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Detroit Big Three, UAW Prepare for Bad Tidings

OhioNewsBureau

with John Michael Spinelli

Columbus, Ohio: Detroit's Big Three automakers and the United Auto Workers union may wake up Christmas morning to find nothing under their tree, if congressional Republicans and their lame duck president stand tough and not throw good money after bad by letting General Motors, Ford and Chrysler fall into bankruptcy, a scenario expert witnesses who also testified Friday said was not in the best interest of the nation.

The leaders of the Big Three car-makers, who this week drove to Washington in their most fuel efficient vehicles instead of flying there by fossil-fueled corporate jets as they did last week, did double duty by repeating their talking points, with hat in hand and a big tin cup, to the Senate and House. The three car stewards from Detroit asked lawmakers for about $34 billion. This amount, nine billion more than the troika said they needed last week, would be enough cash to get them past Christmas and maybe to March, when a new Democratic president and a stronger Democratic congress will do for them what President Bush and many of his party's fiscal conservatives won't do now, namely, keep about three million workers from joining the 1.9 million workers who have already lost their jobs this year.

But by Friday evening Democratic leaders, including Senate Majority Leader Harry Reid of Nevada, House Speaker Nancy Pelosi of San Francisco, Sen. Chris Dodd of Connecticut and Rep. Barney Frank of Massachusetts, agreed that a "rescue loan" to the nation's struggling domestic automakers was essential. Their decision came as The US Bureau of Labor Statistics greeted the nation with employment statistics that assured about 533 thousand workers will not have the same Christmas those with a job will have. The job loss number was powerful. It cast the recession economists now say started nearly a year ago in December as the longest one since the Great Depression. Today's BLS numbers are equivalent to tossing the entire state of Wyoming or the City of Seattle out of work. In November alone, the manufacturing industry lost 85,000 jobs, 82,000 thousand in construction and 91,000 thousand in retail. BLS officials said it was the worst report in three decades.

President Bush said he didn't want to redirect any of the $700 billion congress approved to bail out a sluggish, over-leveraged Wall Street to help the domestic automakers stay out of bankruptcy reorganization known as Chapter 11. The sentiment offered by Mr. Bush and fellow Republicans -- that throwing money at companies that may not survive -- were echoed by Mark Sanford, the governor of South Carolina. He said bankruptcy was the only way to "break certain relationships...like labor contracts" and believes Washington has provided enough stimulus already. He said $ 7 trillion in stimulus already is enough and Washington printing more money can't continue. He defined Detroit's situation as a problem of too much debt, the declining value of the dollar and not working hard enough in a market based economy to get rewarded. But foreign car companies, some in Republican districts, were hurting, too, as seen by a 50 percent downturn in Toyota stock. A fall off in car sales is no doubt linked to Americans who don't have cash or cannot get credit to buy one, or who don't have a job anymore.

One Ohio senator, Sherrod Brown, who sits on the Senate Banking Committee chaired by Chris Dodd, said constituents in his state, where total auto-related employment is about 250,000, are worried they won['t have a job next year. "It's all about manufacturing, making things," she said, adding, "America has a middle class because we make things and export them." Brown, elected senator in 2006, said US trade policies need to be changed, a hope that may come true when his party's new president-elect, Barack Obama, comes to power in January along with a more powerful Democratic caucus in both legislative chambers. Putting people to work is as paramount for Brown, who said no one wants to "play a game of chicken" and political posturing at this time is unnecessary, as it is for Obama, who used his Saturday video to outline a massive infrastructure spending program he'll launch upon being sworn in president.

"I didn't want to vote for money for Wall Street or car makers, but I have to," Brown said, noting that no questions were asked of Wall Street bankers as they are now for Detroit carmakers and workers. "There's a class difference here; people working with their hands...AIG workers make multiples of what autoworkers make," he said in his signature gravely voice. "It's not a pretty sight," Brown said to Rachel Maddow of MSNBC.

House Banking Committee chairman Barney Frank, a Democratic leader who has called on president-elect Obama to get involved now in advance of his January 20 swearing in ceremonies, said the new deal is to loan Detroit's Big Three $25 billion in already approved energy funds, but reserve the right next year to use Wall Street money. Frank said no questions were asked of the big insurance giant AIG, whose leaders and workers make far more than their peers in Detroit. Frank also said the situation calls even more attention to solving America's health care problem, which places a financial burden on the automakers that in turn makes them less competitive than their foreign car rivals, whose government have universal health care. Lack of universal health coverage underscores the "stupidity of America's health policy" he said, noting that Detroit and other business would be better off in two years, after President Obama and Congress work toward a "rational health care plan." Frank, like other Democrats, said there is a distinct bias between blue collar and white collar jobs. One industry observer said people who "shower before work" are given carte blanch while people who "shower after work" are given the third degree.

News came a day later that the size of the bailout may be half what automakers had asked for.

After the car CEOs left he hearing room, a panel of other economic experts chimed in, saying Detroit could not be allowed to go bankrupt or out of business. Felix Rohatyn, a legendary financier who helped bring New York back from the edge during the 1970s, said lawmakers need to hurry up before it's too late. "From a popular point of view, it's difficult, but from a practical point, its' very doable," he said of the rescue loan.

David Friedman of the Union of Concerned Scientists Clean Vehicles Research Center said the rescue package should be structured as investment, not bailout. He said Detroit's survival depends on it, that taxpayers should get a return on their investment, that carmakers should drop their lawsuits to keep increased mileage standards imposed by California should be dropped and new cars should be made to produce cleaner cars and trucks.

Jeffrey Sachs of the Earth Institute at Columbia University said Detroit should not reorganize in Chapter 11. Sachs told lawmakers that Federal Reserve Chairman Ben Bernanke and Treasury Chairman Henry Paulson should both be more involved than they are. He called on Detroit to be pragmatic, restructure their balance sheets and models. "The double standard with Wall Street is painful and palpable and difficult to understand," he said. Sachs said if Detroit gets no help soon, they could meltdown by Christmas. "Unless they are driven to bankruptcy, ,they will survive and prosper," Sachs said.

But a witness like Edward Altman, a professor of finance at Columbia University, said just the opposite. He said the only hope Detroit has is to go bankrupt, where they can restructure and change their management.

One committee member, Al Green, a Democrat, took a pop quiz of the witnesses. He first asked them if the bailout of Wall Street was in America's best interest. All hands went up. He then asked if it was in America's best interest to help Detroit. Again, all hands went up. Pennsylvania Senator Bob Casey took on critics of auto union workers. He debunked the so-called “mythology” that auto workers make $70-an-hour as “scapegoating” and “garbage." According to the New York Times, the average U.A.W. member costs GM about $74 an hour in a combination of wages, health care and the value of future benefits, like pensions. By contrast Toyota spends the equivalent of about $45 an hour for each of its employees in the United States. Base wages between the Big Three and the foreign companies are roughly comparable, with a veteran U.A.W. member earning $28 an hour at the Big Three compared to about $25 an hour at Toyota’s plant in Georgetown, Ky. (Toyota pays less at its other American factories.)

Senator Dodd is echoing the notion expressed here that Detroit should also manufacture mass transit vehicles, an idea one commenter said others dealt with "respectfully."

Michigan Governor Jennifer Grandholm, whose state unemployment figure is within spitting distance of double digits, said access to credit is what's stopping people from buying cars. She said 1 in ever 10 jobs in the nation are tied in one way or another to car makers, and that for reasons of energy independence and economic security, Detroit must not allowed to fail. Meeting with the nation's governors in Philadelphia, where they asked president-elect Obama to ride to their rescue next year, Grandholm, who said her state was the poster child of the sagging economy, said no one wants people living on a "safety net system." She implored that people be given a chance at dignity, retrained in innovative ways instead of the slash and burn philosophy of Mr. Bush and others, like Alabama Senator Shelby who told the car makers he doesn't want to fund them. She said not giving people a second chance "is not American."

John Michael Spinelli is a former Ohio Statehouse government and political reporter and business columnist. To send a tip of comment, email ohionewsbureau@gmail.com