Tonight the U.S. Senate rejected the proposed loan package designed to stave off bankruptcy for General Motors and Chrysler. The sticking point, according to various news sources, was a demand by Senate Republicans that the United Auto Workers union accept “wage parity” with foreign owned automakers by some time next year. The UAW, having already made significant concessions in its last contract, wanted to wait until the next round of negotiations in 2011.
In the coming days you’ll likely read how the UAW sank the Big Three with their outrageous demands. But there’s not much objective reality behind that narrative. Rather, it was a mix of market fundamentalism and flat out anti-unionism that sank this effort. Add to that a bit of sectional conflict between southerners and midwesterners. The rejected bill was essentially a government sponsored Chapter 11 in all but name. The Republicans was simply a much more punitive and miserly version of the same idea.
The markets in Asia are already tanking. I would not be at all surprised to see a press conference tomorrow morning with Hank Paulson declaring a change of heart. Money from the TARP will be on its way. Otherwise, Bush owns this Depression as surely as Hoover owns that of the 1930s. (He owns it anyway, but he can at least imagine he’s passing the baton to Obama).
People in this country are understandably suspicious of corporate bailouts. It’s not only that the Big Three automakers have made many obvious business errors, and are failing in competition with foreign companies (note: it is patently false to say that the Big Three produce cars that “no one wants to buy.” These companies still have a significant, if shrinking, market share). Nor is it that automobilies, rightly or wrongly, are symbolic of the fossil fuel economy that has brought on global climate change. Those sins are significant. But for those in the industrial heartland, the proposed bailout is just the latest episode in the systematic gutting of communities in favor of big business.
The dirty little secret of the “American” automakers is that they are global corporations that have given up on American workers even as the vie for the sentimental, home-team attachments of the American car buyer. The fact that CEOs have graciously offered to work for $1 if their companies receive federal aid is cold comfort for the thousands of employees who will receive pink slips as a result of the demands for “restructuring.” The Republican demand that UAW members take yet another pay cut is just the bitter icing on this mud pie.
Despite all of this, I still support loans to the Big Three as a temporary measure to avoid catastrophic economic collapse, and to keep these companies alive until we have a real President in office come January 2009. At that point, perhaps we can have a more rational discussion.