Last night the rescue of the U.S. auto industry collapsed. This morning GM is already talking about closing 21 plants across North America. Looks like even more workers will be getting some form of a pink slip for the holiday.
I am no fan of how U.S automakers have done business over the years, nor am I a fan of their environmental negligence. In fact I know Henry Ford was a fascist fond of the Nazis and GM had its tendencies as well. If you have seen Roger and Me you are not likely to be too fond of General Motors' business practices. However, I am aware that the U.S. auto industry is one of the few manufacturing bases in left in the United States.
The failure of providing U.S. auto companies a heavily conditioned bridge loan of $14 billion dollars by a Senate that eagerly provided Wall Street with 700 billion no strings attached dollars I find rather sickening. Not to mention, some of the same people voting against this rescue package voted for huge incentives and tax breaks to bring foreign auto-makers into the United States.
I understand there are many people out there who are upset about the idea of "tax payer" money going to "bail out" private business. I say I'd rather have the money I pay in taxes go to keep good jobs in the U.S. than line the pockets of military contractors in Iraq. There is a lot of misinformation being spread around that this economic situation is because of the workers' wages. Please don't believe it. If we start to believe that someone receiving good wages and benefits is causing the downfall of an industry, we put ourselves on a slippery slop. The wages and benefits union auto workers receive were the result of many years of struggle, strikes, and negotiation. They've earned it. You can read more of the specifics about the wages and such here.
The unfortunate reality is that if the automakers do not find some form of money injection to stay afloat, the industry is going to go under, and good jobs are going to be lost. The companies are by no means innocent here, they've made some really poor decisions, but the current economic situation and credit market screwed them. In fact the shutdown of one or more of the U.S. automakers could eliminate up to 3.3 million jobs here in the U.S.
Earlier this fall we saw politicians scramble to bail out the white collar bankers on Wall Street. There was no discussion of how the people from that sector traveled to Capitol Hill, not too many questions asked, no talk about having to reorganize the management of their companies. They said the sky was falling and after some deliberation $700 billion dollars was made available to them. Shortly after some of it was used to pay for CEOs to go to resorts.
Honestly, it looked like Washington was giving away money, so why not come to DC and ask for it?
However, when blue collar industry with high union density comes to town, who actually manufacture tangible goods to be sold (not simply take risky bets on their success), their CEOs were scolded for flying private jets to Washington, DC. Ahem! When was the last time you sat next to a CEO of a former Fortune 500 company in coach on an airplane!?! If anyone is going to fly on a private jet it is a CEO. Now it doesn't make it right, but why weren't the Wall Street folks asked the same question?
Now the politics of this gets interesting. Obviously there was a backlash against the Wall Street Bailout. Additionally, we just had an election where the Republican party got spanked. That political spanking was partially brought to you by your friendly neighborhood union (and they did it like this.) On one side we have the public obviously agitated by another "bailout" and we have Republicans seeing an opportunity to screw a political rival.
The politics of this situation go way beyond the fate of the American automakers, the suppliers of those automakers, the companies that transport the autos, everyone employed by these companies, and their retirees. Senate Republicans seized on an opportunity they could spin to get points in the public opinion polls. While doing so they could payback against a major industrial union, and payback states like Michigan and Ohio who decided to desert the GOP in the last election. Also since the GOP's post election stronghold in the South, this would give a potential advantage to Japanese auto manufacturers who disproportionately do business in their southern states.
Now the Republicans are doing there best to point the finger at the union for the failure. Let's be crystal clear about this, the United Auto Workers (UAW) have made many concessions in this entire process (read here and watch here). The Republicans wanted to restructure the entire auto industry on the backs of the workers and retirees, singling out workers and retirees for different treatment, making them shoulder the entire burden of any restructuring, and subsequently breaking one of their biggest political adversaries (the UAW.) While on the other hand, the UAW having already stepped forward, made enormous concessions, and also made it clear on the eve of the Cloture Vote that the union was prepared to make further sacrifices. Now if you were to decide who was to blame, who better fits the mold?
The silver lining to this while mess is that Republicans will feel political fallout from this move. With this action it seems that the Republicans have not only written off New England and the Mid-Atlantic, but the Midwest. They can also kiss any support from Indiana, Ohio, Michigan, Wisconsin and Minnesota goodbye. Hope they enjoy the limited territory in their Dixie and Plains base.
Hopefully Bush will at least want to assure that the cause of our countries entire economic ruin does not occur during his tenure, and release some of the TARP funds to the auto-industry. If that happens that would be one way to assure that "Main Street" sees the benefit of "Wall Street's" $700 billion gift.
In the meantime, the rest of us should just brace ourselves, as its bound to get a whole lot worse until it gets better.
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