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Ralph Nader and Labor Professor Harley Shaiken Discuss the Bankruptcy and Future of General Motors

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Auto giant General Motors filed for Chapter 11 yesterday in one of the largest bankruptcy cases in US history. Shortly after the filing, GM said it would close fourteen more plants, including seven in Michigan, and cut up to 21,000 more jobs. More than 2,000 car dealerships will be shut down, as well. After the factory closings, GM will have fewer than 40,000 workers buildings cars in the United States, one-tenth of a workforce that numbered nearly 400,000 in the 1970s. [includes rush transcript]

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

AMY GOODMAN: Auto giant General Motors filed for Chapter 11 yesterday in one of the largest bankruptcy cases in US history. Shortly after the filing, GM said it would close fourteen more plants, including seven in Michigan, and cut up to 21,000 more jobs. More than 2,000 car dealerships will be shut down, as well. After the factory closings, GM will have fewer than 40,000 workers buildings cars in the United States, one-tenth of a workforce that numbered nearly 400,000 in the 1970s.

Monday’s bankruptcy filing caps a remarkable fall for the century-old company which was once the world’s largest car manufacturer. After the filing, GM was removed from the group of thirty blue chip companies that comprise the Dow Jones Industrial Average, where it had been listed for the past eighty-three years.

Under the proposed restructuring plan, the US government will invest another $30 billion in GM and take ownership of 60 percent of the company. The Canadian government, a union health trust and current bondholders would own the rest.

On Monday, President Obama laid out his case for the nationalization of GM.

    PRESIDENT BARACK OBAMA: We are acting as reluctant shareholders, because that is the only way to help GM succeed. What we are not doing, what I have no interest in doing, is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They, and not the government, will call the shots and make the decisions about how to turn this company around.

AMY GOODMAN: President Obama also acknowledged the restructuring plan will result in dramatic downsizing and the loss of thousands more jobs.

    PRESIDENT BARACK OBAMA: I will not pretend the hard times are over. Difficult days lie ahead. More jobs will be lost. More plants will close. More dealerships will shut their doors, and so will many parts suppliers. But I want you to know that what you’re doing is making a sacrifice for the next generation.

AMY GOODMAN: Fritz Henderson, who will stay on as GM’s chief executive for the time being, said that going forward, GM will be a new kind of auto manufacturer.

    FRITZ HENDERSON: The GM that many of you knew, the GM that, in fact, had let too many of you down, is history. Today marks the beginning of what will be a new company, a new GM dedicated to building the very best cars and trucks, highly fuel-efficient, world-class quality, green technology development, and with truly outstanding design. And above all, the new GM will be rededicated in entirety as a leadership team to our customers.

AMY GOODMAN: Meanwhile, Chrysler, which entered bankruptcy April 30th, could now emerge as a new corporate entity owned by a UAW healthcare trust, the Italian automaker Fiat and the American and Canadian governments.

For more, we’re joined by two guests. Harley Shaiken is a professor at UC Berkeley who specializes in labor and the global economy. His latest article is in the current issue of Dissent Magazine; it’s called “Motown Blues: What Next for Detroit?” And joining us on the telephone from Washington, DC, longtime consumer advocate and former presidential candidate Ralph Nader. His first book, Unsafe at Any Speed: The Designed-In Dangers of the American Automobile, published in ’65, took on GM and its Chevrolet Corvair model.

We welcome you both to Democracy Now! Professor Shaiken, let’s begin with you. First, your response to the bankruptcy of GM?

HARLEY SHAIKEN: Well, it was quite an enormous shock, not a surprise. We knew it was coming. But there was something about a company of this size, visibility and iconic stature imploding like this that’s quite extraordinary.

It’s very costly for the US government. An additional $30 billion going into GM. But the real key issue here is not simply saving GM. That’s a necessary but not a sufficient condition for a broader set of issues, which is a viable manufacturing base and viability in health for the communities and the tens of thousands of families who are directly caught in this crossfire.

AMY GOODMAN: And the government taking it over, being the majority shareholder, what does that mean now? And what should the government do?

HARLEY SHAIKEN: Well, the government has, in effect, nationalized GM. And President Obama has said that it is a reluctant act. And that’s quite clearly what it is. But the government should not act as if it is a hedge fund. It should not be a reluctant shareholder. It clearly wants to see a viable competitive company at the end of the day, a world-class automaker that also meets some broader public standards on energy and the environment, as well as employment.

But the government, to do that, is going to need a broader set of policies that addresses those concerns as the route to viability and profitability for GM. That, in fact, is what virtually every other auto government in this sort of a situation is doing today. Whether it’s a Christian Democratic government in Canada, such as — I mean, in Germany, such as Angela Merkel, whether it’s the Canadian government, all other governments are raising these issues in terms of public funds for private restructuring. And I think that’s a central challenge for the US government, as well.

In many ways, it is a thin line. There are going to be a lot of conflicting political pressures. But ultimately, this is an opportunity to really have a world-class automaker and meet some broader goals of great value to the public at the same time.

AMY GOODMAN: Ralph Nader, your response?

RALPH NADER: Well, first, we have to recognize the total autocratic, secretive way this bankruptcy was initiated. Congress, which in 1979 had thorough public hearings on the Chrysler bailout and a few years later on the structuring of the Conrail system, completely abdicated its role to the White House, that then allocated the role to a secret task force run by Wall Streeters and overseen by Timothy Geithner, Secretary of Treasury, and Larry Summers. And this is the predictable result of an autocratic, secretive process.

The common shareholders who own GM have been wiped out. They had no voice in Congress to discuss it. The auto suppliers, the auto dealers, consumer groups had no voice to discuss it in Congress. Workers had no actual voice in Congress, other than to tell Congress to lay low while the UAW was negotiating this deal, again, in private. So, we have a process which is very similar to the Chrysler process, which is a White House fiat to a bankruptcy court fiat to Fiat in Italy, if I may have a little play on words. But the bankruptcy process itself is extremely autocratic. Under Chapter 11, the judge keeps pounding the gavel and denying the claimants interventions and appeals on behalf of the combined force of the Obama task force and top brass in GM.

Now, why is this going to turn out bad? Because Obama has made the American taxpayer responsible for saving GM, to a level which will eventually reach $70 billion, but then he makes his government irresponsible by saying he doesn’t want to run GM. Well, what if GM management continues to ship its production to China, which is the grand China strategy of GM from several years back, and unemployed workers and closed factories and, by consequence, closed dealers? Is Obama going to step aside?

So, you have so many questions, Amy, that aren’t being answered. For example, are the China assets and unrepatriated profits of GM going to be included in the bankruptcy procedure, or are they going to be excluded? What about the act of closing dealers? Dealers don’t cost manufacturers anything. The franchise agreement makes certain of that. So why are we further inconveniencing motorists, rupturing their relationship over the years with dealers that are closer to home and making them travel more and more? The answer is, the fewer dealers, the more likely the price of cars go up. So there are all kinds of reasons why this should go back to Congress for thorough House and Senate hearings, if Congress wanted to adhere to its constitutional duties.

AMY GOODMAN: We’re going to break, then come back to this discussion. Longtime consumer activist Ralph Nader and professor at University of California, Berkeley, Harley Shaiken, joining us from Berkeley. This is Democracy Now! Back in a minute.


AMY GOODMAN: We continue with Ralph Nader and UC Berkeley professor Harley Shaiken, who’s joining us from Berkeley. Harley Shaiken, how did this happen?

HARLEY SHAIKEN: This was a long time coming, but it still hit with a huge thud. GM, over decades, began eroding market shares and increasingly, in the last decade, became very out of tune with consumers. It was building a lot of SUVs, a lot of fuel-guzzling vehicles, that became unpopular in the marketplace when gas prices skyrocketed. So the net result was, GM was weakened by a series of managerial and strategic miscalculations. But what got us where we are today is the collapse of the financial system and the downward slide of the US economy. It’s very likely, absent that, GM would be in some tough situations right now, but hardly bankrupt and in the situation of terrific cutting and implosion that we’re looking at.

AMY GOODMAN: What happened to the EV1, to the electric car, Professor Shaiken?

HARLEY SHAIKEN: Well, the EV1 was a great hope and a very visionary thing that GM did in the early 1990s. It sought to be the first automaker in the world to build an electric car. And the EV1 was a very impressive vehicle, and key to it, ultimately, was a new battery, which at the time was highly experimental, but very, very good in terms of its technical specifications, the nickel-metal hydride battery.

GM concluded, after several years of this and a palace coup that got rid of the existing leadership of GM, including those that were championing the electric car, and basically said, “OK, we can’t manufacture this profitably, so we’re going to shut it down.” And then, inexplicably, GM walked away from what might have been a very promising alternative: a hybrid vehicle. Toyota and Honda didn’t. The rest is history. GM pioneered this, shut it down, and later in the decade bought Hummer. And that is almost symbolic of the kind of strategic miscalculation and short-term vision that caused the enormous weakening of the company.

AMY GOODMAN: Do you agree with Ralph Nader’s criticism of how President Obama is handling the bankruptcy?

HARLEY SHAIKEN: Oh, I think Ralph Nader’s got a lot of very valid issues that he’s raising here. The fact that so much of this was done off the public stage, without congressional involvement, lends itself to the government acting as a private equity fund, versus admitting what we are doing in a moment of crisis. We are, in fact, nationalizing a major firm, not on a long-term basis, but certainly to get it through this critical moment, and doing that without the public participation, where we have a model with the loans to the Chrysler Corporation, although on a much smaller scale, that took place in the early 1980s that lends itself to this sort of hedge fund mentality, where the issue is getting in, making money for the government as quickly as possible, and getting out.

The problem with that is twofold. First, it doesn’t lend itself to the sort of long-term planning which is precisely what the industry lacked in the first place and is necessary for a viable future. And second, the taxpayer is not simply a client for a private equity fund. The taxpayer winds up picking up the social cost. For those who are impacted in terms of the unemployment, the communities that crash, the cost is incalculable. But even for the taxpayer, this is not cheap, in terms of unemployment benefits, in terms of the social cost of this kind of a contraction.

Just to put yesterday’s events in perspective, imagine an announcement that took place yesterday morning that said, “We are going to eliminate the Chrysler Corporation.” In the midst of an economic collapse, I think that would have raised a huge amount of criticism and protest. But the cuts of GM yesterday are an entity, these fourteen plants, 20,000 hourly workers, another 5,000 salaried workers, that begins to approximate the size of the Chrysler Corporation in the United States. So the scale of these cuts is rather remarkable under any circumstances, but this taking place in the midst of an unprecedented and devastating recession really compounds these broader economic problems.

So, ultimately, this isn’t simply an auto story. It’s not a Detroit story. It really is an issue of where the economy is going and how quickly and effectively we recover economically, but also in terms of a manufacturing base and in terms of the social cost of this transition.

AMY GOODMAN: Ralph Nader, let’s talk about who’s going to own GM. The US government will invest another $30 billion, take ownership of about 60 percent of the company. The Canadian government, a union health trust and current bondholders would own the rest. The union health fund is set to own something like 17.5 percent of GM’s shares and 55 percent of Chrysler’s. So the UAW both representing the workers and being owners, explain how this works and how you feel it should work and the power of the union here.

RALPH NADER: Well, there should be responsible owners. I mean, you can’t have a situation where the government is the majority owner and then say they’re not going to have influence on GM and they don’t want a full representation on the board of directors. What happens, if that occurs, and that’s what Obama clearly implied in his statement yesterday, what happens is we end up with the situation of bailing out the auto companies and then facilitating moving production overseas. We end up not leveraging the public’s or the taxpayers’ investment to protect jobs and manufacturing capacity in this country, as well as furthering statutory goals and safety and environmentally proper technologies.

A good example of that is the Kenosha plant in Wisconsin. After Chrysler was pushed into bankruptcy by the US government, the Kenosha plant was under the impression that they were going to survive. Then they were called by Mr. Nardelli, who heads Chrysler, and he said, “Sorry, it’s going to have to close.” Well, the Kenosha plant is an up-to-date engine manufacturing plant that has won several awards. It has 800 workers. And the bulk of that production is going to Mexico. Now, that’s an example.

Why are we using tax dollars to facilitate the export of whole plants and jobs to communist dictatorships in China and to oligarchic, authoritarian regimes in Mexico who have turned workers into serfs and denied them independent unions and other rights that workers should have in any countries that we have trade dealings with?

We have raised these questions in letters to Mr. Obama and Chairman Henderson of GM now twice. They don’t reply to letters. They don’t reply to the press’s inquiries. This is an authoritarian corporate-state operation, Amy. And those who are interested in the letters, they’re on my website,

But this business of letting the bankruptcy court be — letting the bankruptcy court allow Obama to put tens of billions of dollars into Chrysler and be irresponsible for it has to be closely examined. The bankruptcy judge is basically a tool of this corporate-state policy, and under very rigid bankruptcy proceedings under Chapter 11. That’s a story all by itself. And he is basically putting his gavel down again and again, as he did in the Chrysler bankruptcy, getting rid of all the claimants and creditors and the rights of people who are going to suffer when this sub-economy called General Motors and Chrysler is further collapsing, in terms of closing dealers and closing factories and laying off workers and moving to other regimes abroad.

AMY GOODMAN: Professor Shaiken, a lot of anti-labor commentators on television are saying it’s the UAW that brought down General Motors and Chrysler, the cost of labor. Can you share your analysis on this?

HARLEY SHAIKEN: Sure, and that’s so widely repeated that if you had a dollar for each time that’s said on radio right now, you could buy General Motors. But it’s factually simply untrue. Of course labor costs are a critical factor for any company, and they become particularly critical when you have a downturn. But the labor costs were not what led us into the current mess with General Motors. How do we know that? Because GM had the same labor structures, significantly higher than today, in the 1990s and earned billions when it was in tune with the market and its vehicles were selling. So it’s not labor costs that got us here. But they’ve become a very convenient culprit.

Now, it is true that there are really extraordinary pressures downward on labor costs. The UAW recognized those political realities and made major concessions in a recent contract to preserve the jobs at GM. I don’t think they had much of an alternative in that. But cutting labor costs won’t get us out of this.

And we forget that the flipside of the labor cost is purchasing power. In the 1950s and ’60s, GM and the US auto industry paid the highest industrial wage in the world and made billions for their shareholders, and that translated into a very vibrant growing economy, because workers spent that money, and that created even more jobs. So, to the extent that you hammer labor costs down and you use that as your exclusive focus, essentially what you’re saying right now is, “Well, what we need in this economy is less purchasing power.” That’s hardly a route for economic recovery and completely misstates how we got into the current situation. And unless we understand that clearly, it’s going to be far more difficult to get out of it.

AMY GOODMAN: And the issue of healthcare, GM, Chrysler, Ford paying more for steel — or paying more for healthcare than they do for steel?

HARLEY SHAIKEN: Well, that is a huge issue. And in part, the largest single component of that, until very recently, has been the cost of healthcare for retirees. Out of a total wage bill — that is, wages and compensation — that amounted to about $16 per hour for the average worker at GM. But the issue isn’t retirees having healthcare. That ought to be a human right that all retirees have. And this was contractually negotiated over a three-decade period. The issue here is a failure of public policy in Washington on the issue of healthcare over many decades that put it at the bargaining table in Detroit, where it’s an unsustainable burden.

Recognizing this in 2007, the union and General Motors and the other Detroit automakers set up for each of the companies an independent healthcare trust fund. That was only funded to 60 percent of its total liability in 2007. But by the end of 2009, it takes healthcare for retirees off the companies’ books, and it becomes a responsibility of the union and this independent healthcare trust fund. So that clears the books and makes this not an issue going forward, but it does create a high risk for the retirees, and it creates some real issues for the UAW, who is going to be responsible for this going forward.

So, short answer, yes, the cost of healthcare is an issue, but the solution to that issue, in my view, is not getting rid of healthcare for retirees, particularly after decades of promise, but rather, addressing this in a responsible way in Washington, for autoworkers, to be sure, but for all Americans.

AMY GOODMAN: On that issue of healthcare, Ralph Nader, Harley Shaiken writes, “The United States is the only major auto-producing country in the world without national health insurance. Unlike their competitors, US automakers are forced to shoulder the crippling burden of health care costs for their employees.”

RALPH NADER: Well, I mean, you know, listening to Harley Shaiken makes me wonder why the task force appointed by President Obama was composed of know-nothing Wall Street types instead of people who have studied and know the auto industry for years. And that’s why we’re getting the wrongheaded policy.

And the point he made earlier, Amy, it needs to be made again and again. We’ve crossed that Rubicon with GM and Chrysler. The taxpayer is bailing out these two companies. We either preserve that manufacturing capacity and that structure in this country, or we allow the devastation by the export of these industries and factories to China and elsewhere, the devastation in communities to increase the unemployment compensation costs, the social service costs, the Medicaid costs, that will have to be transmitted to these devastated communities and people.

So, we need a big debate here. And that debate can only really take place in an authoritative way in Congress. And that means Speaker Pelosi and Senator Reid have got to recover their abdicated responsibility here and begin to try to put the pieces together. That will not be done by the bankruptcy court. The bankruptcy court is a mechanism for the Obama administration to escape responsibility for $70 billion or so of investment in those two companies and say, “Oh, the court made us do it.” And that’s what we’ve got to focus on.

In terms of healthcare, again, single-payer healthcare will relieve these burdens on these manufacturers, level the playing field in terms of competition with other companies in the auto industry. And once again, it’s not going to be the hoaked-up proposals for healthcare that you see floating around Capitol Hill and in the White House. It’s got to be full Medicare for all with quality and cost control. And the key website for that is It’s Single Payer Action.

AMY GOODMAN: Ralph Nader, do you hold hope — do you hold out hope for the Baucus meeting on Wednesday that single-payer activists have wrested from him, this appointment, getting arrested in his hearings, demanding a voice for single payer?

RALPH NADER: Well, you used the right word. The pressure on Baucus led to that meeting. It will at least begin to put single payer on the table. Maybe it will activate the seventy-eight members of the House who have already signed onto single payer, HR 676, John Conyers’ bill. It’s a real step forward, although I don’t expect Baucus is going to change his mind. Simply by having the meeting begins to elaborate a growing presence of single payer on Capitol Hill.

AMY GOODMAN: And Brian Deese, the Times had a profile on him, the thirty-one-year-old who is responsible for dismantling GM, never stepped foot in an automotive assembly plant until he took on this nearly unseen role in remaking the US automotive history?

RALPH NADER: That’s the example of the recklessness of Timothy Geithner and Barack Obama and Larry Summers in appointing a task force that has no experience in manufacturing, that basically looks at this issue as a financial issue. That is, GM is going to be restructured to make money, no matter where it makes it, in communist China or by staying here in the US.

And the most important thing here, Amy, is that the head of the task force, Steve Rattner, as of nine days ago, didn’t know the answer to the question, “Are the GM assets and huge profits in China going to be put into the bankruptcy process to satisfy claimants, creditors, litigators who are going to be wiped out in product liability litigation, or not?” And he said, “That’s an interesting question. I’ll have to look into it.” Now, that is not a man who doesn’t know that answer. He knows the answer to that question, but he wasn’t saying. And nobody in Congress was making him say it.

So we’re dealing here with a corporate state, the kind of corporate state that Franklin Delano Roosevelt called fascism in a statement to Congress in 1938. That is, when government is controlled by private economic power, that’s fascism.

AMY GOODMAN: Ralph Nader, finally, your allegation that Terry McAuliffe, who’s running for governor of Virginia, primary next week, tried to bribe you to step out of the 2004 presidential race?

RALPH NADER: Clearly, in a telephone conversation in June 2004, he said, “If you stay out of my nineteen states” — “my nineteen states” meaning states that are close between Kerry and Bush —- and just campaign in the thirty-one other states, that he, Terry McAuliffe, will support me and provide resources. He said that more than once: “Stay out of my nineteen states.” That was clearly an attempted bribe. And that is all detailed in Theresa Amato’s new book that’s coming out in three or four days called Grand Illusion: The Myth of Voter Choice in a Two-Party Tyranny by New Press.

And the reason why it’s important is that Terry McAuliffe is now going to retrace Clinton’s path to the White House. He wants to be elected governor of Virginia, which he’s running for now, and the primary is coming up in a week. And then he has a springboard to the White House. And somebody who is engaged in the kind of political sleaze and the kind of attempted bribery, not to mention his other dealings with fat cats and backdoor maneuverings, I don’t think can embody the trust that’s necessary to become governor of Virginia. And he -—

AMY GOODMAN: Why wait ’til now to say this, Ralph Nader, five years later?

RALPH NADER: Well, actually, I said it on your program in 2004. Nobody listened. And Theresa Amato has put this in a book with great documentation, that we do not have the semblance of a competitive electoral system in this country. We either give the voters one choice, namely the incumbent, in gerrymandered congressional districts, or two choices, which are increasingly becoming similar on so many issues, like the military budget and foreign policy and dialing for the same corporate powers. So it’s part of a major reform book, this book Grand Illusion by Theresa Amato, and this episode is outlined in the book as being illustrative of the pressures against third party and independent candidates who want to give voters more choice, new and fresh agendas, and redirections for the country.

AMY GOODMAN: We’re going to leave it there. Ralph Nader, I want to thank you for being with us, longtime consumer advocate and presidential candidate for president of this country, and Harley Shaiken, professor at University of California, Berkeley, specializing in labor and the global economy, was being talked about as possible Labor Secretary under President Obama.

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