Disassembling The Middle Class
Well, the President did not opt for the orderly collapse of the auto industry, finally understanding (and articulating) that no consumer would buy a car from a company in bankruptcy. Instead, he extended $17 billion in loans to the Big 3 automakers, in exchange for major concessions and restructuring.
The deal would extend $13.4 billion in loans to General Motors Corp. and Chrysler LLC in December and January, with another $4 billion likely available in February. It also would provide the government with non-voting warrants, although the exact amount was unclear immediately. Ford Motor Co. has said it doesn't need short-term assistance.
The deal is contingent on the companies' showing that they are financially viable by March 31. If they aren't, the loans will be called and all funds must be returned, officials said.
The deal generally tracks key provisions of the bailout legislation that nearly passed Congress earlier this month. But it is relatively lenient in allowing the companies to show their viability. It defines viability as having a positive net present value -- a way of gauging the companies' worth, taking into account all their future obligations.
The "car czar" who gets to determine the viability of the industry is Henry Paulson, for now, but the Obama Administration will get to pick their own official, and as the real decision comes in late March, that position will have more power.
However, what's not in the WSJ write-up, significantly, is that the Bush plan would mirror the Southern-state union-busting plan by significantly reducing American wages:
Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:
• Reduce debts by 2/3 via a debt for equity exchange.
• Make one-half of VEBA payments in the form of stock.
• Eliminate the jobs bank. Work rules that are competitive with transplant auto manufacturers by 12/31/09.
• Wages that are competitive with those of transplant auto manufacturers by 12/31/09.
These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case to achieve long-term viability in spite of the deviations.
In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009.
In other words, the UAW must take wages and work rules that are the same as non-union plants, and since "wages" include benefits and legacy costs, and the Big 3 have quite a bit more of those than their Japanese counterparts, this would depress wages FAR BELOW non-union plants. Marcy explains:
Remember, the measure the Republicans were using to measure "wages that are competitive with those of transplant auto manufacturers" was the lizard lie number--the $73/hour, the number that includes legacy costs, the payments to retiree pensions. Otherwise, there would be no reason to make this stipulation--because if you use the real wage number, and not the lizard lie number, American manufacturer wages are already competitive with the transplants!!
So what Bush is demanding is that the UAW lower wages plus pensions to the level of Japanese wages plus pension (though since they have very few retirees, their pension number is basically zero). Alternately, they could lower this number by basically picking the pocket of a bunch of seniors, by taking away pension money those seniors already earned while they were still working. But one or the other will have to happen.
Now, Bush did give the Obama Administration an escape hatch: the ability to deviate from the quantitative targets provided that the companies report why they did so.
But as written, Bush's last major act as President is to demand that workers for American-owned companies work for less than workers for foreign owned companies. American capitalism, at its finest.
Obama praised the decision to actually lend the auto companies money, and suggested that the automakers must not squander the chance to reform their businesses and get back to viability. If that's done entirely on the backs of American workers, however, I don't see the point. "Saving" the auto industry while providing worker wages that rival burger-flipping isn't going to help the economy even a little. We should be working to increase the purchasing power of the middle class, not to reduce it. This could be a situation in the Obama Administration where we will need a strong labor ally in the cabinet to make that case. Good thing we'll have Secretary of Labor Hilda Solis.