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End of the Road
If the Auto Industry is Dead What does that Mean for
Workers?
By Mark Brenner
and Jane Slaughter
In the 1980s Chevrolet proclaimed
itself the “Heartbeat of America.” Today many would say
that the American auto industry qualifies for life
support. Last November, General Motors (owner of the
Chevy brand) announced that it was cutting 25,000 jobs
and closing up to 12 factories by 2008.
The news came one month after auto
parts giant Delphi declared bankruptcy, promising to
shutter at least a dozen plants and cut as many as
24,000 jobs in three years time. Ford completed the grim
hat trick in January, revealing a plan to cut 30,000
jobs by 2012.
Just months before, GM and Ford had
convinced Solidarity House, headquarters of the
once-mighty United Auto Workers, to make $1 billion in
concessions to help pay for retired auto workers’ health
benefits. Detroit is abuzz over the additional
give-backs the Big Three auto makers (GM, Ford, and
DaimlerChrysler) are likely to wrest from the union in
next year’s contract talks, and the rank-and-file hear
no tough talk—let alone action—from their leaders.
On the face of it, the industry’s
problems seem almost insurmountable. Collectively, U.S.
car makers are billions of dollars in the red and
foreign competitors continue to gobble up the Big
Three’s market share.
America’s auto giants boost their
bottom line only by selling gas-guzzling trucks and
SUVs, and cars would be moving off the lots even slower
were it not for thousands of dollars in incentives used
to sweeten each sale.
In the face of these pressures,
it’s no surprise that analysts from the Motor City to
Wall Street are convinced that this is the end of an era
in the auto industry. There is no alternative, these
experts lament. Today’s auto workers will have to make
do with less or kiss their jobs goodbye.
For over a century the auto
industry has been an anchor for the U.S. economy and a
trendsetter for corporate America. What does the current
upheaval mean for workers? Announcing the company’s
bankruptcy, Delphi’s CEO Steve Miller signaled what was
at stake: “I want you to view what is happening at
Delphi as a flash point, a test case, for all the
economic and social trends that are on a collision
course in our country and around the globe.”
The auto industry paid out a living
wage for millions of working-class people. Is Detroit
about to call an end to that life?
What’s Good for GM . . .
Times weren’t always so tough in
the Motor City. On the heels of World War II America’s
auto manufacturers were the undisputed titans of
industry. Although UAW President Walter Reuther began
his tenure with visions of government-provided pensions
and health care for all Americans, that drive was
blunted when the union achieved, at the bargaining
table, a private welfare state for its members at the
Big Three.
In addition to private insurance
and 30-years-and-out retirement benefits, they also
received “supplemental unemployment benefits” to cushion
the blow when the cyclical nature of the industry
brought about layoffs—a step toward Reuther’s social
democratic dream of a guaranteed annual wage. Besides
their 3 percent annual raises to compensate for
productivity improvements, auto workers also received
cost-of-living increases, and, as the decades rolled on,
tuition and legal services were added as well.
Unions in steel and rubber followed
suit with similar contracts and, to a lesser extent,
other blue-collar workers such as miners, telephone
workers, truckers, and electrical workers all attempted
to follow the UAW’s lead. The pattern of steady wage
increases together with health and retirement benefits
stretched well beyond heavily unionized industries,
setting a higher standard for all the nation’s
employers, union and non-union alike.
Gold-Plated Sweatshops
The ratcheting productivity that
allowed for these benefits was good for the bottom line
but it meant that the factories continued to be, in
Reuther’s words, “gold-plated sweatshops.” The foundry
and the assembly line remained an inhuman way to make a
living. The common pattern was for workers to sign on,
thinking to stay just a few years, but to be seduced by
the benefits—and then say to themselves “it’s only 30
years.”
The mind-numbing drudgery, the high
injury rates, the heat and smoke and oil in the air led
many workers to hit the bottle—and, in one famous case,
led black Detroit Chrysler worker James Johnson to pick
up a gun and shoot two supervisors and a co-worker. A
jury, after a plant tour, found that brutal working
conditions and Chrysler’s shop-floor racism had
literally driven Johnson insane.
Removed from the daily grind of
factory life, however, UAW officials became far more
attuned to the gold-plating in the shops than to the
sweat. They sought gains they could measure in dollars,
and Reuther’s belief in the benefits of technology and
productivity kept him from protesting either automation
or speedup. Officials came to see themselves as partners
with management, truly convinced that “what’s good for
GM is good for America,” and for UAW members.
This outlook ensured that a host of
management initiatives—and stupidities—went
unchallenged. Early on, the UAW abandoned Reuther’s
fight for low car prices; later, it joined auto
manufacturers in lobbying against higher fuel economy
standards. The UAW also embraced its role as guarantor
of orderly industrial relations, repudiating the tactics
that gave birth to the union in the 1930s.
The Path Downwards
These years of collaboration and
quiescence left the union ill prepared for the crisis
that shook the auto industry in 1979. The UAW once again
blazed a trail the rest of the labor movement would soon
follow—only this time it was the path of concessions and
explicit labor-management cooperation.
Through postwar recessions and
expansions, it had not occurred to American employers
that signed contracts could be breached. But when Lee
Iacocca’s Chrysler Corp. threatened bankruptcy in the
fall of 1979, the UAW stepped up to the plate. Chrysler
workers and retirees broke the once-sacrosanct pattern
contract, taking concessions estimated at $203 million,
$2,000 per worker, nonrecoverable.
More cuts soon followed; by January
1981 Chrysler workers were collectively a billion
dollars behind. The next year, with the economy and the
industry in full-blown recession, the union opened pacts
at Ford and GM to make cuts there.
Describing the new bargaining
climate, a steel industry official told the Wall Street
Journal, “The whole posture of negotiating is changed.
Basically we’re asking for something that we’re not
entitled to.” A staffer for the United Food and
Commercial Workers noted, “After Chrysler, everything
changed.”
Employers from meatpacking to
airlines to education demanded and got wage cuts. In
Michigan, the hospital workers union reported that every
hospital it bargained with in 1982 used the argument “GM
took a wage freeze.” Companies used economic hard times
to force a redistribution of power in their own favor.
Accepting Competition
As important as the monetary
concessions was an explicit change in union philosophy:
acceptance of the notion that it is the union’s job to
make the employer more “competitive.”
Workers were to contribute their
ideas for boosting productivity, including speedup and
job cuts. This “team concept” quickly spread from auto
throughout manufacturing and beyond. The flagship team
concept plant jointly run by GM and Toyota in Fremont,
California, became the most famous factory in America
and the site of manager-pilgrims from every walk of
life, seeking the secrets of productivity. . . .
In essence, the UAW’s deal with the
auto makers was this: do whatever you need to do to
boost profits, as long as you maintain the wages and
benefits of (a steadily shrinking number of) workers at
the Big Three. That “whatever” included lean production,
outsourcing to nonunion parts plants at home and abroad,
the sale of GM’s and Ford’s parts divisions in 1999 and
2000 (lopping off 52,000 workers) and, today, buyouts.
There were 466,000 GM hourly workers in 1978 and in
2006, 112,000.
Buoyed by the Bubble
After a decade-long downturn, the
1990s was like winning the lottery for Detroit’s auto
makers. Mini-vans, one of the Big Three’s only bright
spots in the 1980s, continued to register solid sales,
hovering at about 8 percent of the total domestic car
and truck market.
And because their Japanese rivals
were slow to introduce their own models, Detroit
maintained its dominance, with market share never
dipping below 75 percent.
But the Big Three’s real gold mine
was the phenomenal growth of sports utility vehicles
(SUVs) during the 1990s, rising from 7 percent of the
total car and truck market at the beginning of the
decade to roughly 20 percent by the end. And sales
really took off in the latter half of the 1990s, when
most Americans saw their real wages inch up for the
first time in 15 years.
Concerns over fuel efficiency also
seemed to melt away, with gas prices averaging a little
over a dollar a gallon for most of the decade. As with
mini-vans, Detroit’s foreign rivals lagged behind,
leaving the Big Three to dominate the SUV market.
Bolstered by strong sales in these
new niches, together with skyrocketing stock prices,
Detroit’s auto giants hoped to reclaim the global
dominance that had seemed to slip through their fingers
a decade earlier.
In addition to expanding their
existing global operations, the Big Three also
engineered some very high- profile mergers and strategic
investments, acquiring the Saab, Fiat, Suzuki, Daewoo,
Jaguar, Volvo, and Land Rover brands. Investments, of
course, can flow in both directions, and in 1998
Chrysler was acquired by Daimler-Benz.
Spin-Offs and Restructuring
Detroit auto makers were also busy
reshaping their domestic operations. They spun off their
parts divisions into stand-alone companies and then
negotiated steep wage cuts for new-hires there. GM hived
off American Axle and Delphi, while Ford created Visteon.
Chrysler took outsourcing to a new
level by pioneering “modular production” in the U.S. At
its Jeep plant in Toledo, body work, chassis and
paint—considered the core of auto assembly—will soon be
performed on-site by non-Chrysler workers at lower pay.
GM and Ford also paid less and less
attention to producing cars, focusing instead on their
financial services arms, with General Motors Acceptance
Corporation (GMAC) and Ford Credit adding more and more
heft to each company’s bottom line. Indeed, by 2000 both
GMAC and Ford Credit accounted for a third of net
revenue for their respective companies.
Mixed Bag for Workers
For America’s auto workers, the
1990s were decidedly more mixed. On the one hand, after
a decade of bruising concessions and plant closings,
everyone was relieved to see the return of both jobs and
steady wage increases.
On the other hand, much of the new
investment coming into the industry was from foreign
companies—Toyota, Mazda, BMW, Nissan, Honda,
Mercedes—who sprinkled factories first on the outer
edges of the Midwest auto corridor and then across the
right-to-work South. These “transplants” kept their
factories non-union, as did the auto parts industry that
mushroomed in the 1990s, as the Big Three replaced
vertical integration with outsourcing.
Union density in auto, which in the
dog days of the 1980s declined from 62 percent to 50,
fell even faster in the prosperous 1990s, dropping to 37
percent by the year 2000. The UAW proved unwilling or
unable to organize these newcomers, and one can only
wonder whether things might be different today had the
union summoned up some of the spirit, energy, and vision
that drew hundreds of thousands of unorganized auto
workers into the union in the 1930s.
Instead the UAW concentrated on the
state of its existing members, securing promises of new
investment and job security from the Big Three both in
contract talks and through job actions. For example, a
54- day strike at two strategic GM parts plants in 1998
idled most of General Motors’ North American operations,
and resulted in $200 million in new investment in the
two plants.
Unfortunately for the UAW, its
fight to protect its shrinking store of good jobs was
swimming against a much stronger national tide. The
1990s witnessed an explosion in income inequality, in no
small part due to skyrocketing CEO pay (71 times
workers’ average wages in 1989, rising to 300 times by
2000) and a stock market run-up of historic proportions.
The longest economic expansion since World War II did
surprisingly little for those in the lower rungs of the
income distribution, in part because of the declining
share of the workforce represented by unions.
Adding to the insecurity were
large-scale retrenchments by the bulwarks of corporate
America, including Xerox, IBM, and ATT
Underappreciated at the time,
perhaps the biggest development of the 1990s was the
move from defined-benefit pension plans to 401(k)-style
defined-contribution plans. This seemed of little
consequence when the stock market was posting
double-digit gains year-in and year-out, but when the
turn of the century recession hit, baby-boomers across
the nation saw their retirements vaporize. UAW members
at the Big Three were some of the few to retain their
original pensions.
Downturn
These trends collided with a
deflating stock market in 2000 to create a squeeze play
for the auto industry and its hourly workforce. The
recession hit Detroit particularly hard, as rising gas
prices turned consumers off the low-mileage SUVs and
minivans that had saved Detroit’s bacon a decade
earlier. In the last five years the Big Three’s market
share has fallen from 66 percent to 58 percent, and
sales would have been even worse without the deep
discounts auto makers felt forced to offer.
At the same time that the domestic
picture soured, many of the Big Three’s global
acquisitions also unraveled. General Motors, for
example, paid a cool $2.4 billion to acquire a 20
percent stake in Fiat in 2000, then ponied up another $2
billion to get itself out of the deal five years later.
Ford has injected more than $5
billion into Jaguar and to this day the luxury brand
remains stubbornly in the red. Meanwhile the marriage of
DaimlerChrysler has hardly been a match made in
heaven—the merged company is worth less today in stock
market terms than Daimler was on its own before they
united.
Hemorrhaging money and with no end
in sight, last year Detroit’s automakers took desperate
measures to become smaller but more profitable
companies, with Delphi declaring bankruptcy and GM and
Ford putting 55,000 jobs on the chopping block. Since
that time, they have all been singing the same tune,
blaming their troubles on the generous wages, pensions,
and healthcare of their unionized workforce.
In a move whose irony cannot be
lost on executives, Detroit has redirected decades of
consumer frustration with American automakers for their
lackluster designs and poor quality into widespread
resentment of rank-and-file auto workers for their
company-paid health care and pensions. The auto makers
have tapped into middle America’s deep-seated anxiety
and insecurity with a not-so-subtle message: “If you
don’t have a pension or any hint of job security, why
should they?”
The scale and speed of these
changes has left the UAW flat-footed, struggling to get
a hearing—much less formulate a strategy—in its fight to
save some of the last good manufacturing jobs in
America.
So Who Cares?
Cynics might argue, who cares? The
UAW represents fewer than 400,000 auto workers in an
industry of more than a million, and the concessions the
companies are clamoring for will simply bring their
wages and benefits closer to what the market will bear
for less-skilled workers anyway. Besides, manufacturing
is so 20th century. Aren’t we a post-industrial economy
with a future in services and high-tech jobs? America
can design and engineer stuff and let the rest of the
world build it (think X-Boxes and Ipods).
This mindset misses most of what’s
important about the crisis in auto. Downsizing isn’t
accountants shuffling numbers around on a spreadsheet;
the lost jobs are concentrated in specific communities,
such as the already devastated Flint, Michigan made
famous by Michael Moore in his first film, Roger and Me.
Cuts of this magnitude will
reverberate throughout the Midwest, leaving a lasting
economic and social hangover. And they will not be
confined to auto, as other companies follow the Big
Three’s lead.
High tech companies can’t fill the
void. Google, for example, has just announced plans to
open up shop in Michigan. But Google employs less than
6,000 people worldwide, a drop in the bucket compared to
the 70,000 jobs this round of auto restructuring will
destroy.
How could the auto industry right
itself without devastating workers and communities?
Execs have shown themselves curiously unwilling to
campaign for one measure that would save them billions
of dollars per year: single-payer health insurance.
GM is the largest private purchaser
of healthcare in the country, providing coverage to 1.1
million people. Last year the price tag was $5.3
billion, which, as CEO Rick Wagoner is fond of pointing
out, is more than GM pays for steel. Half of those
covered are retirees, and the company claims to provide
healthcare to 1 percent of America’s seniors.
Legacy Myths
The Big Three say that such “legacy
costs,” which also include pension benefits, are choking
their business, obscuring the fact that all three auto
makers have pension and retiree health funds flush with
cash—healthy for the foreseeable future. If health care
is such a heavy burden, why not join the movement for a
far cheaper national health care plan? Canada’s
single-payer system makes it much less expensive to do
business there and has spared most Ford and GM plants
north of the border from the ax.
But despite promises to the UAW to
pursue “universal coverage” in exchange for the union’s
$1 billion in concessions on retiree health care last
fall, GM’s CEO didn’t even mention national health care
in testimony before a June Congressional special hearing
on the nation’s healthcare crisis. Either free-market
ideology is trumping good business sense, or paying for
benefits is not such a burden after all—or the employers
don’t mind having a propaganda hammer to use against the
union.
When Henry Ford introduced the
five-dollar day in 1914 he famously quipped that he
wanted to pay his workers enough so that they could
afford to buy his cars. Today, a new-hire at Delphi or
Visteon now makes $14.50 an hour, a bit more than half
his or her counterparts at the Big Three. In 2007, when
new agreements are negotiated, the Big Three’s new-hires
are sure to take a hit.
What will America look like if most
workers earn Wal-Mart, instead of General Motors, wages?
For those without a four year college degree—i.e., about
70 percent of the labor force—average wages (adjusted
for inflation) have stagnated or fallen for the last 30
years, hovering under $15 today. Manufacturing jobs paid
wages no better than the economy-wide average when Henry
Ford was perfecting the assembly line, but by the end of
the 20th century they were about 25 percent above
average, in no small part due to unions like the UAW.
A New Playbook
To solve the industry’s problems,
many analysts have urged Detroit executives to go back
to the drawing board and start fresh. This advice
applies with even more force to the UAW.
Forged in the 1930s’ social
upheaval, the UAW’s pioneers originally saw the union as
just one piece of a large-scale social movement to solve
the problems of the Great Depression.
Today the stakes are higher than
they have been in 60 years, but the UAW is still
fumbling through its golden-age playbook. The
rank-and-file revolt after the Delphi bankruptcy
demonstrates that members are willing to fight, but they
can’t do it alone.
Now, more than ever, the UAW needs
the audacity and the guts of its founders, who set their
sights on more than the survival of their union
headquarters. Their fight to build a better world
inspired millions.
With health care becoming less and
less attainable for more and more working people, the
fight for national single-payer health care has the
potential to galvanize a new workers’ movement.
Rekindling such a movement may be the only way to ensure
that the UAW founders’ legacy doesn’t evaporate before
our eyes.
Source:
LaborNotes
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Democrats Set to Offer
Loans for Carmakers—
Faced with staggering
new unemployment figures, Democratic
Congressional leaders said on Friday that they
were ready to provide a short-term rescue plan
for American automakers, and that they expected
to hold a vote on the legislation in a special
session next week. Seeking to end a weeks-long
stalemate between the Bush administration and
House Speaker
Nancy Pelosi, senior Congressional aides
said that the money would most likely come from
$25 billion in federally subsidized loans
intended for developing fuel-efficient cars. . .
. G.M. is seeking $18 billion in loans, but says
it needs $4 billion immediately to survive past
the year. Chrysler, which is also running out of
cash, wants $7 billion. Ford, the healthiest of
the three, is asking for a $9 billion line of
credit.
NYTimes
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posted 18 November 2008 |
