The Case for Keeping the Big Three Out of Bankruptcy

The United Auto Workers’ pamphlet is nothing if not explicit in criticizing the direction of the American automobile industry. New cars cost too much relative to the buying power of the American public, it says. They are oversized. Their fuel efficiency is appallingly low.

This indictment of the Big Three appears in "A Small Car Named Desire," published by the UAW in 1949 (when the Tennessee Williams play which its title invokes was new). It was written by the social democratic labor intellectuals with whom the UAW's new president, Walter Reuther, staffed what was then the world's largest and most vibrant union. During World War II, the union, along with the Steelworkers, had won the first contracts that committed its employers to paying for its members' health care. In the first years of Reuther's presidency, it won the first contracts ensuring that productivity gains would be shared with the workers and devised the first annual cost-of-living adjustments so that paychecks would keep up with inflation. The union also won decent pensions for retirees and coverage of those retirees' medical expenses.

In other words, the UAW did more to build the era of postwar American prosperity, when workers' paychecks kept up with productivity gains, than any single institution save the federal government itself. That's one reason why it's such a target for conservative attacks as the Big Three beg the government to bail them out: In an era when no productivity gains are shared with workers, when workers’ incomes have been stagnating for decades, the UAW still preserves some of the gains that were broadly shared among American workers three and four decades ago. Once the trendsetter for the unprecedentedly prosperous working class of the postwar decades (in 1947, Reuther called the union "the architects of America's future"), today's UAW is a lagging indicator of the slow (and now, not so slow) decline of America's workers. The union won so many gains in decades past that it has not yet given them all back. What could be more outrageous?

Unfortunately, that's not the only reason the UAW has come under attack. It's hard to imagine the union of the past 20 years authoring anything as critical of the industry as "A Small Car Named Desire." The union stood shoulder to shoulder with management in opposing decades of bills that would have raised fuel-efficiency standards. It's not that the members or leaders of the UAW were convinced that Big Three management exhibited sound judgment; far from it. But battered by foreign competition and foreign-owned plants in the U.S., by companies whose health-insurance costs were picked up by foreign governments or which (in the case of newer foreign-owned plants in the U.S.) didn't have hundreds of thousands of retirees to whom they paid pensions, the union became fearful of changes that could entail short-term job losses and more insular in its concerns generally.

But the factories are no longer the Tayloristic assembly lines that conservative critics cite as a reason why autoworkers are "overpaid." Over the past couple of decades, the UAW has worked with management to produce factories that are far more efficient and to demand of workers considerably higher levels of skills than their predecessors. The problems with new American cars today are problems of design (the one part of the production process in which UAW members play no role) and of cost, in which the "legacy" share of the bill -- the companies' obligations to their retirees, an obligation that in Japan and other auto-producing countries is assumed by the government -- is the great unequalizer.

But whatever the moral claim of UAW members and retirees to their paychecks and pensions, it's their sheer number that requires the government to keep the Big Three, for now, out of bankruptcy court. According to the Alliance for American Manufacturing, the total number of Big Three employees, parts-supplier employees and car-dealer employees comes to 1.59 million. Add the multiplier effect of other jobs dependent on these jobs for their own existence -- in construction, retail, restaurants, and so on -- and you've easily exceeded 3 million jobs, perhaps 4 million. That's a big chunk to take down at a time when the economy is already headed into the steepest recession we've seen in decades. Nor does that include the 2 million people reliant on the industry for health care, and the 775,000 retirees who collect auto-industry pensions. (It's not just Michigan, Ohio, Indiana, and Wisconsin that would be devastated, it would be Florida, too.)

This is why bankruptcy would be a catastrophe for the country and not just the companies. Consumers would cease to buy cars from companies they couldn't count on to provide long-term maintenance. And under bankruptcy, union contracts could be abrogated, pensions abolished, health care dropped. A recession could well turn into a depression.

And yet, at the same time, the industry needs to be restructured, and it is ludicrous to believe that the executives who have helped run these companies into the ground are the executives who can make the necessary changes. The task cannot be given either to them or to a bankruptcy judge. It must be undertaken by the federal government -- by the Obama administration and the next Democratic Congress. The money that the government extends to keep the industry afloat must be conditioned on new management in all three companies, on a retooling of both factories and cars that greatly reduces their carbon footprint. It may not be prudent for the government to take an equity interest in such beleaguered companies, but mandating that these companies' boards of directors include environmental, consumer, and worker representatives seems a less risky way to ensure compliance with the government's goals. It would also give the industry a governing structure akin to that for which Reuther was calling in the 1940s, when the industry bestrode the world and the union fought to ensure it did so benignly.

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