Our esteemed colleague Robert Reich makes a great and indisputable general point on the auto bailouts – that the government shouldn't be funneling money to auto companies that are slashing jobs here and taking production elsewhere. The government should be concerned with the jobs, not the companies.
But the Chrysler bailout follows Reich's prescription to the tee. It explicitly doesn't cut any jobs, which have already been cut like crazy over the past several years. More remarkably, it actually stipulates that 40 percent of Chrysler's product (measured by value) that is sold in the United States has to be made here as well. Back in the '80s, as the U.S. began to de-industrialize and move toward offshore production, advocates of "domestic content" legislation called on the government – unsuccessfully, as it turned out – to require companies over a certain size to adhere to the kind of production requirements to which Chrysler has now agreed. To the best of my knowledge, the Chrysler deal that the administration worked out is the first ever to require a percentage of production to be kept within the U.S. Far from flouting Reich's recommendations, they faithfully adhere to them.
Nor is it clear that General Motors' decision to cut an additional 21,000 jobs is a case of the government forcing the company to shrink – the company would probably be compelled to shrink simply due to the catastrophic reduction in sales. In any event, the Chrysler deal and what we know thus far of the GM-deal-in-progress makes clear that the administration's approach to auto is based on creating viable companies that employ American workers and that preserve (as much as possible) the commitments made to retirees when they worked at what were then the world's largest (and largely successful) companies.
The deals follow the principles that Ron Bloom laid out in a talk he gave several years ago: Shareholders and bondholders knew they were taking risks when they invested in the company, but workers were flatly promised pensions and health benefits in retirement, payments for which were deducted from their paychecks. In sum, even as the administration's policy toward the banks has a bias toward capital, its policy toward auto has a bias toward labor. Which, in the latter case, is entirely as it should be.
-- Harold Meyerson