As I write on Monday morning, the news reports have it that a short-term bailout of General Motors and Chrysler will emerge and be voted on sometime this week. What are the parameters and objectives of the immediate actions that will probably be taken?
The key objective is to prevent an out-of-cash situation at General Motors, and possibly at Chrysler. If nothing is done, it’s more likely than not that GM will enter a process of forced liquidation by the end of this year, mere days from now.
But because this is an emergency situation, there’s been no time to fully debate the issue, and to deal with the fact that no one has bothered to try to convince the American people that their tax dollars should be used to reward a couple of badly-failed businesses.
That heavy lifting indeed will get done. But not in the current Congress and Administration. The can is going to get kicked down the road into January.
And as you’ll see, this outcome is entirely to the liking of the United Auto Workers and their leader, Ron Gettelfinger.
The simplest way to solve the GM emergency is for the government to give them just enough cash to get them through the next two months or so, giving everyone time for some more political horsetrading, and to allow the incoming Democrats to deal with the problem.
Notice, I said the “simplest,” not the “best.” The blockage to this sort of an emergency bridge loan has been among Democrats in the House of Representatives.
Republicans have been proposing for weeks that a chunk of already-appropriated funds be used for a short-term bridge. Since these dollars were originally intended for research on fuel-efficient vehicles, the Democrats have been dead-set against spending them merely to ensure the survival of the automakers.
But late last week, House Speaker Nancy Pelosi signaled that she’d be ok with using some of that appropriation as an emergency bridge, provided that the money would be replaced in a subsequent appropriation, “in the next few weeks.”
So I suppose Republicans will be able to claim a moral victory of some kind, that they were able to force Pelosi to delay a cherished piece of pork-barrel spending for a few more weeks. I’m so impressed.
Now the Bush Administration, for its part, has been pushing this line as well. One supposes that they want more than anything else for the collapse of GM to occur after they’re out of office. Fair enough, I guess it’s a lot to ask for this crew to start showing some leadership now, after we’ve waited in vain for it all these years.
Congressional Democrats really don’t want their fingerprints on yet another bailout, after seeing how well the TARP financial-system bailout went over with the public. So they’ve been pushing hard on the Treasury to use some of those same TARP funds to bail out GM.
They’ve even put pressure on Ben Bernanke to use the “exigency” powers in the Federal Reserve Act to create some cash for GM and Chrysler. Neither Paulson nor Bernanke are expected to bite on any of this. The bridge loan for GM will need to come from Congress.
So the fast and easy outcome will be to vote some kind of emergency bridge, with very few strings attached, and then get out of town for the holidays, leaving the next Congress and the new Administration to finish the job.
This approach has a very big flaw. A fatal flaw.
Keep in mind that the Republicans have an effective majority in the Senate right now. Senators Obama, Biden, and Clinton will probably abstain from voting on a GM package. If we want to influence the outcome, now is our last chance to do it.
And among the very few people in the Capitol who have the right perspective on this, is Senator Corker of Tennessee.
In Senate Banking Committee hearings last week, Sen. Corker pointed out that there’s a big elephant trying to sneak out of the room: the United Auto Workers.
The UAW obviously wants all the pain to be borne by GM’s management, shareholders, bondholders, and of course by the taxpayers.
But Sen. Corker suggested that any near-term bridge for GM must include some strict, binding conditions on the UAW, in addition to the ones that will be imposed on GM (such as firing CEO Rick Wagoner, who seems to have made Senator Dodd’s enemies list).
I can’t stress enough how important this is, and Republican lawmakers MUST MUST MUST follow through on this.
The reason is simple. If the whole mess gets pushed into next year, it will be decided by a Congress and Administration that owe a very great deal to the UAW for their electoral successes last month, not least for delivering Michigan’s electoral votes into the Democrat column.
There will be no significant cost-cutting or pain imposed on the UAW in the restructuring of the domestic auto industry, unless it happens right now, this week.
The UAW must agree to a labor-cost structure that, in Sen. Corker’s words, is no higher than that faced by foreign (“transplant”) automakers who assemble vehicles in the United States. The union must agree to very painful concessions on wages, healthcare, work rules, and retiree benefits.
Gettelfinger, playing to the galleries, has assured lawmakers that he will indeed be open to doing whatever he can to seal the deal. Among other things, he’s signaled willingness to end the so-called “job bank.” You know, that’s where an automaker closes a production facility that no longer makes sense, but continues to pay the workers full wages and benefits to play video games all day, for years into the future.
But what Gettelfinger has pointedly not said, is that he’s willing to re-negotiate the contract that the UAW currently has with the automakers. In short, he’s not preparing to compromise at all, or to ask his people to take any real pain.
If we bail out and restructure the domestic auto industry without forcing the UAW to take their fair share of the pain, I guarantee you that the Big Three are doomed. Without concessions from labor, there’s no conceivable way for Detroit to remain even marginally competitive. Unless we’re prepared to keep putting more and more public money into them, month after month.
Without UAW concessions, a collapse will happen, sooner or later. And the later it happens, the more taxpayer dollars will be wasted in the process.
Senator Corker, we’re counting on you to stick to your guns. Convince your Republican colleagues to make strong UAW concessions a condition of any short-term bridge loan to the Big Three.