Economy & Trade, Financial Crisis, Headlines, Labour, North America

ECONOMY-US: Carmaker Rescue Could Cost Workers

Bankole Thompson

DETROIT, Michigan, Dec 23 2008 (IPS) - After debating whether it was wise for the Republican administration to let the U.S. automotive industry collapse under its watch, Pres. George W. Bush, who leaves office next January with a battered legacy marked by an unpopular war in Iraq that has consumed billions of tax dollars and an economic meltdown at home, finally came to the aid of General Motors and Chrysler with a 17.4-billion-dollar rescue package.

The Centre for Automotive Research (CAR) issued a report in the midst of the Congressional debate on the auto bailout about how serious it could be if the government allows GM, Chrysler and Ford to fail or go bankrupt.

“Our model estimates that a complete shutdown of Detroit Three U.S. production would have a major impact on the U.S. economy in terms of lost wages, reductions in social security receipts, personal income taxes paid, and an increase in transfer payments,” said Sean McAlinden, CAR’s chief economist who directed the study.

“The government stands to lose 60 billion dollars in the first year alone, and the three-year total is well over 156 billion,” he said.

Bush stepped in with an aid plan for the cash-strapped carmakers Dec. 19, marking the end of an anxious week for the industry. He said that 13.4 billion dollars will be disbursed this month to GM and Chrysler.

But the aid package aimed at stabilising the operations of the auto industry, keeping the lights on and paying its workers for the next three months came with some heavy strings attached.

Evidently playing to the gallery of Republican members of Congress who wanted the United Auto Workers (UAW) contract with the carmakers reopened for negotiations, Bush said one of the conditions for the bridge loans would be a more competitive labour contract between the UAW and the carmakers.

For the UAW, that would mean more wage cuts in a hard-pressed economy, on top of the existing concessions it members have made in the last three years.

“The time to make hard decisions to become viable is now, or the only option will be bankruptcy,” Bush said. “The automakers and unions must understand what is at stake and make hard decisions necessary to reform.”

UAW President Ron Gettelfinger dismissed the president’s call for union concessions, saying it would ask the incoming administration of President-elect Barack Obama to remove any onerous conditions.

“We are disappointed that President Bush has added unfair conditions singling out workers,” Gettelfinger said. “We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed, as we join the coming months with all stakeholders to create a viable future for the U.S. auto industry.”

Gettelfinger said it doesn’t make sense for the federal government to keep asking union workers to sacrifice.

U.S. Senator Debbie Stabenow, a Democrat of Michigan whose 2000 Senate campaign was run by Obama’s new press secretary Robert Gibbs, told reporters in a conference call that she will ensure that unions are not required to take another pay cut in the loan.

“That part of it I don’t believe is fair and I will be asking our new president to have flexibility and make changes in those provisions,” Stabenow said. “To single our workers with very specific short-term targets I think is the one disappointing part of this.”

Congressman John Dingell, another lawmaker from Michigan, called Bush’s push for wage cuts “irresponsible”.

“We all want to see the Big Three restructure and be competitive in the future, but it is irresponsible during a time of economic crisis for the White House to insist that workers take further wage cuts on top of the historic concessions they have already made,” Dingell said.

“No one is asking corporate executives to reduce their salaries to levels similar to that of their Japanese counterparts, and no one required the employees of Citibank or AIG to take a pay cut. I strongly urge President-elect Obama to revisit this issue as his first priority upon being sworn in, and to ensure that assistance to the automakers is provided in a way that is fair to working Americans.”

Obama, who ran as a labour candidate, said in his first post-election interview on CBS’s 60 Minutes programme that he supports assistance for the auto industry that has built-in protections for labour and suppliers as well.

Responding to Bush’s aid package, Canada also said it will provide the Canadian subsidiaries of the Detroit automakers with 2.7 billion dollars in emergency loans.

Canada’s Prime Minister Stephen Harper said his country’s bailout plan, the equivalent of 20 percent of the U.S. aid plan, will help keep Canadian Auto Workers (CAW) on their jobs while the automakers restructure their companies to retain a valued sector in Canada’s economy.

“We cannot afford, in the United States or Canada, the catastrophic short-term collapse of the Big Three automakers,” Harper said. “The U.S. has signaled that they are not going to allow these companies to fail, and we will do our share of the North American package to see that this doesn’t happen either.”

About 400,000 auto workers are based in Ontario and the auto industry has been rated as the lifeline for a dozen communities in the Ontario area.

What happens with Detroit’s car makers could have ripple effects on thousands of lives in Ontario, Canadian officials said in making the case for their counterpart rescue package. GM and Chrysler CEOs Rick Wagoner and Robert Nardelli both indicated they will have a plan ready for their Mar. 31 deadline.

Obama urged the executives to go to work and make the industry profitable, reminding them that taxpayers are running out of patience to save failed companies. He said his first priority is to create over two million jobs and he wants some of those to be in the auto industry.

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