Bush Punts Auto Industry to Team Obama; UAW Concedes Even More
There's an old joke in the car business: A customer visits a dealership and, after enjoying the overwhelming attention of a salesperson, does buy a car. After signing the contract, the salesperson becomes distant, remote, and informs the buyer of the industry's "Three Cs," saying: "See the car, see the keys, see ya later!"
Leave it to President Bush to add a fourth C -- "CYA!"
This new agreement gives General Motors and Chrysler a total of $17.4 billion between now and February. After January 20th, the challenge of "What to do about the Detroit Three?" will be squarely in the lap of the new Obama Administration, which was Bush's prime motivation in crafting this deal. It's a classic Cover Your Ass retreat action by Bush, made to unravel completely after the Obama Inauguration because the mandates in the agreement are not really mandates -- they're all still negotiable.
It took less than 24 hours for Treasury Secretary Henry Paulson to change his position from refusing the Detroit Three access to Troubled Assets Relief Program (TARP) funds, to his "getting religion" and agree with President Bush that, of course, sure, why not? ... The loan money for the Detroit Three should indeed come out of the $700 billion TARP ($350 billion left), created to bailout - not loan to - the financial industry.
(Bush can duck shoes, but not history; his failure to help the country's auto industry in meaningful ways is just one of the many disasters of his administration).
One small bright spot: using TARP money leaves intact the $25 billion fund created last December for development of alternative fuels and other new automotive technologies -- for now.
Yesterday, the White House demanded (and got) even more concessions from the United Auto Workers, while few were requested of the carmakers. The New Detroit Two are now expected to drastically restructure their 100-year old industry in the next 14 weeks. And to do it with the same management which got them into this mess.
By March 31st, GM and Chrysler, if either still exists, must give Washington a "viability plan" explaining how they're going to build high-mileage cars and trucks which Americans will really want to buy, but mostly their plans to cut, cut, cut costs, then cut some more. And to tell Washington how they're going to pay it all back in three years.
(And here he is - Your new Default Car Czar, America, Henry Paulson! He did such a great job bailing-out Wall Street, just imagine what he'll do with our nation's auto industry!)
If GM and Chrysler renege on the repayment, or Washington doesn't like their viability plans, they'll call the loans back immediately with the only option then for these New Detroit Two being "managed bankruptcies."
Who will judge the submitted plans? Why, America's Default Car Czar, Henry Paulson. Now he's in-charge of the TARP, where he did such a bang-up job, and, as of today, the Detroit Two (or Three, when Ford asks for help).
Where is Ford in all this? Saying thanks, but no thanks, we don't need any cash right now. But Ford's future depends on something over which they have no control: whether Chrysler and GM survive. If either fail, then so do their supplier companies, which are shared by all three carmakers. Ford, unable to replace these suppliers, then fails as well.
(Why is this man smiling? Because he's Alan Mulally, CEO of Ford, and before he took the job he insisted Ford put a "signing bonus" of some $20 million in his bank accounts. Wouldn't you be smiling, too?)
Ford's bet is based on their having enough cash to get them to January 21st, when they believe they'll have a friend in the White House, not a president concerned only with his reputation and unwilling to do the hard work necessary to save their industry.
Under this loan/bailout, the Detroit News reports, the UAW is being asked to move up contract negotiations, scheduled for 2011, to the end of 2009. Then, UAW worker pay is supposed to be made equitable with the pay and benefits given non-union foreign transplant blue-collar employees. The Congressional Detroit loan/bailout bill, voted-down by Republican Senators from states with transplant carmaker factories, called for those changes to be enacted immediately.
(Soon, Republican Senators from southeast states with "right-to-work" rules, aka union-busting laws, will lower the pay for auto industry workers so low no one will want the jobs. That's why Honda created Asimo the Robot - To work on their assembly lines. And I'm not kidding).
The UAW has already agreed to a two-tier wage/benefit system with new employees being paid $14 an hour, rather than the $23 average UAW members had been getting.
Further, the UAW will be asked to accept stock rather than cash for the billions of dollars of retiree health care liabilities being shifted to a union-run trust fund by the three carmakers.
Anyone see a trend here?
At a GM press conference Friday morning, after the Bush announcement, Executive VP and CFO Ray Young gave a real-world indication of what the UAW has conceded in just the past two years, and what management seems intent on doing.
Young said that in 2007, GM's US hourly labor costs totaled $18 billion. In this year, 2008, that amount had dropped to $8 billion. While GM executives are no doubt pleased, it really means GM's hourly workers this year made $10 billion less than they did the year before.
(Republican Senator Richard Shelby of Alabama led the successful charge in the Senate to block the first Detroit loan program which was passed by the House. Some union supporters may think twice about buying cars and trucks assembled in Alabama, while others are calling for a boycott of all the state's products).
Ex-Clinton Administration Secretary of Labor Robert Reich said on the Rachel Maddow Show on MSNBC Friday night that every aspect of this deal is "absolutely negotiable."
This way, Reich said, "Bush avoids Detroit bankruptcies happening on his watch, and he placates his Republican colleagues so they don't feel that he has turned on them."
This "agreement" is just another part of the recent "Bush/Cheney Revisionist History Farewell Tour." Can't wait to get my commemorative satin jacket. This agreement was created to fail, just as long as that failure didn't happen while Bush was still president.
Like the bad joke, "See the car, see the keys, see ya later -- and CYA!"
Read More:
Should the Government Bail Out the Big Three U.S. Automakers? HuffPost Bloggers Weigh In
Follow Steve Parker on Twitter: www.twitter.com/autojourno
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US Court of Appeals judge for the 7th Circuit Richard Pozner says it best: The goal of unions is to redistribute wealth from the owners and managers of firms, and from workers willing to work for very low wages, to the unionized workers and the union's officers. Unions do this by organizing (or threatening) strikes that impose costs on employers. ... Unions, in other words, are worker cartels. ... There is also a long history of union corruption. And some union activity is extortionate: the union and the employer tacitly agree that as long as the employer gives the workers a wage increase slightly above the union dues, the union will leave the employer alone.
That's right Bush wants the America auto industry to collapse on Obama's watch...
He probably hopes "The Flood" comes in Iraq during Obama's watch as well...
Seasons Greetings to UAW officers Ron Gettelfinger, General Holiefield, Bob King, Cal Rapson and James Settles …from over 500,000 betrayed UAW retirees.
“AUTO RETIREE HEALTH CARE IS THE SACRIFICIAL LEGACY COST AND THEREFORE RETIREES ARE THE PROBLEM! LET THEM DIE AND DECREASE THE SURPLUS POPULATION!”
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Union busting and private jets will save us all.
I and many Americans believe senator shelby and his cohorts should be tried for treason for they are obviously in the pockets of the foreign car companies. They were willing to let the country fail for their own agenda
Senator Shelby and his "cohorts" understand that GM with this new loan now has about $80 billion in debt, and they at the same time haven't made any profit whatsoever in many years, even in 2005 when they sold a lot of vehicles. It looks to me that a pre-packaged bankruptcy or some similar restructuring which involved getting rid of the pensions, cutting the health care benefits, and cutting many thousands of employees is inevitably the only option.
Just can't help taking another swing at those greedy, selfish, lazy union workers, can you. Not a word from you about management in your comments. You are actually saying that the very idea that a union worker with thirty years on the line deserving a retirement check is truly too much to ask. You have accepted hook-line-and- sinker the myth by the elite that organized labor is harmful and at cross purposes to the successful operation of an industry.
Only in the US does the notion exist that if you work for 30 years you are not sure if you will have a retirement or not. Your retirement should be GARANTEED by the state, like in every civilised country except the US
This should be a basic right of the individual, non negociable. Until the US has a national health care and retirement system, this obsolete debate will continue. The US is 40 years behind the rest of the advanced industrial world in many basic things
The DC Democrats sat and watched Bush "bail out" the AIRLINES immediately after 9-11... all the money went to execs, none went to workers, and the cowering DC Democrats didn't say a word.
Nancy Pelosi and Harry Reid and all the DC Dems _promised_ us "CHANGE!" when in the campaign to take back the House in 2006. Because of a courageous minority volunteer (from Jim Webb's campaign) with a video camera who got Senator Allen's "Macacca" comment on video) the DC Dems even won the Senate in 2006. But it was OUTSIDE DC CHALLENGER CANDIDATES who did the HEAVY LIFTING in campaign 2006.
Sure enough, Nancy Pelosi became speaker of the House... and not only did she "KEEP IMPEACHMENT OFF THE TABLE" but she REFUSED to hold the Bush administration ACCOUNTABLE FOR ANYTHING.
It is ONLY because the Bush administration WRECKED the American economy that the Democratic candidate won the race for the White House this past November.
SO - if the Republicans TRY TO PAINT THE DEMOCRATS as RESPONSIBLE for their (the GOP's) economic nightmare, well, it's not like Pelosi, Reid, Hoyer, Rockefeller, and any other Dems have been raising hell to stop this economic meltdown.
Yep, the Dem.-contr
I've got a really unique solution to this whole "Detroit" thing that nobodies considered. Here goes, the next time your in the market for a new car, at least consider going to a GM, Ford, and/or Chrysler dealership. Talk to the people, drive the car around the block, and if you like it, BUY IT! Leave the politics, your brother-in-laws, and Consumer Reports opinions at the curb. Try to use your best judgment, grow a little spine, and just maybe throw a little work to your fellow Americans! That's really the least you can do, and quite frankly the most as well.
Bush's whole career consisted of failing upward. The classic example is his "ownership" of the Texas Rangers. Arlington gave his people not just a stadium but land for the parking and 10x that land for speculation: space to build hotels and malls near the stadium and a fun park. The only way he could fail is if baseball tanked. Whereupon, baseball tanked. For the only time since the nineteenth century, the world series was cancelled, plus half the season and the 1995 season started without the baseball star athletes who were locked out by the owners. Bush cannot be wholly blamed as he was but one of two dozen owners but he was in the clique that brought this disaster about, and he did maintain his record of failing up.
With such a record and with the horrible model of the financial bailout freshly laid before us, the administration's choice to punt the crisis to Obama is the best thing that could possibly have happened short of the administration totally changing its spots. I will not criticize Bush for this decision, rather I will praise God and praise Bush who spared us his more typical "deside."
While we are forcing the workers who are NOT at fault for troubles of the Big 3 to take a pay cut can we also please force the executives who ARE responsible for the trouble of the Big 3, top cut their own salaries to match their international counterparts?
Yea! Can we also force all Wall Street recipients of the Paulson bailout fund to accept the same pay cuts as the UAW? Yaaaay!
We give the money now, so Obama doesnt face three companies already in bankruptcy and unemployment tipping the scales even further. For you anti-Bush dolts out there... lets use common sense... and I've got a few things to say about the automakers and the UAW. Concessions are necessary. If theyre not careful there wont be any automakers for them to concede to. No company no union. Plain and simple fact... That being said however, I do think the big 3 need to figure out more than just blame the unions... The whole thing sucks in this case, but what options are there? Other than the most obvious which is no company, no jobs period... I dont think the alternative here is very pleasant..
1. No such thing.
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"... anti-Bush dolts out there"
]
We have plenty of anti-Bush geniuses here, but all the dolts are pro-Bush.
2. Wall Street, which produces nothing but only moves money around and calls it "work" should make "concessions" first.
[
"... lets use common sense... and I've got a few things to say about the automakers and the UAW. Concessions are necessary. If theyre not careful there wont be any automakers for them to concede to."
]
"Common sense," you say? I have a better idea than what you call "common sense": nationalize The Fed, the credit reporting agencies, and every bank that fails or has received TARP funds. They caused the credit contraction that TARP was created to solve and which has also endangered Chrysler and GM while they were already in the process of adjusting to slowly growing demand for higher-mileage vehicles. Let the banksters who caused the problem be the first to make "concessio
"Wall Street, which produces nothing but only moves money around and calls it "work"
And that not even physically! Just cyber money counting and reallocating, not even real. And calling it "work".
So how come these transactions cannot be invalidated, or immediately reversed?
What are the laws that back these money transfers?
How come they get to keep their ill-gotten loot?
It is all too surreal to me. Something's gotta give.
If I was Bush I wouldn't have punted anything because this bailout is the biggest waste of money ever. When $17 billion won't last you 3 months, it is pointless. I say give the money to Ford because they are the only ones that can survive without $100+ billion.
As for the UAW, punt to Obama forsure because unions are right up his alley and he can't say no to them, they put him where he is.
BS
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"biggest waste of money ever"
]
$17B = AIG / 5
And just what part of "if GM and Chrysler fail, Ford is doomed too" did you not understand?
The Detroit 3 share parts suppliers. And just to make it crystal clear, some of the transplants also use these same suppliers. When the suppliers don't get paid by the Big3, they go out of business. So then, where will transplants get their supplier parts, and how soon before they are forced to close plants here -- or more likely, demand worker concessions in order to remain viable?
Quietly,I point out,GM's market cap is less than 2.5 Billion..I also hesitate to make this point -and obscure emotionalism with thought,but 1)I don't know what the feebies 'Shelby' and his friends gave Toyota,et al.And,it seems neither does Shawn 828,a couple of spots above.But let's make an Aristotelian thought problem.I propose the Alabama legislators,aka 'Shelby and friends' thought some tax breaks would be recouped by an enormous increase in state taxes,secondary spending from workers,su
I think it's silly to blame all the problems on the UAW.But it's sillier to think one firm can offer substantially higher wages than another when they're making the same product.th
GM's plant, on the other hand, is about 10x the capitalisation. The bailout includes a provision that the companies cannot be bought out except the government gets its money back. Detroit's former policy of planned obsolescence has been replaced by cars competitive with the Asian cars according to the Consumer's Union. I appreciate the instinct to kick who is down, but I am quite happy to bet on America to succeed.
I have an intuition that something is very wrong with the way this big corporate bailout has proceeded. The ailing institutions just do not behave like organizations in trouble. Where is the fear? AIG had 3 buyout offers early on but decided that it would wait on a better deal from Congress. Further, the financials never agreed to stem the rate of foreclosures for financial reasons even though foreclosures were supposedly the cause of the collapse to begin with. How could the financials possibly be in a position to dictate this to Congress?
Neither the financials nor the Big 3 show any evidence that they know what they are doing. Big 3 were completely unprepared for class when the defended their handout in Congress. The financials change tactics, like staggering in the dark with a big sack of money. Actions that had to be done yesterday to stop the avanlanche are hindsighted as a bad choice today. Then Congress allows the merger of financial institutions already "too big to fail"?
Something is wrong, our Government. Congress is selling American well-being wholesale to the corporate lobby. It is time that Bloggers and activist groups start leading action against the lobby directly. Give up on Congress and go directly after the one's calling the shots, the companies pushing the corruption. Consumer behavior rules the day here in "Consumerland". Orchestrated boycotts and consumer-based activism can be dramatically effective tools to reclaim a not- for- profit government from K Street.
While I'm certainly not a fan at sending my money off to some big inefficient, greedy and irresponsible companies, an additional 3 million plus people being unemployed certainly isnt going to help. Its our money that also goes toward the unemployed to help keep bread on the table... The whole system got screwed up a long time ago and its finally catching up.
American Middle Class has existed for less than a 100 years. In 1914 Henry Ford doubled the pay of his factory line workers to $5 per day. This was unheard of and his contemporaries criticized the move as leading ultimately to bankruptcy and financial disaster. It was the genesis of a middle income class that could afford to buy the cars that were built. This was only a first step. Fruition of the middle income class, that is known popularly as “Fulfillment of the American Dream”, ( a nice house, good food, decent clothing, ability of son’s and daughter’s to pursue a higher education, a secure retirement, loftier goals achieved by succeeding generations) came about because of the sweat and blood and sacrifice of people who fought to create UNIONS. The prosperous Middle Class, we enjoy,did not exist before UNIONS. Millions of non union workers enjoyed good pay and benefits because their employers maintained parity with existing Union wages & benefits in order to avoid losing skilled employees to Unionized companies, and/or avoid having their own companies being organized. The failure of the conservative right to aid American automakers, and in particular the UAW, is largely due to an attempt by those who would like to see the Middle class eradicated. They seek a return to a society of Lords and the working poor with no Middle class. Good luck with that. I will see you in the barricades or on the other side of them.
Good post, Moderatenation. I also believe there is a little more to the antipathy shown in particular to the UAW by vocal congressional social conservative lackies. I had always wondered why the UAW has been particularly scorned until I came across an article by John Nichols in the NATION magazine. In it he states: It was the UAW that fought for national healthcare and pensions and, when those policy initiatives were blocked by reactionary Congresses, forced Corporate America to create a social safety net for workers and retirees that would form the model for union and nonunion workplaces across the country. It was the UAW that fought government- and corporate-
NOW I understand a great deal about the role the UAW has played in creating such antipathy among those social conservatives.
Jeez, After your post I feel bad that I haven't supported them more.
Steve, the UAW is not a part of the agreement, according to what they said in the press, so no further cuts are baked in just yet. The local news in Detroit said UAW had to download it from the UST website to find out what was in the loan document.
Perhaps that means the union is on the hook for whatever Obama thinks is right, which I bet is some more cuts but not what Senate GOP wants. Everyone, even Senate GOP, realizes that one can't solve a top-line, revenue problem (the economy went to hell and industry-wide auto sales, already anemic, fell by 35% in one month) by focusing on reducing the labor that makes up 10% of the costs.
I am still waiting for the press to figure out that the auto industry is in trouble world wide - this is not just a Detroit problem, although it didn't help that they shot themselves in the foot before the financial trouble started. Media darling Toyota just had to stop its U.S. Prius project and will likely announce Monday that it will suffer a world-wide loss. Honda already announced its loss. Governments world wide are supporting the auto industry. But only in America does it devolve into a media debate over unionized workers that are 10% of the cost base. Stunning.
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