The bankruptcy filing by General Motors is the end result of a disastrous economic policy by the Obama administration and underscores Obama’s double standard in dealing with the auto industry versus Wall Street.
Instead of giving GM and Chrysler (which declared bankruptcy in April) the kind of money they would need to really get back on their feet, they’ve been nickel and dimed and lectured to about how they and their workers have to make sacrifices.
Yes, the two firms got about $25 billion to date, and there’s plans for another $30 billion more for GM as both firms wind their way through bankruptcy. In normal times, $50 to $60 billion would be a lot of money. But these aren’t normal times. The heart of manufacturing in the United States --- or what’s left of it --- is at stake. Jobs by the hundreds of thousands, at the auto plants, suppliers and dealerships, are on the line.
How about $150 billion or $200 billion to really rejuvenate this industry? That would be more like it.
In fact, overall, some $3 trillion in public funding has been made available for the finance sector to resuscitate banks.
From the start of the financial crisis, the government has literally had the cash spigot on for anything the banks wanted. There’s also been little accountability or demands for sacrifice.
But it’s been a different story with the auto industry and its workers. They’ve had to beg for help, and “prove” they were doing enough to “justify” government assistance.
After an initial $17 billion was extended to help the auto firms, Obama and his auto task force, headed by Wall Street billionaire Steve Rattner, ordered GM and Chrysler to come up with radical restructuring plans to cut costs and become “lean and mean” and more competitive. Otherwise, the firms were told, there would be no more help.
The firms and the union representing employees, the United Auto Workers, took the warnings to heart and came up with major concessions. The union agreed to deep cuts in pay and health benefits. New workers at Chrysler, for instance, would make $14 instead of $28, under a proposal offered in March.
Both firms laid off thousands of workers and offered to dump thousands more. The companies closed plants, ended product lines and shut down dealerships.
But twice, the restructuring plans were rebuffed, and further aid denied. GM CEO Rick Wagoner was pushed out by the administration.
Eventually, the administration forced Chrysler into bankruptcy in late April, and then GM the first of this month.
President Obama says he’s hopeful that both firms will emerge from bankruptcy in better shape to compete. But will they? Already, the bankruptcy news has badly hurt sales of Chrysler and GM cars, on top of the ill effects from the recession.
GM is proposing another round of 21,000 job cuts and closing 40 percent of its 6,000 dealerships.
The viability of a health benefit fund for thousands of GM retirees has been thrown into question in bankruptcy. The company was supposed to put billions into the fund under a previous contract, but now that the firm is in bankruptcy, GM is proposing --- with the administration’s backing --- to support the fund with company stock equity. Right now, that equity is worth next to nothing.
The whole saga of cuts and concessions has left the UAW --- once one of the nation’s strongest unions --- decimated.
Meanwhile, Wall Street has felt little pain under Obama. No CEOs have been forced out, or employees forced to take pay cuts.
Just the opposite.
The New York Times reported on April 26 that “workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began.” The piece went on to say that employees at Goldman Sachs, which received bailout money, are on course to earn on average $569,000 a year.
And not a peep is heard from the administration.
Maybe it’s not surprising that Obama is treating the auto industry and its workers so differently from Wall Street. According to the research group Open Secrets, while labor gave $466,324 to the Obama presidential campaign last year, and the auto companies $1.3 million to all Democrats, the finance, insurance and real estate sector gave Obama a whopping $38 million.
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It’s a shame Obama has handled these two economic crises this way. He’s allowed the government to squander countless billions on largely insolvent banks that have little hope of recovering on their investments. Thousands of layoffs in the auto sector could have been avoided by more thoughtful policies.
But in the bankruptcy process, the administration has an opportunity to change course and do some real good. Under the current plans, the government can have real sway over what the companies do. For instance, with GM, the government will have a 60 percent stake in company shares.
How about taking some of the billions earmarked for banks and instead use the money to reopen shuttered car plants and convert them into factories that make fuel-efficient cars, electric cars and equipment for a light rail system? This would restore lost jobs, do wonders for the economy and reduce global warming.
That would be real change we can believe in.
Reginald Johnson is a free-lance writer living in Bridgeport, CT.
