THE BLOG
01/12/2009 05:12 am ET Updated May 25, 2011

Republicans Kill any Help for Detroit

Late Thursday night, Republicans in the Senate derailed a bill, passed the day before by the House, to loan $15 billion to the Detroit Three. The Senate vote was 52 to 35, with 10 Republicans joining 40 Democrats and two Independents in favor.

Sen. Bob Corker, R-TN, after the talks collapsed late Thursday said, "We are three words away," from a deal.

Those words? Most likely, "United Auto Workers."

Republicans are demanding that the UAW accept, in 2009, pay scales, benefits and work rules equal to those of workers in transplant import factories. The union said they will accept all of them, but in 2011, when their current contracts with the Detroit Three, and many supplier companies, expire.

But the "wage parity" question of UAW workers compared to those in transplant factories is not as cut-and-dried as Republican senators may think. There is little in the way of wage and benefit parity among the transplants themselves. And in recent years, industry journal Automotive News reports today, the overseas-based automakers have been pushing wages lower.
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These so-called transplant factories, ranging from Hyundai to Honda to BMW to Nissan to Mercedes-Benz and more, are almost all located in Southeast states, many of them with "right to work" labor laws aimed at union-busting and represented by Republican members of Congress and the Senate.

Republicans seem to be looking to score a rare political trifecta:

- First, they've already gotten a pound of flesh from their own failed and disliked president by forcing him to publicly side with the Democrats;

- Second, they see a chance to finally destroy the UAW;

- Third, they're hoping to appear as if they're just sticking-up for their own deeply-held conservative American beliefs.

For example, Senator Mitch McConnell of Kentucky, the Republican leader, trotted-out some of the old bromides, saying Thursday that "a government big enough to give us everything we want is a government big enough to take everything we have."

I can almost hear America's children tonight, "Please check under the bed, daddy, for those UAWs!"

Didn't these Senators take note of the recent election? The vote against hate, political in-fighting and name-calling? The loss of several of their buddies? They're probably betting that their constituents didn't notice. Maybe these representatives have -- once more since Election Day -- outsmarted themselves.

Thursday, one of the Republican senators opposing the loans, said, "The Republicans are trying to save the industry, and the Democrats are trying to save the union."

Senate Majority Leader Harry Reid said he dreads what will happen on Wall Street today, Friday. "It's not going to be a pretty sight,'' he said, that this means "a very, very bad Christmas" for many Americans.

Japan's Nikkei dropped 6% when the bad news hit the market in Tokyo about noon Friday.

Immediately after the Senate vote, the administration was already coming under pressure to act on its own to prop up GM and Chrysler, an idea that administration officials have resisted for weeks. Some say the Federal Reserve may have no choice but to prevent the automakers from bankruptcy proceedings that could have ruinous ripple effects.

In China last week, Treasury Secretary Henry Paulson told reporters that a failure of a major auto company "would not be a good thing" amid current economic distress and said he hoped Congress would "prove successful in addressing this issue."

After the vote Thursday, a Treasury spokeswoman said that Paulson's position was unchanged, and reiterated that the $700 billion TARP (troubled asset relief program) fund should be used exclusively to help the financial sector.

While the representatives from these transplant states clearly see all this as a chance to be conservative heroes and grievously harm the UAW, the transplants themselves have little to gain from a Detroit collapse, and plenty to lose.

Just as the failure of one Detroit carmaker could result in the fairly swift shut down of the other two because of the tentacles between the Detroit Three and all their supplier companies, those same suppliers make hundreds, if not thousands, of parts for the transplants, too. They also use many of the same financial services companies.

Most Asian and European transplants have already reduced their US production and car-building in their home markets, too. Losing a major US parts supplier is a headache they don't want or need.

During a radio interview I gave last night, the host asked, "Has anyone looked into whatever contributions these Republican Senators have gotten from these transplant companies in their states?"

I told him no, not that I knew of, but I thought it'd be a good idea. If anyone reading this wants to get started on such a project, drop me an email (just go to SteveParker.com and you can find the address easily enough).

Starting January 20th, a new President and a bunch of new, fresh eyeballs will be dealing with the Detroit Three crisis. Heck, even if they're old eyeballs, we're familiar with many of them from the Clinton years and know that, at least, they can be trusted to have the nation's needs at heart.

It does seem, at this point, that the $15 billion, if loaned with enough tough ropes, not strings, attached, to keep GM, Ford and (maybe) Chrysler alive until March 31st, when detailed plans for recovery (or failure) would be made public, that's a worthwhile and, these days, negligibly small investment.