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Obama and the Crisis of the U.S. Auto Industry

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Making sense of the recent developments in the automobile industry is a difficult process.  If you look to the media or the government for answers, you’ll receive a long-winded description of behind-the-scenes deals between Obama and his advisers, their Wall Street friends (the bond holders — big banks and hedge funds), and lastly the United Auto Workers (U.A.W.).

It seems odd hearing the U.S. President combing over the business details of Chrysler: whether or not a merger with the Italian automaker Fiat will happen; whether or not the banks and hedge funds will be willing to relinquish enough of Chrysler’s debt; and whether or not labor will make major concessions.

To grasp this odd dynamic one must first understand the motive to “restructure” Chrysler.  According to the Obama administration, because Chrysler has produced more cars than people are currently able to afford as a result of the recession, the company has to be turned “inside out.”

Plants must be closed, wages and benefits must be slashed, and machines must be sold for scrap iron.

Instead of “restructuring” the plants to produce mass transit vehicles, electronic cars, or selling cars at government subsidized prices, the Obama administration is intervening solely with the principle that the automobiles must “make a profit” on the “free market.”



When achieving this goal means that thousands of workers will lose their jobs, while those left will make substantially less money and receive fewer benefits, the average person will question the virtue of Obama’s capitalist principles.

The strategy Obama is using to achieve his goals is indicative of his general free market perspective.  Obama essentially held a gun to the U.A.W. when he announced that they had 30 days to agree to major concessions or have Chrysler be “liquidated” with the union contract being torn to shreds in a bankruptcy court.  After decades of the U.A.W. making concessions, the leadership once again urged its members to bend backwards for “job security.”

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U.A.W. President Ron Gettlefinger rationalized the sell-out contract by saying:

“Our members have responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive.”

After it was announced that the contract was ratified, rumors started spreading that Chrysler would be pushed into bankruptcy anyway: the U.A.W. concessions would stand as a starting point for a quick “bankruptcy court restructuring.”      

Gettlefinger’s treacherous role in the whole affair was praised by the always business-friendly New York Times, who commented:

“Mr. Gettelfinger, the current president, has also been an effective, steel-nerved leader, and has managed to maintain the union’s importance in recent negotiations, even though the U.A.W. has lost nearly 200,000 members since he took office in 2003.”  (April 29, 2009)
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Of course any union president who has presided over a loss of 200,000 members is a pathetic failure.

Interestingly, the big banks and hedge funds, the bondholders, claimed that they were being treated unfairly in the restructuring process, and that the U.A.W. was being given special treatment. The U.S. government was asking the bondholders to accept substantial losses to their previous loans to Chrysler to avoid the messy proceedings of bankruptcy court, where typically they would lose nearly everything.

Because of the close ties these banks and hedge funds have with members of the Obama administration, and since they were treated so nice during the bank bailouts, they decided to drive a tough bargain with the government.  The group elected a committee for intense negotiations. The New York Times reports:

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Shamus Cooke is a social service worker and activist living in Portland Oregon.

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