As President Barack Obama visits Europe following the G-20 summit in London, projecting the “new face of U.S. politics,” in the U.S. itself, this image is already starting to crumble under the harsh reality of the economic crisis. For example, Obama is no longer addressing auto workers in terms of “Change” but rather, with the cold vocabulary of Wall Street: Viability, Profitability and Liability. And these words are not hollow. The administration’s recent restructuring plan is backed up with factory closings, mass layoffs, wage and benefit cuts and possibly the closing of entire companies. Despite being elected with the enthusiastic backing of the unions, less than three months after coming to power, Obama has already launched the worst attack on the key and heavily-unionized auto industry in decades.
Long-teetering on the edge of bankruptcy due to mismanagement, the “Big Three” U.S. automakers GM, Ford and Chrysler have all seen their profits collapse due to the economic crisis and a steep fall in car sales. GM alone has lost $82 billion in the last four years and its value on the stock market has fallen to its lowest level since 1934. Despite remaining one of the better-paid sectors of the U.S. working class, over this same period auto workers have seen their wage and benefit levels consistently erode while dozens of plants have been closed and hundreds of thousands of jobs eliminated In December, GM and Chrysler, the largest and third largest U.S. car makers, both announced that they were facing bankruptcy in 2009 and asked the Federal government for emergency financial help in order to keep the companies running. Under the TARP program, the then-Bush administration gave the auto companies a $17.4 billion loan package, which was followed by additional loans in February which brought the total to $39 billion of public funds loaned to GM and Chrysler.
In December, GM and Chrysler management, along with representatives of the workers’ union, the UAW, were brought to Congress for public hearings to negotiate the terms for the rescue package. However, from the beginning the Democratic Party majority made it clear that their intention was to give the loans only on condition that GM and Chrysler showed “fiscal responsibility” and would “do all that is necessary” to make profits once again to repay the U.S. Treasury and Federal Reserve Bank. GM and Chrysler management were also given a deadline to complete restructuring plans to make the companies profitable.
President Obama personally demanded more concessions from the union. As he put it: “We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge – at the other end – much more lean, mean and competitive than it currently is.” In addition, the President announced that he would create an auto industry task force – headed by Treasury Secretary Timothy Geithner – which would administer the loans and also would in effect take on some aspects of managing the industry while leaving the management structure of the companies in place. The companies have been put into a form of government administration, they have not been nationalized, and are most certainly not under democratic public control.
The GM and Chrysler management plans called for clawing to profitability entirely at the workers’ expense: eliminating 50,000 jobs at both companies, with GM closing 14 North American plants by 2012 and eliminating the Saturn and Pontiac brands altogether, in addition to further cuts in wages, pensions and health benefits. However, after reviewing the plans, the President’s auto task force rejected them on March 30th and announced its own plan. It also forced the firing of GM’s CEO, Rick Wagoner and called for the removal of a majority of the company’s board of directors. Seeing Wagoner go undoubtedly pleased many auto workers. Wagoner oversaw years of wage, job and benefit cuts and piecemeal plant closings at GM, all the while earning a multi-million dollar salary and giving himself a 64 percent raise in 2007. He represented GM management, which has seven levels, each of which has received big pay increases for several years in a row, while workers were told it was their compensation and “privileges” which were ruining the company. However, the firing of just a few members of management (why not all of them?) can only amount to a public show that “something is being done.” Obama was elected based on his populist “pro-labor” image, and firing the CEO of a major company reinforces that image while leaving the management structure itself untouched. But the details of the new plan are more than enough to erase any doubts as to whose interests are being looked after.
The task force’s plan, called the “Obama Administration New Path to Viability for GM and Chrysler” actually outlines even deeper cuts than the auto bosses’ pushed for. While being short of concrete figures, the path outlined for the companies is a “supervised bankruptcy” for Chrysler and even deeper job cuts and more plant closings at GM. Both companies’ plans were called insufficient to cut “long-term liabilities” – that is, workers' pensions, health care costs and wages. The new plan gives the companies the ultimatum that these costs must be cut quickly and completely, and that “Their best chance of success may well require utilizing the bankruptcy code in a quick and surgical way.”
The task force has given Chrysler a 30-day deadline to either merge with Italian auto maker Fiat or declare bankruptcy. This same report also praised Fiat for its own recent cuts – never mind the effects this has on Italian workers and their communities! It has given GM 60 days to agree to the new plan, which means it must approve a re-negotiated contract with the UAW. The UAW leadership and GM have already agreed on a new contract that gives the company more than $1 billion in cuts, although this still has to be ratified – or rejected – by a vote of the union’s members. If the companies cannot meet these deadlines, Obama’s task force will cut off all public funding, meaning total bankruptcy.
The companies are being steered toward the bankruptcy courts because once there, the UAW’s contracts (and all other legal contracts) become void. If this is allowed to happen, it will mean that the bosses, through the courts, can dictate wages, benefits, rights and even union representation itself to auto workers. Far from “helping workers through the recession,” which was his stated aim when announcing the task force’s plan, Obama’s plan is to use the economic crisis to break the backbone of the UAW, one of the strongest unions in the U.S. The example of factory occupations by U.S. auto workers in the 1930s and the Canadian auto workers at the Aradco parts plant just two weeks ago is sure to give U.S. auto workers plenty of food for thought!
The treatment given to the auto industry is in stark contrast to that given to the big banks and insurance companies. Over this same period, under the same TARP program which has been used to “aid” the auto industry, the huge insurer AIG was given $40 billion in public money without any conditions or ultimatums. This huge amount of the public’s funds, mostly paid by working class taxpayers, was given without even token firings of inept managers – instead, AIG management used these funds to give themselves multi-million dollar severance packages and weekend spa getaways in Las Vegas!
The economic policies of Obama, despite the “friend of labor” image he projects, are aimed at maintaining American capitalism and to place the burden for this on the working class’ shoulders. The huge sums of money that have been handed over to the big banks are all debts, which fall on the tax payers to repay not just today but literally for decades to come. These debts will be paid for through tremendous cuts in public education, health and all other public services and will result in a qualitative decline in living standards for generations to come. This is the cold reality of capitalism, which is why many workers and youth in the U.S. today are not just beginning to question whether Obama can deliver fundamental change, but they are also questioning the system that he defends.
No to cuts, concessions, closures and layoffs!
Nationalize the auto industry under democratic workers' control!
- Why the UAW Should Fight for Nationalization by David May (March 18, 2009)
- Can Obama Save Capitalism? by US Socialist Appeal editorial board (March 11, 2009)
- "Bloody Monday" and the Changing Consciousness in America by John Peterson (January 30, 2009)
- Obama's Inaugural Call for "National Unity" by John Peterson (January 26, 2009)
- Obama and the Economic Crisis by US Socialist Appeal Editorial Board (January 12, 2009)
- [Video] The election of Obama and the perspectives for class struggle in the USA by John Peterson (January 22, 2009)
- Obama’s Ag Policy: Corporate Business as Usual by Josh Lucker (January 15, 2009)
- Obama and the “Chicago School” of Economics by Graeme Anfinson (January 14, 2009)
- Martin Luther King Jr., Obama and the Struggle Against Racism by Workers International League (January 19, 2009)
- Does Obama’s Victory Mean the End of Racism in America? by Josh Lucker (December 5, 2008)
- [Audio] US elections - Obama for change? by Mick Brooks
- US elections: Welcome to the “School of the Democrats” by John Peterson (November 5, 2008)