US Auto Deal Denied: Republicans in the US Senate Push World to Brink of Economic Collapse
When the history of this economic crisis (and the failure to respond to it) is written this is likely to be one of the top three failures of leadership. The first was letting Lehman Brothers fail. That spread the real estate crisis world-wide, depressed the European markets and dried up possible sources of credit in the US. The second was when the bailout funds were allowed for banking business as usual--paying bonuses and allowing further consolidation-rather than ensuring sources of credit to the largest possible numbers to stabile the housing market and keep supply and demand flowing. The third is this idiotic move to force bankruptcy on GM and Chrysler.
The cynical GOP, especially southerners in the pocket of foreign auto makers (Sen. Richard Shelby (R-Hyundai), wants to break the UAW. One of the central goals of the Republican Party has always been to limit and break unions. But this new breed wants the US to be just another Third World country, a source of cheap un-organized labor for large foreign companies who back them with campaign contributions. They appear to believe or at least argue that, if GM and Chrysler go into bankruptcy, they will be able to dispose of labor obligations and restructure--but it appears very unlikely that any US automaker who enters bankruptcy would ever emerge from it. Instead, it would likely take other US automakers and parts suppliers down with it. Further, the 5 percent stock market drop in Tokyo shows that any failure of the US auto industry would, like Lehman Bros, have negative global impacts.
We are in a very precarious state, and the petty Republicans in the US Senate are pushing us to the brink of economic collapse.
Senate Abandons Automaker Bailout Bid
By DAVID M. HERSZENHORN
WASHINGTON — The Senate on Thursday night abandoned efforts to fashion a government rescue of the American automobile industry, as Senate Republicans refused to support a bill endorsed by the White House and Congressional Democrats.
The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.
After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.
The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.
“It’s over with,” the Senate majority leader, Harry Reid of Nevada, said on the Senate floor, after it was clear that a deal could not be reached. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” Mr. Reid added: “This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”
Auto Suppliers Share in the Anxiety :Many of the small suppliers will simply liquidate because they don’t have the resources to go reorganize in Chapter 11 bankruptcy,” Mr. Casesa said. “They’ll just go away.”
It is the dire scene laid out at the first set of Congressional hearings on an auto bailout in mid-November by Ford’s chief executive, Alan R. Mulally.
“Should one of our domestic competitors declare bankruptcy, the effect on Ford’s production operations would be felt within days, if not hours,” Mr. Mulally said. He has said his company has enough cash to last through 2009, even if the current sales environment for new vehicles — down 16 percent over all so far this year — continues.
In years past, suppliers have often been able to assist a troubled automaker by extending payment periods to get through tough times.
But by Mr. De Koker’s estimation, hundreds of suppliers no longer have that flexibility. They cannot borrow money in a frozen credit market, and they cannot buy raw materials without first being paid for parts they already shipped.
The Big Three, along with their foreign competitors, are what most people think make up the entire auto industry. But the car manufacturers are just the top of the pyramid.
While G.M., Ford and Chrysler employ 239,000 people in the United States, the country’s 3,000 or so auto suppliers have more than 600,000 workers.
The cynical GOP, especially southerners in the pocket of foreign auto makers (Sen. Richard Shelby (R-Hyundai), wants to break the UAW. One of the central goals of the Republican Party has always been to limit and break unions. But this new breed wants the US to be just another Third World country, a source of cheap un-organized labor for large foreign companies who back them with campaign contributions. They appear to believe or at least argue that, if GM and Chrysler go into bankruptcy, they will be able to dispose of labor obligations and restructure--but it appears very unlikely that any US automaker who enters bankruptcy would ever emerge from it. Instead, it would likely take other US automakers and parts suppliers down with it. Further, the 5 percent stock market drop in Tokyo shows that any failure of the US auto industry would, like Lehman Bros, have negative global impacts.
We are in a very precarious state, and the petty Republicans in the US Senate are pushing us to the brink of economic collapse.
Senate Abandons Automaker Bailout Bid
By DAVID M. HERSZENHORN
WASHINGTON — The Senate on Thursday night abandoned efforts to fashion a government rescue of the American automobile industry, as Senate Republicans refused to support a bill endorsed by the White House and Congressional Democrats.
The failure to reach agreement on Capitol Hill raised a specter of financial collapse for General Motors and Chrysler, which say they may not be able to survive through this month.
After Senate Republicans balked at supporting a $14 billion auto rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a deal but deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.
The failure in Congress to provide a financial lifeline for G.M. and Chrysler was a bruising defeat for President Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.
“It’s over with,” the Senate majority leader, Harry Reid of Nevada, said on the Senate floor, after it was clear that a deal could not be reached. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” Mr. Reid added: “This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”
Auto Suppliers Share in the Anxiety :Many of the small suppliers will simply liquidate because they don’t have the resources to go reorganize in Chapter 11 bankruptcy,” Mr. Casesa said. “They’ll just go away.”
It is the dire scene laid out at the first set of Congressional hearings on an auto bailout in mid-November by Ford’s chief executive, Alan R. Mulally.
“Should one of our domestic competitors declare bankruptcy, the effect on Ford’s production operations would be felt within days, if not hours,” Mr. Mulally said. He has said his company has enough cash to last through 2009, even if the current sales environment for new vehicles — down 16 percent over all so far this year — continues.
In years past, suppliers have often been able to assist a troubled automaker by extending payment periods to get through tough times.
But by Mr. De Koker’s estimation, hundreds of suppliers no longer have that flexibility. They cannot borrow money in a frozen credit market, and they cannot buy raw materials without first being paid for parts they already shipped.
The Big Three, along with their foreign competitors, are what most people think make up the entire auto industry. But the car manufacturers are just the top of the pyramid.
While G.M., Ford and Chrysler employ 239,000 people in the United States, the country’s 3,000 or so auto suppliers have more than 600,000 workers.
posted by Faithful Progressive at 7:55 AM
3 Comments:
I worked for GM for almost 40 years and became a union member in 1962. A late neighbor of mine was like a father to me and was among the original sitdown strikers when the auto industry was unionized. I know first hand of what I say and said it internally for many years - thus becoming very unpopular with both union and management. Over the years we saw the pendulum swing way to far. GM was in decline for most of my time. Basic issues were
1. Bloated labor contracts made small cars totally unprofitable. This was as much in work rules and unjustified benefit packages as wages. GM turned control of the plants over to the union and they became unbloated with workers with jobs unrelated to the production of automobiles. 2. GM management never stood up to union abuses because they still had a high market share on those vehicles which were profitable. 3. Government regulation required the company to build the small unprofitable vehicles to meet CAFE standards. 4. The company turned it's efforts to high profit trucks which fortunately came into favor. 5. Saturn was intended as a fresh start by GM and the UAW to profitably build a small car. When the truck profits came in both the company and the union forgot about all that. 6. Foreign car companies without the union baggage set up in "red" states and avoid the UAW at all costs. They skillfully marketed small cars to get into the market, then to bigger cars and trucks. The lost market share has been the death knell for our industry. Who is to blame? First and foremost is the company management that failed to stand up and fight for competitiveness. By the time they woke up it was to late. The UAW has evovolved from an organization geared to the interest of workers to an organization dominated by greed and the statues quo. Never mind the concept of shared sacrifice just keep my personal goodies. The government is responsible for perpetuating all this with regulations. And finally, the public has shown a preference for vehicles built by foreign and non union workers. This is no where more evident than in Madison, Wisconsin. Blaming Senate Republicans at this is patently absurd. They have shown that the UAW emperor has no clothes. I pray the message is not to late and the company will survive.
Hi Rich:
Your perspective is valuable historically but perhaps less so today.
Yes, costs are high but today the average line worker at a UAW plant now starts at $17 per hour.
How much are labor costs in relation to the total price of a new vehicle?
UAW: The total labor cost of a new vehicle produced in the United States is about $2,400,2 which includes direct, indirect and salaried labor for engines, stamping and assembly at the automakers’ plants.
This represents 8.4 percent of the typical $28,4513 price of a new vehicle in 2006. The vast majority of the costs of producing a vehicle and transporting it to a dealership and preparing it for sale – including design, engineering, marketing, raw materials, executive compensation and other costs – are not related to direct or indirect manufacturing labor.
About Madison: the State of Wisconsin buys many GM vehicles, mostly Chevy Impalas these days.
Thanks for your comment. An open dialogue is always valuable. I am not history yet and am in daily contact with active and retired hourly employes at GM. Your statement of $17 is not accurate. That would be in 2011 for new hires (if that ever comes about). The current number is about $30 plus annual bonuses in the contract, plus cost of living adjustments, plus benefits. The compromise the UAW did not accept would have reduced that about $8. When push comes to shove I believe our rank and file will demand the UAW leadership agree to a deal. Right now it is a big game of Chicken.
You are correct about labor being only one factor is cost. None the less, we can't compete starting out with a $1500 or so handicap. GM has increased efficiency and is quite competitive in other areas of cost.
As far as Madison goes, I was talking about the civilian population. Jon Lancaster has advertised for several years bragging that Toyota is number one in Dane County. They are fine cars but I am also proud of the fine GM products on the market today. If American buying habits were to change back to buying American and buying union all would go well (to paraphrase William T Evjue).
I appreciate your perspective and any corrections of errors I might make.
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