Emergency assistance to domestic automakers

Thursday, December 11, 2008

The controversial subject of bridge loans to the Big Three automakers is center stage on almost every newscast these past few weeks. Because of the potential devastating consequences to workers and retirees and to the entire economy of our country, inaction by the federal government is not an option.

Together, Chrysler, Ford, General Motors and the United Auto Workers have committed to work together to solve this crisis. While the UAW relies heavily on the Big Three to provide jobs and benefits to its members, it also believes that any legislation crafted by Congress to assist the domestic automakers should meet certain basic principles:

A. It must provide an emergency bridge loan to the companies to ensure that they can continue operations and avoid bankruptcy.

B. It should impose tough limits on executive compensation, prohibit the companies from paying dividends and give the government an equity stake in the companies to protect the interests of taxpayers.

C. It should establish a government advisory board to oversee the operations of the companies to ensure that any taxpayer funds are expended in the U.S. and that all expenditures are consistent with the business viability plans and any additional requirements imposed by Congress.

D. It should require the Obama administration, early in 2009, to develop and submit to Congress a plan for the long-term revitalization of the domestic auto industry. This plan should involve all stakeholders and should include commitments by the automakers to retool facilities in the United States to produce more fuel-efficient vehicles, as well as approaches for dealing with retiree health care and pension legacy costs and other issues facing the domestic automakers.

As the auto crisis threatens the entire economy, the UAW stands ready to do its part again. At a news conference last week, following an emergency meeting with UAW local and regional leaders, Ron Gettelfinger, president of the UAW said the union is willing to "take the extra step" to aid the industry. Union leaders, he said, have agreed to delay automakers' payments to a union-administered health-care fund and to modify the union's job banks program that provides laid-off workers with a portion of their wages and benefits. But he reiterated that UAW members already have agreed to wage and benefit concessions that have lowered labor costs at the Big Three. Terms of the current contract will lower those costs even further.

During the debate on the auto industry assistance, news reports -- especially conservative commentators -- have focused on labor costs. Some, such as Fox News anchor Gregg Jarrett, have gone as far as laying the blame for industry's failures at the feet of the workers and the UAW. But labor costs are about 10 percent of the costs of producing a vehicle. The other 90 percent includes research and development, parts, advertising, marketing and management overhead.

On Dec. 1, on "The Rachel Maddow Show" on MSNBC, United Steelworkers president Leo Gerard said blaming workers is a "phony attack."

"An auto worker who makes $57,000 a year, working some overtime, who produces a good car, who has a half-decent pension who now has had their pension equity whacked by more corruption and calamity on Wall Street, who has some decent health care after working 30 or 40 years in the workplace, an employer that's trying to provide that health care because it's the only country on earth where society doesn't get its health care provided through a universal system ... and all of the sudden, we're going to blame the workers? It's not the workers' fault."

It is important that Congress act this year to approve legislation containing these essential principles. Inaction is simply not an option. The consequences of a collapse by the domestic auto companies would be truly devastating:

* 3 million lost jobs.

* Pension and health-care benefits cut for 1 million retirees, spouses and dependents.

* Thousands of other businesses -- dealers, suppliers and others -- would be threatened.

* Huge pension and health care costs shifted to the federal government.

* Negative impact on the entire economy, making the current recession much worse.

* Drop in revenue to federal, state and local governments, forcing cuts in vital social services.

Making the case for assisting the Big Three shouldn't be so hard. Consider this:

CNN Headline News did a short news listing regarding Ford, Chrysler and GM's (and others) contributions after 9/11 to the relief and recovery efforts in New York and Washington. The findings:

1. Ford -- $10 million to American Red Cross matching employee contributions plus 10 Excursions to the New York Fire Department. The company also offered emergency response team services and office space to displaced government employees.

2. GM -- $10 million to American Red Cross matching employee contributions of the same number and a fleet of vans, SUVs and trucks.

3. Daimler Chrysler -- $10 million to support of the children and victims of the Sept. 11 attack.

4. Harley-Davidson motorcycles -- $1 million and 30 new motorcycles to the New York Police Department.

5. Volkswagen -- Employees and management created a Sept 11 foundation, funded initially with $2 million, for the assistance of children and victims.

6. Hyundai -- $300,000 to the American Red Cross.

7. Honda -- Nothing, despite boasting of second-best sales month ever in August 2001.

8. Porsche -- Nothing. News release with condolences via the Porsche website.

9. Toyota -- Nothing, despite claims of high sales in July and August 2001. Condolences posted on the website.

10. Audi, BMW, Daewoo, Fiat, Isuzu, Mitsubishi, Nissan, Subaru and Suzuki -- Nothing.

Mark Baker is president of the Central Trades and Labor Council of Cape Girardeau AFL-CIO.

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