Considering the Government’s Possible Bail-Out of the Automotive Sector: A Broad View
November 19, 2008
by Robert A. Letcher, PhD
Regarding the prospect of the government bailing out the automotive sector, it seems to me that there are – generally speaking – two types of argument: argument that proceeds from the total certainty that only brazen commitment to self interest or idolatrous commitment to ideology could support; and argument that proceeds with eyes wide open to the complicated facts of the automotive sector and the even more complicated history behind those facts – and the uncertainty that wide open eyes inevitably bring.
I find myself in the latter category. Let me illustrate. My grandfather was a bricklayer who lost his hand when he slipped on a wet plank at a construction site and his hand fell into the open gear drive of a cement mixer. More recently, about a year ago, after PBS had aired one of its multi-part World War II stories and commented about the changeover at Willow run plant from making cars to making bombers, I argued in a letter that the UAW printed in its Solidarity magazine (Nov.-Dec. 2007, page 4) that the automotive sector had to be included in discussions of national security, because the companies and the union are not only auto makers just-in-time, but are also bomber makers just-in-case – and that the war may have had a different outcome had that changeover not been possible.
Only a few years before the war, working people like my grandfather had won the right to unionize – a response to decades of cruel exploitation by hard-hearted business moguls whose hardheaded successors have contributed so much to the development of the current problem. (Please note: historically speaking, discussion of companies and unions does not involve a chicken and egg question; corporations clearly came first with their exploitation of workers, and unions formed later, in self protective reaction to such corporate exploitation.)
During the brief time that I worked as a salaried employee in the auto sector, I heard my desk jockey colleagues refer repeatedly to the “golden handcuffs” that kept them from suggesting new ideas: their salaries were too high to risk losing, if for some reason their idea didn’t work; while they felt no risk if they came up with no new ideas and just did what they were told to do. By chance, I ran into a friend who had earned a Ph.D. in engineering mechanics from a prestigious school: he complained about having his sophisticated knowledge reduced to what amounted to glorified drafting of surfaces, rather than applying it – say – to more sophisticated matters, like vehicle dynamics or crash safety. I recall, at the time, wondering whether his case might be a manifestation of Henry Ford’s now bypassed by events assertion, “styling sells cars.”
I would be remiss if I did not point out some foolish actions taken by the union. As I recently discussed in recounting M. Olsen’s logic of collective action (See my essay, “Pendulum or Wrecking Ball…?” at URL=http://www.mytown.ca/ev.php?URL_ID=124370&URL_DO=DO_TOPIC&URL_SECTION=201&reload=1226974874), the union joined with the automobile companies to obstruct the introduction of new technologies, not unlike the steelworkers union and steel companies had a few decades earlier, on the way to killing off integrated steelmaking in this country. (My own research indicates that not a single one of the breakthrough technologies in steelmaking – not the Linde process for generating oxygen, not the basic oxygen furnace, not continuous casting – had been invented in the United States.) Although Olson helps us see the structural aspect of this problem, the details are also important. As several columnists have pointed out – myself among them – they successfully pressured Michigan’s congressional delegation to “protect” them by blocking every single effort since 1970 to restrict emissions or increase corporate average fuel economy. Their efforts over the past four decades has led to the truly ironic situation of the current Michigan delegation seeking protection for the automotive sector from the “protection” that the automobile companies and automotive union’s bought from previous Michigan delegations. You can’t make this up! It would be funny if the implications were not so serious.
I’m not saying that the automobile companies in the automotive unions did nothing to develop technologies capable of reducing emissions and increasing fuel economy; rather, I am charging that they did nothing in good faith to develop such technologies. All three groups – the companies, the union, and the congressional delegations – put their heads down and mindlessly blocked, like linemen hoping to get a fullback into the end zone from one yard out – and they “blocked” to keep those SUV profits rolling in. They blocked every effort to regulate. They even blocked a good-faith effort undertaken by the US Department of Commerce in the late 90s to improve fuel economy without regulation: the latter was called Partnership for a New Generation of Vehicles (PNGV), an effort that a recent PBS frontline episode reported the government’s contributing upwards of $1 billion.
In fact, I was involved in that partnership myself, as a freelance policy entrepreneur. While the PNGV was initially intended to focus on technology development only, I focused on the broader institutional obstacles that had to be transcended in order to create a viable market for highly fuel-efficient cars the PNGV was nominally intended to create. (Those institutional obstacles would still have to be overcome if the bail-out being discussed today is ever to have any chance to succeed.) I recall now that at the time there were groups who accused the partnership as being windowdressing – and I watched then as the three companies effectively dropped out of the partnership, by shifting their focus to the business-as-usual focus on cutting internal costs, a shift mentioned to me by one big three executive in personal communication.
If I recall correctly what my logic teacher taught me 40 years ago, any conclusion can be drawn logically from a contradictory set of premises. Now, I don’t know whether the foregoing meets all the conditions my logic teacher would have required in order for me to characterize them as being “contradictory”. But they are most assuredly confounding, and for policy purposes, close enough to warrant being treated as contradictory. To the extent that logic might be applicable to this aspect of politics, I hope that the foregoing demonstrates that arguments of the first type I raised above – that is, arguments that proceed from total certainty – rest on shaky ground, at best. Total certainty in such arguments can only come from and can only indicate total self delusion – hardly a sensible basis upon which to develop such a costly, central, complex, complicated, crucial bit of public policy.
So, what policy do I recommend? To begin with, I would urge the parties to acknowledge their history together, beginning with corporate indifference and cruelty, moving on to union intransigence and antisocial behavior, and including recognition of the hypocrisy of asking the public now to protect their parties from 40 years of “protection-in-effect” that they had already enjoyed at the public’s expense. I would urge the consumers of their products to acknowledge their own selfish, antisocial behavior around purchasing gas guzzlers. (My 1992 VW GTI has about 165,000 miles and still gets almost 32 miles per gallon on the highway and 26-28 around town. That’s hardly in the PRIUS range – but it’s not bad for an almost 17 year-old car.)
As far as action, I will urge the Congress to require the firing of all top executives of all three car companies – from anyone whose title has ever included “vice President” and on up. Replace the Boards of Directors, too. I would do this as a favor to the country as well as to the companies, irrespective of whether the companies ever receive any bailout money from the government. Think of it as a group-think lobotomy – take out enough material to encourage everyone else to take off their golden handcuffs.
Next, I would urge Congress to require treating all retired top executives in the same manner as current top executives end up treating the lowest paid worker who loses his or her job during this difficult time. I would urge Congress to authorize the breaking of contracts with such former top executives, if that is necessary. And just so I can sleep at night, I would urge Congress to go back as least as far as Roger Smith (the guy Michel Moore made famous), whose retirement package the board of directors graciously doubled in order to get General Motors out from underneath him.
Next, I would urge the union to acknowledge that these are no longer “the good old days” – and that they are also no longer “the bad old days” like when my grandfather lost his hand. I say, in behalf of my grandfather’s lost hand, “solidarity forever!”, not stupidity forever! Times have changed. The world has changed. It’s time for the union to change. I urge the union to become a movement for justice again: justice not just for skilled tradesmen, as in the aftermath of the Homestead strikes in the 1880s and 1890s, when unskilled workers and immigrants who had helped to win the first of those strikes were dismissed by the skilled tradesman, thereby contributing to their own defeat in the second strike; justice again not just for skilled tradesmen, as in the 1930s when the AFL would have nothing to do with the CIO; justice not just for industrial working men, as in the aftermath of World War II when women were sent back to the kitchen; justice not just for industrial workers as in the 1930s when farm workers were excluded from the Labor Relations Act; and finally, justice not just for American workers (to the extent they have won it), as when fair labor standards were left out of NAFTA. I say “Solidarity forever, for every working person everywhere!”
I imagine that if the public were to see union members organizing for the general welfare in the spirit of “solidarity for every worker, everywhere!” and with the same vigor they showed in supporting the Obama for president for their own union-related reasons, the public just might find a way to support its government’s involvement in their work. In effect, I call on unions to see solidarity as a many-way street.
Would you like more details still? Okay. I would urge the Congress to limit the total compensation package of any employee of a company which benefits from a bailout to the salary of the president of the United States, with paid health benefits equal to that received by members of Congress, and a maximum of four weeks off (vacation plus sick days), and a retirement program similar to union retirees who’ve worked for about as many years in the sector as these executives end up working. For most people, that’s a lot of money; indeed, it’s a LOT more money than most workers would even know how to dream about. But it might reduce the difference in compensation sufficiently to allow a little “solidarity” to ooze into the relationship between workers and executives. On the other hand, If that large a compensation package attracts no takers, I say, close the industry down because that would be an indication that there’s just not enough love out there to turn the automobile sector around – we sure don’t want to replace golden handcuffs with plain old handcuffs to get people to work. The automobile sector will become healthy again only through love and dedication and hard work: If the bosses really need the shenanigans that John DeLorean detailed in On a Clear Day You Can See General Motors, I say, sorry—I’ve gotta draw the line there.
And of course, the companies must yield back to public influence the capacity to influence design that the union ceded to them during the strikes in the late 1940s (during the early years of the Cold War). No more gas guzzlers. Instead, high fuel-economy. And not just cars: buses, too. GM killed them (See Bradford Snell, Statement of Bradford C. Snell before the United States Senate Subcommittee on Antitrust and Monopoly: Presented at hearings on the ground transportation … in connection with S1167, February 26, 1974); I say, require GM to resurrect them as well. And high quality: SOLIDarity forever. Require companies to build high quality into their vehicles, not just into their advertising about their vehicles.
And give employees incentive to “show off” their pride in their work. Begin by expanding the employee benefit package so that it also rewards employees for keeping their own vehicles on the road. Create a 100 thousand mile club, a quarter of a million mile club, perhaps even half-million and million mile clubs—each with its own rewards. I urge the companies to then offer members of those clubs opportunities to participate in advertising for the cars they build and drive.
Why bother with all this? Because I think that if the companies and the union did all these things, the understandably hard-hearted citizens of this country might become less hard-hearted, maybe even warm and squishy–and that might lead to a popular groundswell in favor of bailing out the Detroit 3 (formerly known as “The Big Three”).
In closing, with apologies to FDR, all we have to fear in this matter is total certainty itself. Nuance matters, not ideology. You know, I think I talked myself into supporting a bail-out on something like the terms I’ve described.
Comments
2 Comments »
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Bob's Bail Out Plan by bobl-tlm
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How Do You Like Deregulation Now? graphic politics by Dicky Neely
Bob,
I agree with all of your points, but practically, can we get these miscreants to do what you suggest in time to create that groundswell of public support for whatever it takes to bail these companies out effectively? Aren’t these companies in imminent danger of total collapse now?
Jerry, first of all, thanks for commenting. I write for hours and hours, and I feel like i’m playing ping-pong solitaire–you know: ping… ping… ping.
As for the substance of your question, who can say whether there is enough time to develop the public support i called for? Not me. But i can say that it the danger is that imminent, then the company executives and boards were incompetent to have waited so long, to have cut things so close indeed far too incompetent to justify NOT firing them. So, i guess that leads me to argue for Congress to investigate this matter with dispatch, and act on their findings. I imagine that taxpayers would go ballistic if Congress bailed out the three auto sectors, left the tope management in place–and then watched the companies get mismanaged again, into a proper bankruptcy.
Imagine what might happen if Obama announced that he was moving his offices to Detroit and bringing along his economic advisors with him, for the sole purpose of developing a viable path to a viable manufacturing sector centered on the auto sector…. oh! and what if Obama invited people to bring their winter tents and veery warm sleeping bags to join him there, outside of Ford World Headquarters in Dearborn, or outside of Fortress GM in downtown Detroit. THAT might get things moving. I’d sure go there.
What do you think about that?