[corp-focus] The Nasty Class and Anti-Union Bias of Auto Bailout Opposition

[robert weissman]

The Nasty Class and Anti-Union Bias of Auto Bailout Opposition,
or the Wall Street-Detroit Double Standard
By Robert Weissman
December 12, 2008

Nancy Pelosi says the Congressional Republicans are playing Russian 
Roulette with the economy by refusing to agree to an auto industry bailout.

But for that metaphor to work, you have to add that they've loaded the 
gun with six bullets.

The only hope is that someone -- Treasury Secretary Henry Paulson or 
Federal Reserve Chair Ben Bernanke -- will come in and prevent the 
trigger from being pulled. Luckily, it appears they are ready to do so. 
A statement from the Bush administration this morning signaled that it 
would find a way to keep the Big Three automakers in business until next 
year, when a more comprehensive bailout and industry restructuring 
package can be worked out.

What is remarkable about the Senate Republican refusal to agree to a $15 
billion loan deal for the auto industry is that they are not serving any 
corporate interest. A collapse of the U.S. auto industry would be bad 
not just for the Big Three, and the supplier networks and auto dealers, 
but pretty much every sector of the economy, including Wall Street.
Earlier this week, U.S. Chamber of Commerce President and CEO Thomas J. 
Donohue urged that "Congress must immediately authorize bridge loans to 
America’s carmakers to prevent the collapse of the U.S. auto industry 
and the devastating impact it would have on the economy, American 
workers, and national security."

The motives for the Republicans appear to be narrow political 
calculation that the public is tired of industry bailouts (a foolish 
political read, because if the Republicans permit the auto industry to 
fall into recession-worsening bankruptcy, they will pay a political 
price for at least a generation); a hypocritical claim that they oppose 
government intervention in the economy (contradicted by everything from 
Republican-approved state tax breaks for Honda and Toyota assembly 
plants to Ted Stevens' earmarks, from public insurance and loan 
guarantees for the nuclear industry to subsidies for weapons exporters); 
and a vicious anti-unionism and anti-working class bias.

The Republicans say the failure to reach a Congressional deal on the 
auto bailout rests with the United Auto Workers, who refused to reduce 
wage scales to match those of non-unionized workers in Japanese auto 
company plants in the United States.

Actually, Japanese plant wages have always been close to those of the 
UAW, and the UAW has agreed to cut wages for many new workers almost in 
half -- with many new jobs starting at $14 an hour. (GM says that, for 
these new hires, overall per-employee costs will decline from the 
totally misleading $78 per hour to $26 an hour.) But there's no logic in 
chasing non-union wages down as a way to be competitive, because the 
non-union employer can always unilaterally lower them below those 
reached through collective bargaining.

There is a special cruelty and nastiness in the idea that unionized auto 
workers, who do very dangerous, physically demanding work with minimal 
opportunity for creative expression, are excessively compensated or 
enriched by unreasonably generous health insurance plans.

Here are a few points of comparison with an industry where physical 
demands and workplace safety hazards are minimal, and where white-collar 
employees brag about how they are free to be innovative. Like the U.S. 
auto industry, Wall Street has also fallen on very hard times due to 
spectacular mismanagement.

* Auto worker compensation makes up a small cost of manufacturing a car 
-- less than 10 percent. So, you can slash wages as much as you want, 
but you won't bring costs down much. By contrast, as you would expect in 
a service industry, compensation makes up a huge portion of costs for 
the financial sector. The New York state comptroller lists employee 
compensation costs as equivalent to more than 60 percent of 2007 revenue 
for the 7 largest financial firms headquartered in New York City. At 
Goldman Sachs, employee compensation made up 71 percent of total 
operating expenses in 2007.

* UAW contracts give workers the right to retire after 30 years of 
laboring, with pensions and healthcare. This week, Goldman Sachs 
announced that, given the hard times, it was considering raising its 
retirement requirement to the industry standard of the rule of 60 (from 
Goldman's current 55). Under that rule, you can retire with nice 
benefits after any combination of age and service totaling 60. So, if 
you've done 15 years service at age 45, you're eligible.

* In 2007, average wage and benefit costs per employee at Goldman Sachs 
were $661,490. Even using misleading and wildly inflated auto industry 
claims, UAW workers cost $150,000 a year.

* Congress has allocated $700 billion to bailout Wall Street, but the 
overall total is higher by an order of magnitude. Including all of the 
loans, investments, swaps, guarantees and more, the federal government 
(including the Federal Reserve) has doled out more than $7 trillion to 
Wall Street. The auto industry said it was looking for $34 billion, 
Congress was debating $15 billion, and analysts say the auto companies 
might ultimately need something like $100 billion.

Most of those funds -- for both Wall Street and Detroit -- are various 
kinds of loans that will be paid back, many accompanied by the right to 
make money if beneficiary stock prices rise in the future.

But some of the money for Wall Street is almost certain to be lost. 
Notably, the government has agreed to accept losses up to $250 billion 
on a $306 billion pool of Citigroup mortgage-related assets that are 
certain to show major losses. So, the government is on the hook to 
Citigroup, with the certain prospect of enormous losses that are likely 
to be more -- just for this one financial behemoth -- than the total 
amount the auto industry will seek in loans.


Robert Weissman is editor of the Washington, D.C.-based Multinational 
Monitor, <http://www.multinationalmonitor.org> and director of Essential 
Action <http://www.essentialaction.org>.

(c) Robert Weissman

This article is posted at: 
<http://lists.essential.org/pipermail/corp-focus/2008/000307.html>.