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US Auto Giants, Workers Face Uncertain Future as Bush Admin Mulls “Orderly” Bankruptcy

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The future of auto giants General Motors and Chrysler remains up in the air one week after Senate Republicans rejected a deal to grant the automakers $14 billion in emergency loans. Chrysler is closing all of its plants today. The White House says it is considering allowing the companies to go bankrupt in what it describes as an “orderly way.” We speak to union activist and writer Gregg Shotwell, a thirty-year General Motors retiree. [includes rush transcript]

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This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ: The future of auto giants General Motors and Chrysler remains up in the air one week after Senate Republicans rejected a deal to grant the automakers $14 billion in emergency loans. Chrysler is closing all of its plants today. They won’t reopen until at least January 19. General Motors and Ford have said they, too, will idle some plants.

Bloomberg News reports a Bush administration rescue plan would be announced as early as today, but it’s unclear what concessions would have to be made by the auto companies and the United Auto Workers. The White House says it is considering allowing General Motors and Chrysler to go bankrupt in what it describes as a “orderly way.”

White House Press Secretary Dana Perino addressed the issue at a press briefing on Thursday.

    DANA PERINO: I will tell you this. The President is not going to allow a disorderly collapse of the companies. That is not an option. Some people have assumed that that’s one of the things that we would decide. That is not going to be the case. When the President says that we’re going to take all of this into account, he means that we’re going to do something. And we’re nearing a conclusion. We’re narrowing options. I just don’t have anything for you today.

    REPORTER: Let me just ask two things quickly. Do you think the week will end without a decision? And two, this may have been asked before, so forgive me if it’s a repeat, but when you say “disorderly collapse,” can you explain what that means? Does that mean that there’s some kind of collapse that’s OK, but a certain other kind of one is not?

    DANA PERINO: There’s — by that, I mean a “disorderly collapse” would be something very chaotic that is a shock to the system. If there is an orderly way to do bankruptcies that provides for more of a soft landing, I think that’s what we would be talking about. That would be one of the options. I’m not saying that that is necessarily what would be announced.

AMY GOODMAN: Dana Perino at the White House.

We’re joined now in Michigan by union activist and writer Gregg Shotwell. He worked at General Motors for thirty years before retiring in November. He’s a longtime dissident member of the United Auto Workers and co-founder of the website

Gregg Shotwell, tell us what’s happening in Michigan and your response to the possibility of letting these auto companies go bankrupt.

GREGG SHOTWELL: If they let these auto companies go bankrupt, it’s going to turn this recession into a depression. I’m shocked that they’re even contemplating this. There’s no such thing as an orderly bankruptcy. You know, millions of people would be affected. I don’t mean directly. You know that General Motors only employs 73,000 UAW members. But it’s all the suppliers, and those suppliers are going to be affected today. It’s going to start with Chrysler, you know, shutting down for the next thirty days. Anybody that supplies them in any way is out of work, and they’re not getting SUB payment, and these people won’t even get unemployment. And then General Motors is shutting down all these plants now, too.

This loan that they’re asking for is often mischaracterized as a bailout. It’s not a bailout; it’s a loan. And it’s the result of this credit crisis — and some gross mismanagement. I’ll concede that. The only people who are not at fault in this are the workers. The workers show up every day. They do their jobs. They do them well. They do them diligently. And they’re the only people who should not have to make any concessions. And, in fact, they already have made concessions. And I don’t just mean UAW members. Wages have been falling in the United States since 1973. People cannot keep up.

JUAN GONZALEZ: Gregg Shotwell, one of the things that would happen, obviously, under a bankruptcy, whether you call it orderly or disorderly, is that the union contracts that already exist would in essence be then nullified, wouldn’t they? And whatever emerged from bankruptcy would not have to deal with the existing commitments to the workers.

GREGG SHOTWELL: Well, bankruptcy is not that simple. Delphi has been in bankruptcy since October of 2005, and they are still in bankruptcy. It took them almost three years to renegotiate their contracts. And Delphi is not a tenth the size of the General Motors octopus. General Motors and Chrysler, they would be in courts for years. The only people who would make money on this would be attorneys.

The danger of this that I see, as well, is that, you know, in the ’90s, when the auto companies were making billions of dollars, they were taking profits out of North America and investing them overseas in Europe, South America and Asia. So there’s been a huge transfer of assets overseas. Now, those assets would remain protected in bankruptcy. So what, in effect, they’ve done is undermined the manufacturing base in the United States so that they could become a major importer to the United States. You see, they already have fuel-efficient — small fuel-efficient cars that they’re making in Europe and in Asia and in South America. They’re ready for import. And they would like to be like Toyota. Yes, Toyota has plants in the United States, but Toyota imports about 46 percent of all the cars it sells in the United States. That’s what General Motors is setting itself up to do, and they’re going to use this capitalist disaster to help them wipe out the dealerships and close the plants. And Congress is just going to help them strong-arm the unions into giving up any job security or gains.

Also, you’re right about the bankruptcy. And this is one of their goals, is to wipe out the legacy costs. You know, the people who earned a pension and earned healthcare and retirement in the past, they would take that away. To me, it’s like a thirty-year mortgage. I paid my mortgage every week, and I paid it off. Now that house is mine. Now they want to say, well, we’re going to take it back.

JUAN GONZALEZ: Now, obviously, there are those who continue to say that the labor costs in the auto industry, especially in the Big Three, are way out of whack. And could you talk, for those who are not familiar with, how this misrepresentation of what the labor costs really are of today’s workforce among the Big Three has been created?

GREGG SHOTWELL: Well, there’s a good reason that the plants, the transplants in the South, have not been organized, and that’s mainly because they make as much or more money as organized workers. And that was a strategy that the Japanese plants did on purpose, because they didn’t want the plants organized. So they pay as much.

The real difference is in what they owe the retirees, what they call the legacy costs. Now, you’ll hear in the media, they’ll say GM workers get $73 an hour, and Toyota workers only get $45 an hour. They arrive at that $73 an hour by tacking on the cost of all the retirees onto the active worker. This is fraudulent bookkeeping. This is essentially a Ponzi scheme, wherein the old investors are paid off by the new investors. In other words, the older investors, the retirees, their pay — their pension and healthcare — comes from the new investors, the workers. I heard Keith Olbermann compare it to saying the average wage in America, and then you would add on everybody who’s collecting Social Security or pensions. It’s really preposterous.

On top of that, I want to emphasize this. I earned my pension while I was working, not [inaudible] somebody else. The guy working today isn’t earning my pension. I already earned that. General Motors should have taken that money, set it aside, put it in a trust. If they didn’t do that, then they’ve committed a malfeasance. That’s their responsibility. Also, when I was working, they charged the customer more money based on the fact, based on their excuse that “we have to pay more for this worker because of healthcare and pension and his retirement, so we have to charge the customer more.” Whether that was 1980 or 1990, they raised those prices. What did they do with that money? They apparently didn’t put it in a trust. But they did — and this is a fact — they’ve invested largely overseas. General Motors and Ford, they have more plants overseas than they have in the United States. They’re ready to become major importers to the United States and dump all their responsibilities to the people who made those profits.

AMY GOODMAN: Gregg Shotwell, what would you like to see happen right now?

GREGG SHOTWELL: Well, you know, I think that we need to advocate for a national industrial policy that supports and sustains the expansion, rather than the destruction, of the middle class. And I would advocate for a policy that strengthens our economy, our national security, and makes the dream of a higher standard of living attainable for a wider number of citizens. You know, the working class is the backbone of this nation. And I think that we need to strengthen the American worker.

I would like to see, first and foremost, that we have national healthcare, because this is the one solution that would help everyone. It would help the employers. It would help the employees. It would help the consumers. And that is the biggest factor that takes away our competitiveness. That’s the one factor that would level the playing field, because all of our competitors have national healthcare and stronger pension systems in their country — and by “pension,” I mean government pension — so that when Toyota, you know, imports all these cars, they’re not paying for healthcare, they’re not paying for the pensions on those employees that are working overseas.

AMY GOODMAN: This is very interesting. Some people have called GM a healthcare company that makes cars and that — saying that they’re building plants in Ontario, because Canada has single-payer healthcare.

GREGG SHOTWELL: Yeah. This is the biggest advantage. They complain that they’re paying $1,500 per car, when — and that cost includes all of the retirees. You know, they are one of the largest insurance companies in the United States. General Motors isn’t just an automaker; you know, they’re a real estate agent, they’re a bank, you know, they’re an insurance company. They have a piece in every square of the capitalist board.

AMY GOODMAN: They pay more for healthcare than steel.

GREGG SHOTWELL: Yes, yes. And, you know, furthermore, we need, you know, these companies — and I think there is going to be a lot more pressure on this, but, you know, Congress acts like they had no responsibility. If Congress — see, we’re the only country in the world that subsidizes outsourcing of our jobs. Other countries subsidize research and development, and they erect trade barriers to protect their basic industries. What we did was — we do not subsidize research and development, and we subsidize outsourcing. Those are other things that need to be changed.

JUAN GONZALEZ: Gregg Shotwell, one of the things that you raise in some of the articles you’ve written is that there’s a lot of attention placed on, again, labor costs, but that the actual production workers for the Big Three, their salaries represent about ten percent of the cost of a car, while the money spent for supervisors and management represents 20 percent of the cost of a car. But we rarely get any attention on that aspect of the compensation.

GREGG SHOTWELL: No. You know, the media and Congress really look at UAW wages, and this just shows their bias. But, you know, these facts I got from the book Fat and Mean by [David] Gordon. And he points out that the United States actually has, you know, like three or four times as many supervisors and monitors as Germany or Japan, that we waste a lot more money on management.

But, you know, the actual labor costs — you know, this is another aspect, I think, that people don’t understand. I understand why, but — our productivity really should justify a raise. And when I say that, in 1992 — you know, they say that — they justify all this, because we’re losing market share. Well, the market has gotten bigger. The pie is bigger. But General Motors is selling as many cars. And the notion that they don’t like — people don’t like GM cars belies the fact that they’ve sold more cars than Toyota. In 1992, GM had 34 percent of the US market. This is from the Bureau of Labor Statistics. And they produced 4.4 million cars. Now, at that time, GM’s hourly employment was 265,000. In 2005, the market share had fallen about eight percent, but they had produced the same level of cars, 4.5 million, with 111,000 workers. With 154,000 workers less, they produced the same amount of cars. They lost market share, but they still produced the same number of cars. Their productivity has doubled. So this would — in normal times, when your productivity goes up, that means you deserve an annual improvement factor, a raise.

We’ve experienced just the opposite. The only reason that autoworkers make what seems to be a higher wage than non-union workers is that we have a cost-of-living adjustment. We won that back in 1970. But we often do not get any raise at all. And in the best years, we only get a three percent raise. But it’s the cost of living that we have that is the difference between union and non-union.

AMY GOODMAN: Gregg Shotwell, we want to thank you for being with us, union activist and co-founder of the website He retired from General Motors last month after thirty years. He’s the editor of the newsletter Live Bait & Ammo.

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