEOs to explain how this rescue could be a good deal.
Unlike the other bailouts, this one could provide a model for how management and labor might team up to create better companies in a fairer, more productive economy. If this actually happened, the taxpayers would get their money's worth. But if all that's on offer is a plan to buy the CEOs a few more months or years, they should drive back to Detroit empty-handed.