USA: Election 2012 and the Auto Industry

With the long-running Republican Party primaries finally winding down, it looks like millionaire front-runner Mitt Romney will face President Obama in the November elections. Not surprisingly, the topic that will likely dominate the elections is the economy. One area where Obama and Romney have already begun debating is over the auto industry. But are the two parties’ policies really that different?

Romney has campaigned calling for an end to government stimulus programs and for allowing the “free market” to run its course. He has specifically targeted the government’s $80 billion bailout of General Motors and Chrysler in 2008, begun by George W. Bush and carried on by President Obama’s administration. In a 2008 op-ed piece in the New York Times titled “Let Detroit Go Bankrupt,” Romney said that only through a “managed bankruptcy” would the auto industry recover, by “shedding excess labor, pension and real estate costs.” Put another way, a turn-around was possible only through mass layoffs, factory closures, breaking union contracts, and leaving retired workers with nothing to live on.

Mr. Romney knows a thing or two about bankruptcy after serving on the board of Bain Capital, a company which made billions by buying up bankrupt companies, firing workers, and asset-stripping what was left over.

The Obama administration has defended the bailouts, opportunistically using Romney’s ties to Bain Capital to paint the picture of an Obama who “saves jobs” and fights for the “middle class” against the cold-hearted capitalist, Romney. The AFL-CIO leadership has jumped on this same bandwagon as well by endorsing Obama. But they conveniently forget to mention that Obama’s 2009 bailout came with quite a few strings attached.

The industry task force that took over direction of GM and Chrysler demanded “responsibility” from the bankrupt companies, which in plain language translates to cost-cutting through downsizing and wage cuts. In exchange for the bailout package, GM agreed to cut 47,000 jobs worldwide, close 14 North American plants, and eliminate the Pontiac and Saturn brands altogether. Chrysler agreed to cut 3,000 jobs. This was in addition to a concession contract imposed on United Auto Workers union members that instituted a two-tier wage system, with newer, second-tier workers earning significantly less than older workers. These cuts were made in order that GM and Chrysler could become profitable again, not so that auto could be a source of good union jobs or to meet the needs of society as whole. At the time, Obama urged auto workers to accept these cuts in the name of “shared sacrifice.”

But now that the companies are profitable again, will workers also share the gains? As long as GM and Chrysler are run as capitalist companies, and as long as the world capitalist economy remains weak, the answer is no. Unless the UAW fights back, the profits will remain in the hands of the bosses, not the workers.

In reality, both Obama and Romney represent the interests of big business. They just use different strategies in order to advance them. Romney says the only way the auto industry can recover is to allow the “free market” to run its course. Obama bailed out the industry, using public funding to keep a key part of the private sector economy from collapsing, and says that this has solved the problem. Both are wrong.

Romney’s “free market” idea is similar to the logic of the U.S. military during the Vietnam War, where the generals would “destroy the village in order to save it” from the Vietcong. Had GM and Chrysler been allowed to implode, more than 200,000 jobs would have been destroyed.

But stimulus packages like the one implemented by Obama do not offer a long-term solution either. The bailout kept GM and Chrysler out of bankruptcy, but only at the cost of exacerbating the public debt. This will be paid for through more cuts to education, health and other social programs. What is more, even as GM and Chrysler recover in terms of profits, there is little hope for any real upswing in the world economy any time soon. As the debt crisis mounts in Europe, the threat of another downturn is the most likely outcome. If that happens, the huge amount of public debt itself makes it nearly impossible for the federal government to intervene with more bailouts in the future.

These are the choices capitalism offers: either crisis and economic destruction now, or we can have even worse later on! But what choice have the leaders of the UAW and the AFL-CIO offered? Instead of taking an independent position and offering a workers’ alternative, leaders like Richard Trumka continue to hang onto the Democrats as the “lesser evil.” They fail to realize that in reality, the Democrats need the unions far more than the unions need the Democrats!

In the case of GM and Chrysler, the International UAW leadership was able to convince the membership that Obama’s “shared sacrifice” concessions were the best option available, despite much opposition from the rank and file. Without the support of the AFL-CIO, the Democrats’ position would be greatly weakened when they demand cuts and concessions, because they would be faced with the possibility of strikes, mass demonstrations and independent political action by the unions.

There is a workers’ alternative to the butcher’s block “options” of the bosses. Simply put, if they want public money, we demand public control! At the time of the auto bail out, in a March 2009 article “Why the UAW Should Fight for Nationalization,” we wrote the following:

“The auto industry does need help. But it needs a solution that is based on advancing the interests of working people, which is the role that our unions are supposed to play. This means that the UAW needs to break with both the auto bosses and the Democratic Party, which day by day is showing where its true interests lay by placing corporate profits before the needs of working families and our communities. Despite the bleak set of options presented by GM, Chrysler and the Democrats, of either: A) bailouts and job cuts or B) total bankruptcy, there is actually a third option: nationalization of the auto industry under democratic workers’ control.

“The auto industry has become the front line of the bosses’ efforts to make the working class pay for the crisis. If the UAW were to take an independent stand and negotiate independently with the federal government, fighting tooth and nail to defend each and every job, defend every penny for wages and benefits and fight to keep all the plants open, auto workers would readily gain the support of workers in the steel, airline and other industries, who are also under attack.

“Nationalization under workers’ control would allow for the creation of thousands of quality new jobs, for the expansion of the country’s public transportation infrastructure and lay the foundations for an economy based on society’s needs, not corporate profits. If the UAW, along with the whole of the labor movement, mobilized the membership to reject cuts, concessions, and to demand for nationalization of the industry under workers’ democratic control, they could mobilize the support of the working class as a whole.”

It is the job of the union leaders to lead. But as long as they support the Democrats, it is this party of corporate America that dictates its terms to the labor movement, not the other way around. If the AFL-CIO and Change to Win union federations broke with the Democrats and built a mass labor party, this would allow the working class to have an independent voice that would enable the unions to reach far beyond its membership for support in fighting back against concessions in the private sector and austerity in the public sector. Such a party would be able to offer a real alternative to the crisis of the auto industry as well: nationalization under workers’ control.