The U.S. auto industry is facing the worst crisis in its history, one that may lead to the potential bankruptcies of the three remaining major U.S.-based auto makers —General Motors, Chrysler and Ford.
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How could an industry that was raking in enormous profits just a few years ago be teetering on the brink of collapse today? The corporate media machine’s answer to this question—surprise, surprise—is that autoworkers, past and present, have been too highly compensated.
But in reality, the root of the auto crisis can be found in the workings of the capitalist system itself. The insatiable thirst for ever-greater profit leads inevitably to capitalist overproduction and the boom-bust cycle that has characterized the system from 1825 on.
Auto industry in peril
Despite shedding more than 100,000 jobs since 2006 and closing factories across the country, U.S. automakers have been unable to adapt to a rapidly declining market. In October, sales dropped 32 percent industry-wide, plummeting to the lowest levels seen in 25 years. (New York Times, Nov. 7) As of Wednesday, Nov. 19, GM’s stock sank to $2.65 per share, its lowest level in more than six decades.
GM is in the most tenuous position. After giving up on merger talks with Chrysler in October, the company warned it could run out of cash before the end of the year. In the third quarter, GM lost $6.9 billion, ending with $16.2 billion in cash reserves. But the company requires up to $14 billion just to keep functioning, bringing it dangerously close to collapse.
“Clearly you can’t rule out bankruptcy,” said industry analyst Erich Merkle. “In fact, it’s highly likely if there isn’t some sort of government action.” (New York Times, Nov. 7)
Bankruptcy impacts workers
If GM—the largest of the Big Three—were to fail, consequences would be devastating for as many as five million U.S. workers both in the auto industry and in industries connected to it.
One in 10 jobs in the United States is related to the auto industry, which is the biggest purchaser of steel, iron, aluminum, rubber and electronics. In 2007 alone, the industry bought $156 billion in U.S. auto parts, supporting jobs in all 50 states. (Washington Post, Nov.18)
Retirees would also be in danger of major benefit reductions. The already underfunded federal Pension Benefit Guarantee Corporation would take over tens of thousands of pensions, resulting in pension checks dwindling to a fraction of their current levels. The Voluntary Employee Beneficiary Association, a UAW-administered trust for retiree health benefits, would also very likely collapse, potentially eliminating already shrinking healthcare benefits. (Monthly Review, Nov. 18)
Failure would also deepen the credit crisis. The auto industry’s lending arms make up one of the largest sectors of the finance industry, accounting for approximately 10 percent of the high-yield bond market. (Washington Post, Nov. 21)
The debate in Washington
Initially, the Democratic Party leaderships in both the Senate and House proposed bailing out the industry with $25 billion in funds carved out of the $700 billion Wall Street bailout fund. Senate Democrats abandoned those plans when it became clear they did not have enough votes for passage.
Another plan, supported by the Bush administration, would expedite access to $25 billion in loans previously set aside to retool factories to build more fuel-efficient vehicles. But House Democrats led by Nancy Pelosi strongly oppose using those funds for anything other than their original purpose, arguing it would undermine modernization and further hinder the ailing industry.
A third camp simply argued that the government should let the companies declare bankruptcy and reorganize. This was not a principled opposition to squandering taxpayers’ dollars to bail out auto industry tycoons—quite the contrary. Proponents of this view say bankruptcy would allow the auto industry to do away with existing union contracts and impose steep cuts in wages, pensions and health care for autoworkers to bolster the auto industry’s bottom line.
“The Big Three’s financial straits are not the product of our current economic downturn, but instead are the legacy of the uncompetitive structure of their manufacturing and labor force,” said Senator Richard Shelby whose state of Alabama is home to plants owned by Honda, Toyota and Mercedes-Benz; companies ineligible for any potential bailout funds. (CNN, Nov. 17)
In a sign of what can be expected from an Obama administration, economic advisor Robert Reich, a supposedly “pro-labor” liberal, recently advocated further wage and benefit cuts for auto industry workers as part of any government bailout of the industry. (Bloomberg News, Nov. 14)
But UAW President Ron Gettelfinger rejected calls for further sacrifices by his members, who have already submitted to a two-tiered wage system and other concessions over the last year:
“Let’s go to AIG, Bear Stearns, active and retired workers: Did anybody go in and ask them to give back wages and benefit levels?” Gettelfinger said. “We made an agreement, and we made major concessions. So how can you blame the autoworkers?” (CNN, Nov. 16)
At the same time, Gettelfinger testified before Congress together with the GM, Chrysler and Ford CEOs to appeal for an industry bailout. The CEOs had flown in separately from Detroit on their private corporate jets, an extravagance that drew much criticism. By testifying together with them, Gettelfinger made it appear that the interests of the auto bosses and workers are one and the same.
Most recently, Congressional leaders ordered the automakers to submit detailed proposals by Dec. 2 explaining how a government bailout would save their companies.
But even if some form of bailout is enacted, it gives no guarantees to working people. A bailout of Chrysler in the early 1980s preceded major concessions from workers. The company shed nearly half its workforce and left its employees earning $3.00 an hour less than workers at GM and Ford. (Monthly Review, Nov. 18)
The goal of the capitalists is to use the current crisis to attack the UAW and destroy the wages and benefits that the workers have fought so hard for. If the bankruptcy route is followed, the union could face liquidation. Regardless of which proposal is ultimately acted upon, if the capitalists have their way the working class will be the ones to bear the burden.
Workers’ control of industry
But do all solutions have to result in cuts for workers while CEOs escape in golden parachutes? The answer is “no.”
As the Marxist writer Sam Marcy argued in his work “High Tech, Low Pay,” the case of bankruptcy is a ready-made opportunity to establish workers’ control of industry.
When a company files for bankruptcy, it surrenders its title and is no longer the legal owner. Therefore, the union, on behalf of the workers, could act as the principal creditor and de facto owner of the company. The enormous sums of unpaid wages and benefits workers are owed by their employers should be considered advanced credit to the company. Virtually every company, Marcy pointed out, pays its employees not before but after they have worked for a week or a month, thereby making the workers creditors on an ongoing basis.
Once the union was established as the principal creditor, it would have the right to be appointed as a trustee—a court-appointed representative to run the company. As the legal trustee, the union would have the right to operate the company according to the union contract, therefore maintaining wage and benefit levels.
The concept of the worker’s legal right as creditors in a bankruptcy has never been successfully asserted before, but new forms of struggle must be developed. The workers and the union would undoubtedly have to take concrete steps to protect their rights as creditors and legal trustees of the company, likely including the rapid seizure and occupation of the plants.
Historical precedent for successful seizure of the plants already exists in the courageous sit-down strikes at GM plants around the country in the 1930s. Autoworkers successfully forced the bosses to submit to significant wage and benefit increases by occupying the plants, shutting down production and holding the means of production captive.
The Flint sit-down strike victory in early 1937 after a fierce 43-day battle, was followed by hundreds of similar sit-downs across the United States in factories, hospitals, retail stores and more. During that year, five million workers joined unions, a 250 percent increase in the number of union members in the country.
The opportunity now exists to advance the struggle. Popularizing the demand for workers’ control, while it still remains within the confines of the bourgeois system, would be a very significant step for the class struggle.
Currently, the primary barrier to achieving this goal is our collective lack of class consciousness, which can only be overcome by engaging in struggle. Most often struggles begin around the most immediate needs of the workers. When it becomes clear that those needs cannot be met within the confines of the system as it presently exists, the struggle can quickly escalate.
A battle over whose rights come first—those of the capitalists to their private property versus the rights of the workers to a job, housing, food, health care and so forth— has the potential to bring about a mass transformation in consciousness. That is exactly what happened in the course of the Flint strike seven decades ago.
The traditional trade union tactics cannot rescue workers from the present predicament. The role of the revolutionary party in developing mass, working-class consciousness is critical at this juncture to unleash the true power and potential of our class.
