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GM, Chrysler, and Ford’s Race to the Bottom

www.socialistworld.net, 14/11/2007
website of the committee for a workers' international, CWI

Union Leaders’ Historic Sellout of Workers

Ty Moore

With their industry caught in a deep crisis of overcapacity, the Big Three auto companies demanded brutal concessions on all fronts, and the United Auto Workers’ leadership delivered. In a series of carefully-orchestrated contract votes at General Motors, Chrysler, and (as we go to press) Ford, the UAW bureaucracy is pushing through a sell-out of historic proportions.

The contracts contained no guarantees against fresh waves of layoffs, and within days of the Chrysler deal the company announced 11,000 job cuts. The brutal impact these industry-wide layoffs will have on tens of thousands of workers and their communities will be enormous. The Detroit area already suffers under the highest unemployment rate in the country.

The contracts also mean new hires will start at $14 per hour with minimal health benefits, down from $28 before. The two-tiered contracts will divide the union, paving the way for future attacks on the wages, benefits, and retirement of longer-standing autoworkers, who still receive higher pay and benefits.

Crossing the Class Line

The Big Three are also off-loading health and retirement obligations for their 600,000 retirees onto the UAW in the form of “Voluntary Employee Beneficiary Associations.” The VEBAs will be private insurance schemes managed by the UAW. But the auto companies only agreed to pay part of the tens of billions of dollars they owe their retirees. The remainder is supposed to be raised through investing the funds, but the VEBAs at Detroit Diesel and Caterpillar set up in the 1990s by the UAW have run out of funds, leaving retirees to fend for themselves.

Worse still, the VEBAs will turn the union into a major healthcare provider that, like other insurance companies, will stand to reap huge profits by cutting their own members’ benefits. In another stunning move, the UAW is accepting, as payment for part of Ford’s VEBA obligations, a 16% share in Ford stocks! This deal ties the union’s own financial future to Ford’s profitability; in other words, to more layoffs and concessions.

“These deals are the bitter fruit of the ‘non-adversarial… teamwork with the companies’ approach [of] the UAW and most other unions,” Todd Jordan, a leading UAW dissident, told Justice. The contracts represent an “historic collapse.”

Capitalist Logic

“The long-term outlook isn’t great for anyone,” explained Business Week (11/5/07). “Henry [Ford] firmly believed … if his own workers could not afford to buy the product they made, his company would fail. At $14 an hour, these new workers will be able to afford few of the cars GM makes — or Ford, for that matter — so consumer wages and price deflation will continue their downward spiral.”

Business Week is a staunch defender of capitalism, but they point to the same systemic contradictions Marx first explained 160 years ago. Fierce competition forces companies to, on the one hand, invest in the latest technology and equipment to expand their production while, on the other hand, push labor costs down to expand their profit margin. Workers can’t buy back the products they produce, and the market is flooded.

This contradiction, when reproduced throughout the entire capitalist economy, causes the cyclical economic crises that have wracked capitalism since its beginning.

The auto industry, and the U.S. economy as a whole, is caught in this classic “crisis of overproduction,” or overcapacity. The results are also classic: bankruptcies, mass layoffs, factory closures, and deep attacks on wages and conditions.

Which Way Out?

In the face of the industry-wide crisis, the only way autoworkers can hold back wave after wave of attacks is to mount an all-out drive to unionize the unorganized, lower-paid autoworkers, both in the U.S. and internationally.

However, the deeply-corrupted UAW leadership has shown no willingness to do this. In fact, their refusal to stand up for their own members’ jobs, wages, and benefits makes the union an unattractive option to disgruntled workers at Toyota, Honda, or other non-union companies. Why pay union dues, struggle, and risk your job to form a union if the leaders are going to turn around and negotiate wage cuts and layoffs for you?

As long as the UAW accepts the logic of the capitalist market, autoworkers will remain defenseless in the face of a continuous corporate assault. The UAW bureaucrats base their strategy on the question: “What can General Motors afford to give us?” Socialists instead ask: “What do we need to live a decent life?”

This country is wealthier than ever. More than enough exists to provide a good life for all. If this system can’t afford to meet our needs, then we can’t afford this system. If GM, Chrysler, and Ford can’t maintain profitability while upholding union wages and benefits, then we should fight to take them under public ownership and democratic workers’ control. This strategy may appear distant from the immediate consciousness of most workers, but there is no other way out.