Betraying American Workers To Bail Out Car Companies

Lame duck Pres. Bush signed that $17.4 billion bailout package on the back of American auto workers:

The loan deal requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Automobile Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers in the United States.
[…]
The debt reduction and the cuts in wages in the Bush plan were central components of proposal by Senator Bob Corker, Republican of Tennessee, who tried to broker a last-minute deal. Those talks had deadlocked on a demand by Republicans that the wage cuts take effect by a set date in 2009, while the union had pressed for a deadline in 2011.

The plan announced on Friday offered a compromise between the positions, by making the requirements nonbinding and allowing the automakers to reach different arrangements with the union, provided that they explain how those alternative plans will keep them on a path toward financial viability.

To gain access to the loans, G.M. and Chrysler must agree to a range of concessions, including limits on executive pay and the elimination of private corporate jets.

Funny, I don’t recall any requirements for executives at AIG or Bear Stearns to limit pay or eliminate corporate perks for top officers.

Emptywheel fleshes out the details:

The President of the United States just dictated that American corporations pay their employees significantly less than the employees of foreign owned manufacturers. And/or, he dictated that American corporations pick the pocket of their senior retirees.

That’s the take-away of the bailout plan, which is basically the Bob Corker plan dressed up, through sleight of hand, as a majority-supported legislation. As Bush notes, some of this bailout was supported by a majority of the House, at least.
[…]
Yet then Bush throws in the demands that Republicans made–without noting that this was basically an ideological ploy to break the union, all the while demanding that employees of American-owned companies make significantly less than the employees of Japanese-owned companies.

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.

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.

Beth Meacham in Comments points out, “I assure you that as soon as this is accomplished, the workers at Japanese-owned companies will find their wages cut. The only reason they make as much as they do is to achieve parity with Detroit.”

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Tags: American Autoworkers Union, automotive bailout, Congress, Pres. Bush

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