U.S. Auto Industry in Crisis – the Case for Nationalization

As the auto workers' struggle with the Big Three U.S. auto makers continues, the business pages of the nation's newspapers have been hit with troubling news about the state of the world's largest auto manufacturer, General Motors. While GM's parts subsidiary, Delphi has filed for bankruptcy, GM itself has seen a huge loss in profitability, sales and its stock tumble to the floor. This is despite starting the year leading the U.S. auto market which is by far the world's largest.

Despite the current "boom" in the economy, GM has hit the skids. Even Daimler-Chrysler and Ford, both of which were profitable in 2005, have not been immune to the problems facing U.S. companies in the industry. Ford has already been shedding jobs by attrition (not replacing retired workers) and has announced the closing of half a dozen plants in the U.S. Daimler-Chrysler will be sure to take advantage of the problems being experienced at Ford and GM to demand similar cuts and concessions from its workers.

The fourth quarter statistics from GM are truly stunning. In the fourth quarter alone, GM had a net loss of $4.5 billion. GM has seen its biggest losses since 1992, losing a total of $8.6 billion in 2005. These losses are larger than the total national budgets of several small countries! Heaped in with these losses was a pre-tax charge of $3.6 billion to cover "restructuring" at the now bankrupt Delphi. GM has announced that nine North American plants will be shut down and 33,000 jobs eliminated by 2008. GM's health care obligation to its workers is under-funded by $50 billion. The total amount owed to GM's workers in pension and health care obligations (in liabilities) exceeds $150 billion. GM has also announced plans to sell its financing arm, GM Acceptance Corporation. Even an economic behemoth like GM cannot sustain losses such as these for very long.

One of the reasons for GM's loss was a deep slump in sales of its 'flagship' models – the huge gas-guzzling SUVs such as the Cadillac Escalade and the Chevrolet Suburban. The reason people are no longer buying many of these models anymore is obvious to anyone who has been to a gas station recently.

GM is not alone in making steep cuts – deep cuts have already been announced at Ford, and Daimler-Chrysler can be expected to attempt similar cuts. Ford stated last year that it will close plants in Michigan, Missouri and Ohio as part of eliminating 30,000 jobs. But it is not all auto jobs that are being targeted: just the unionized jobs with decent wages, benefits, conditions, and pensions. Several Japanese and German companies are actually moving production to the U.S. - but these jobs are low wage, dangerous, and non-union. The Big Three want to smash the unionized auto-making workforce in order to compete with non-union workers.

The Big Three auto makers have clearly decided that the auto workers, and the communities that depend upon these jobs, are going to have to pay for the manager's inability to run these huge companies successfully. The U.S. auto industry was built with the brains and muscles of the American working class, and the work force in the Big Three's plants have largely put up with the ever increasing amount of cuts, restructuring and productivity "speed ups" over the past 20 years.

Since the 1980s millions of industrial jobs have been lost in the U.S., laying economic waste to scores of communities large and small. The "Flint Effect" of plant closings was well recorded in Michael Moore's movie "Roger & Me," which documented the traumatic effects on the city of Flint, Michigan in the early 1990s after GM announced the closure of several plants there. Today, Flint has the highest rates of unemployment, youth delinquency and crime per capita in the state of Michigan, and one of the highest in the country.

In 2005, three U.S. states saw a net loss in jobs – hurricane-hit Louisiana and Mississippi, and Michigan, which has been wracked by the bankruptcy of Delphi and the crisis of the Big Three. It is important to remember the elimination of auto plant jobs has an effect on the jobs that support those plants. According to Economy.com, in Missouri alone there are 18,000 auto worker jobs which are supported by 59,000 jobs at parts suppliers. According to David E. Cole, head of the Ann Arbor based Center for Automotive Research, "When the history of this period is written, Delphi will be viewed as the tipping point where the auto industry either got its act together or failed. The spillover to the rest of the economy is going to be tremendous." Plant closings and the elimination of union wage jobs will have a multiplying effect throughout the economy as a whole. It is not just the auto workers of the UAW who are under threat, but the American working class as a whole.

What is not included in these statistics are jobs that don't support the auto plants in a direct way. For example, in a smaller or medium sized city, plant closings will effect not just parts plant workers but the entire community which depends on the auto workers' wages to fuel the local services, utilities, education and health system. For proof of this, just look at the example of Flint, Michigan and even larger cities such as Detroit, Pittsburgh, and St. Louis to name a few.

What is really remarkable about the crisis facing the American auto makers is that this is taking place during an economic "boom." In terms of consumer spending, housing growth and corporate profits overall, the U.S. economy has recovered from the slump of 2001 – 2002. That is not to say that overall employment, workers' income or capital investment (investment in new business and plants) has recovered much at all. The capitalist future facing the U.S. working class and our brothers and sisters around the world is not a rosy one by any stretch of the imagination. As more and more workers and trade union members are beginning to understand, desperate times call for radical new measures - or perhaps not so new.

Soldiers of Solidarity

The American working class has already suffered more than a quarter-century of steep cuts in quality jobs, income, health benefits and living standards. Our real wages (adjusted for inflation) have not risen since 1975, while the CEOs now make over 300 times our average income. Calling for "sacrifices" is easy for these people, who even if they lose their top management positions still have millions in the bank and a corner office waiting for them somewhere else (or a job, say, at FEMA or somewhere else in the government). But our class has been sacrificing our future and our children's future for as long as anyone can remember: Enough is enough!

For most of this time the majority of trade unionists have kept their heads down in the hope that someday things would improve. But it has now become painfully clear that things won't get better for us anytime soon if we keep following our current course. The "Labor-Management highway" takes us nowhere but down. The U.S. Labor Movement, with the UAW in the front lines, has to break with the policy of "partnership" with the bosses. Not one real gain has been won through this approach because our "partners" are interested not only in reaping the rewards from our labor, but now they are prepared to sacrifice our jobs on the altar of profit as well. This can't continue, and organized labor is the only force that can stop it, shoulder to shoulder with the working class as a whole.

Our class is being given a lead by the Soldiers of Solidarity (SoS) in their fight back at Delphi. This is a fight that all trade union members and workers must support wholeheartedly! After the long, dark night that the Labor Movement has been sleeping through for the past decades, the growing rank and file movement in the UAW is waking the working class up to what a union is supposed to be – an organization that actually stands up to defend its members and fight tooth and nail against concessions. This is a long-awaited return to the militant traditions on which the UAW and the CIO were founded in the 1930s. Solidarity, unity and determined struggle created our industrial unions and secured good living and working conditions for our class. Concessions have only eroded our jobs and the quality of life for ourselves and our children.

The route to defeat has already been spelled out by the likes of the current international "leadership" of the UAW. Even in the face of the absolute gutting of Delphi, where the only possible defense the workers have is to work to rule in preparation for a GM-wide strike, people like International UAW Vice-President Dick Shoemaker can only say: "a strike would devastate everyone." Of course it would, but the point is that there is no other option for the union if it's going to actually defend itself instead of committing suicide! It will be far more painful if 2/3 of the workforce is laid off and wages are cut from over $20 to just $10 to $12 an hour. Thousands of workers will be unable to pay their mortgages and will lose their homes.

What is really needed is to replace the leadership of the UAW, and the Labor Movement as a whole, with rank and file workers who are willing and capable of defending the interests of the union and of the class. Unfortunately, the current leadership is more interested in maintaining its perks, privileges and proximity to the bosses than in defending the interests of the rank and file. If the rank and file were to take back the leadership, huge gains could be made.

The Case for Nationalization

GM was once the model of corporate centralism, where all of the affiliated industries and operations were owned and administered within one economic entity. Not only did General Motors Corporation own and run the auto plants, it owned the factories producing the parts, the engines, the glass, the paint and the tires as well. It owned its own finance bank, so that when a buyer wanted to purchase a car they would take out a GM loan to buy a GM car. The only parts that were outside of its field of production were the steel, aluminum and other raw materials. GM was the number one corporate behemoth in the world. Its Detroit headquarters, a trio of massive, gray towers, was designed to convey just one impression – that of a modern colossus. The example of GM's corporate centralism was copied by Ford and Chrysler, and later by the Japanese auto makers as well. This kind of industry organization was the most efficient yet seen under capitalism.

So why is such a well organized corporation falling apart? Because the capitalist system itself is decrepit and torn apart by the anarchy of the "free market". Truly efficient economic planning and coordination is not possible under capitalism because of the simple fact that under capitalism, production is not carried out to satisfy human needs, but to turn a profit. If the executives of a company can make more money by closing a plant and selling off its machinery than by developing the economy by producing a product, they will close the plant. If genuine planning and foresight was a factor in GM's strategies and products, they would have started producing fuel efficient cars using new sources of fuel a long time ago. But instead, since SUVs were popular in the heady days of the IT boom in the 1990s, the executives made SUVs their "flagship" product. Now that gas prices have skyrocketed, GM is running out of fuel itself. If GM can suffer such a catastrophic decline, the other U.S. auto makers are just as likely to do the same.

The crisis at GM has led some to call for massive "restructuring," meaning mass layoffs and plant closings. Others have called for GM to be reorganized into an employee-owned company, where workers become stockholders. Some states have even proposed that they become co-owning partners with the auto companies in order to save the jobs on the chopping block. The only problem with these solutions is that in the long run, they will not save jobs - it will only delay the day of reckoning. GM, Ford and Daimler-Chrysler have already been thoroughly "restructured" for two decades straight. Profitability, production and employment have all steadily fallen. Whole communities have been laid to waste economically by the "restructuring" of the 1980s and 1990s. This bosses' solution will more than likely end up "restructuring" GM out of existence.

Employee stock ownership sounds interesting enough as an idea, but it is an idea that has already been put to the test and failed. The workers at United Airlines for example, despite owning the company's shares do not in any meaningful way control the company. United has experienced some of the worst cutbacks in the airline industry and was headed for several years by none other than current Delphi CEO Steve Miller! So despite "owning" the company, the United workers and the Machinists Union had to contend with their "employees" on the company board of directors cutting their jobs and benefits. With corporate "restructuring" and employee "ownership" ruled out, the only solution left before us is the nationalization of the auto industry under democratic workers' control.

Nationalization - that is, turning the privately-owned Big Three auto companies into a single state-owned enterprise, democratically controlled by the workers themselves, may sound like a far-fetched idea at first to many trade unionists and workers in the United States. However it is the only real alternative to the crisis facing one of the key industries in America. As long as this huge industrial structure, with its vast array of plant, machinery, supplies and most importantly workers, is left in the hands of the greedy robber barons such as Wagoner and Steve Miller, it will never be run in the workers' interests. The millions of working people who depend on the auto industry for their livelihood have already learned that they cannot depend on even the biggest corporations to ensure their future. The auto workers are the ones who have built up the American auto industry, not the bosses. The bosses have only managed to run these companies into the ground!

So why should these people, who have failed to adequately run this important industry be given another chance? If the workers can already manage to operate a highly complex auto plant, why couldn't they collectively operate all of the auto plants? Neither Steve Miller nor Rick Wagoner are engineers or scientists. The average auto worker knows more about producing cars and trucks and they already are responsible for producing them. Democratically-elected and recallable plant and industry-wide committees would be a thousand times more capable of administering the industry than the current capitalist set-up. If the entire U.S. auto industry were nationalized, under democratic workers' control, the economic future of today's auto workers, their families, and their communities would be assured. A nationalized auto company would finally be able to deliver affordable vehicles which emphasize quality and could pioneer more energy efficient and environmentally-friendly fuel alternatives.

The SoS are an example of the process that led to the emergence of a rank and file controlled trade union movement in Venezuela. They are just the beginning of the organizational formations that must emerge around the country and in all sectors in response to the bosses' attacks. All working Americans should support and join the SoS! The way forward to nationalization can be seen in Venezuela, where over the past few months, where under the pressure of the rank and file, several important industrial plants have been nationalized under workers' control. In many cases workers occupied the factories and got them running themselves. Instead of being "restructured" into oblivion, nationalization of the U.S. auto industry under democratic workers' control would open an entirely new chapter for the U.S. and world working class.

* Concessions Don't Save Jobs!
* Every Worker a Soldier of Solidarity!
* Nationalize the Auto Industry Under Democratic Workers' Control!