An Auto Giant Falls and Workers Pay the Price

The bankruptcy and government takeover of General Motors marks the end of an era in which U.S. capitalism could claim to offer an “American dream” of rising standards of living for working people — and highlights a grim future for workers under American capitalism.

GM was once the quintessential industrial powerhouse, synonymous with the dominance of U.S. capitalism worldwide. Now GM is a symbol of the decline of U.S. capitalism.

From AIG to GM, American capitalists’ short-term obsession with profits and their religious faith in the free market contributed mightily to an epic collapse. Even before the auto industry’s crash, the current recession had already shattered the lives of millions of working people in the U.S.

For the last 30 years, workers have been forced to compensate for stagnant or falling wages with ever-increasing amounts of debt. The financial meltdown and the housing bust put an end to that, wiping out tens of billions of dollars in household wealth. Now comes rising unemployment, reductions in wages and benefits, and deep cuts in public spending on education and health care. The bankruptcy of GM — and Chrysler before it — will only accelerate those trends.

But none of that bothers right-wingers in Congress or conservative commentators. To them, the deal that gives the federal government 60 percent control over GM is further evidence of President Barack Obama’s “socialism.”

“What we’ve done…it’s the road toward socialism, government intervention in the market in a big way,” said Sen. Richard Shelby (R-Ala.). “I’m sure they haven’t cut enough, and there aren’t enough concessions there.” Shelby, of course, was all for handing out government money when the state of Alabama gave $530 million in tax breaks to BMW, Honda and Toyota to get those automakers to build factories in his state — all non-union, of course.

The Wall Street Journal editorial page sounded a similar theme. “The new agreement simplifies some work rules and job descriptions but makes no reductions in hourly pay, pensions or health care for active workers,” the Journal complained. It was forgetting that the United Auto Workers (UAW) agreed to forgive a $20 billion debt that GM owes the union for a retiree health care fund. Instead, the UAW health care trust fund will get 17.5 percent of company stock — which is highly unlikely to ever be worth enough to pay for retirees’ health care.

At Chrysler, the UAW health care trust fund will get 55 percent of company stock under the takeover by Fiat — but that’s even more likely to force cuts in retiree health care. And at both Chrysler and GM, the UAW gave up the right to strike until 2015 — and contract negations will apparently be replaced by arbitration.

So despite the complaints of right-wing blowhards, it’s autoworkers, their families and communities who are getting screwed. With 14 GM plants set to close, the company’s UAW workforce will be downsized from 64,000 today to just 40,000 — compared to 450,000 in the late 1970s.

And as better-paid autoworkers retire, most will be replaced with new hires earning just about half the current top wage of about $28 per hour, thanks to a contract concession made several years ago.

That means that the UAW, once the pacesetter in winning improvements in wages and conditions for U.S. workers, is now collaborating with Corporate America in its race to the bottom. As Labor Notes’ Jane Slaughter put it, “From now on, working for the auto companies will be just another bust-your-hump factory job.”

The impact of GM’s collapse — and that of Chrysler before it — marks the convergence of three crises: the worst recession since the 1930s; the resulting acceleration of a long-term decline of decently paid, unionized manufacturing jobs; and the rollback of what little exists of a welfare state in the U.S.

Under these conditions, the impact of the auto crisis will radiate throughout the economy — not only in its direct effects on related industries like auto parts and steel, but in setting an example for employers who are determined to cut wages and benefits.

Of course, even in its heyday, GM was never the utopia for autoworkers that right-wingers imagine. The company was notorious for the brutal pace of its assembly lines, its militaristic discipline and constant attempts to undermine union power in the workplace. If the company set the standards for blue-collar wages and benefits, it’s only because the union was powerful enough to fight for them and win.

Over the last 30 years, however, the UAW has been unwilling or unable to resist continuous cuts in jobs. Hourly pay was effectively limited to increases in the rate of inflation. And now, as the Obama administration triumphantly proclaims, “the concessions that the UAW agreed to are more aggressive than what the Bush administration originally demanded in its loan agreement with GM.”

But none of this is good enough for anti-union forces, which never forgave the UAW for its radical beginnings in the 1930s that included illegal factory occupations and clashes with police and the National Guard.

While media commentators may complain about GM’s terrible management and disastrous investment decisions, they concentrate their fire on “overpaid” autoworkers for causing the company’s problems–even though labor costs account for less than 10 percent of GM vehicles’ costs.

The auto crisis should be an opportunity to forge ahead in new directions for the U.S. economy — to meet goals the Obama administration claims it supports, like creating jobs and supporting green industries.

But as former labor secretary Robert Reich pointed on the public radio program Marketplace, the government isn’t spending $50 billion to save jobs, since the Obama administration’s plans call for the elimination of 21,000 positions at GM. The only logic to the government intervention, Reich argued, is to soften the economic blows from GM’s unraveling:

But if the purpose is to help the Midwest adapt to industrial decline, investing that much money in GM seems an inefficient way to accomplish it. Wouldn’t it be better to use the money to convert GM and other declining manufacturing companies into producing what America needs, such as light rail systems and new energy efficient materials, and training laid-off autoworkers for the technician jobs of the future?

Filmmaker Michael Moore made a similar argument, calling for the conversion of GM factories to social needs, modeled on the changeover from car manufacturing to military production during the Second World War:

President Obama, now that he has taken control of GM, needs to convert the factories to new and needed uses immediately: Don’t put another $30 billion into the coffers of GM to build cars. Instead, use that money to keep the current workforce–and most of those who have been laid off–employed so that they can build the new modes of 21st century transportation. Let them start the conversion work now.

Instead, the Obama administration is using bankruptcy as a means to beat down the UAW and lure private capital into taking over a profitable “new GM” that’s rid of its debt and unwanted assets. “The [administration’s] GM/auto task force plan for bankruptcy and restructuring — shaped by a secretive, unaccountable group of Wall Street expats without expertise in the industry — seems designed above all to perpetuate GM as a corporate entity,” wrote left-wing journalist Robert Weissman.

The GM and Chrysler bankruptcy proceedings fit perfectly with Obama’s banker-friendly economic policy: a thinly disguised state capitalism in which the government bails out and props up failed companies, but hides behind private managers in order to dodge political responsibility for everything from rising home foreclosures and the bankers’ outrageous executive pay to auto factory closures.

The collapse of GM is a signal moment in the history of U.S. capitalism. A stronger and more militant labor movement could seize the opportunity to call for new economic priorities that not only maintain good-paying manufacturing jobs, but create millions more of them.

Instead, the bankers and their enablers in the Obama administration are calling the shots. That means the autoworkers and other workers will keep paying the price for this crisis — until they’re organized enough to fight back.

Lee Sustar writes for Socialist Worker. Read other articles by Lee, or visit Lee's website.

9 comments on this article so far ...

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  1. Don Hawkins said on June 4th, 2009 at 11:26am #

    Let’s see how the Earth looks by this December and we will know more of what GM might build.

  2. rg the lg said on June 4th, 2009 at 6:09pm #

    In my opinion, BIG LABOR deserves what it has gotten. Just as BIG BUSINESS is getting theirs.

    Labor was co-opted long ago … and it didn’t take a whole hell of a lot.

    The current collapse is actually going to have to go long enough and deep enough to totally destroy the system.

    This hog-wash about radical beginnings? Give me a break … once labor reached a certain point of self protection the laborers were talked into giving in so they could ‘preserve their gains.’ It was very short sighted. They did back off instead of going for real change … and since they did they became part of the system. I really don’t see that anything has changed … they make concessions now to preserve themselves in the short run, and the long run be damned.

    Sad, isn’t it. They were simply out smarted and out lasted.

    And people wonder why I am cynical. Big labor is part of it …

    Finally, Don, I fail to see how the earth will look in December has anything to do with the spineless behavior of labor and the general greed of our system.

    RG the LG

  3. Christopher Lee said on June 4th, 2009 at 11:36pm #

    The UAW is the last bastion of Labor to fall. It’s demise was inevitable. Now it’s merely a mop-up operation. Once the Soviet Union fell, the facade of a “middle class” was no longer necessary to maintain in America. Manufacturing and Steel were but a stepping stone in the process; as was the airline industry. If you’re curious about what the future will look like for the United States, then look no farther than just beyond it’s southern border.

  4. Deadbeat said on June 5th, 2009 at 3:33am #

    Finally, Don, I fail to see how the earth will look in December has anything to do with the spineless behavior of labor and the general greed of our system.

    Don’s myopia is like many of his ilk who fails to understand that without economic democracy there can never be any real “environmentalism”. If environmentalist really care about the environment they really need to be in the fight for economic justices. Unfortunately they pit environmental concern against the concern of working people. Such is their elitism and class disdain for working folks and deadbeats.

  5. bozh said on June 5th, 2009 at 5:27am #

    christopher, yes
    if my view is correct that we humans only have, broadly speaking, two structures of society.We may call one fascsit and the other socialist, and then conclude that the strongly asocialist structure in US will sink deeper into a fascist structure.

    a socialist structure wld guarantee each citizen the basic human rights: right to an education, healthcare; right to be informed.
    once these rights are given to people, people wld be in control to much higher degree than now.

    a governance/social structure/constitution without these minimal rights we may call fascist.
    but by any other name, it still has a rotten smell.
    PS. Of course, these rights shdln’t be given; i shld have said returned!tnx

  6. Tennessee-Bolivarian-Marxist said on June 5th, 2009 at 7:21am #


    CARACAS, Venezuela (AP) — President Hugo Chavez says he has a new book for President Barack Obama: “What is to be Done?” by communist Vladimir Lenin, founder of the Soviet state.

    Chavez says he’ll “give it to Obama at the next meeting.”

    “What is to be Done?” is Lenin’s political treatise on the role of intellectuals and the proletariat in promoting revolution, written more than a decade before he led the Bolshevik takeover of Russia in 1917.

    Chavez gave Obama a copy of “Open Veins of Latin America: Five Centuries of the Pillage of a Continent” by Eduardo Galeano at an April summit.

    The book jumped the next day to the No. 2 seller on

    Chavez spoke Friday on a marathon, anniversary edition of his “Hello President” television show

  7. Don Hawkins said on June 5th, 2009 at 7:28am #

    Pit environmental concern against the concern of working people. We are talking about the end of the human race as we know it as a start. A Herculean effort is needed and man it is not going to be easy. Either way easy is not in the cards.

  8. Michael Kenny said on June 5th, 2009 at 10:40am #

    Re BMW: the idea of a non-union car plant is nonsense in Europe! Part of the problem is, of course, that in the US, in the absence of a proper welfarw stste, the unions pay a role which, in Europe, is played by the state. Just goes to show how different Europe is!

  9. Don Hawkins said on June 5th, 2009 at 1:49pm #

    Myth I have to admit is a ferrous competitor.