Cutting Wages Won't Solve Detroit's Crisis

Tuesday, 09 December 2008 13:42 By Mark Brenner and Jane Slaughter, The Detroit News | name.

Cutting Wages Won
Automakers have blamed workers for the financial collapse of the Detroit auto industry. (Photo: motortrend.com)

    In the 1980s, Chevrolet proclaimed itself the "Heartbeat of America," but today the American auto industry barely registers a pulse. As Washington considers Detroit's plea for life support, the only place where pundits, politicians and Big Three executives seem to agree is that auto workers must make do with less or watch their jobs disappear.

    Some lawmakers have complained that unions are the source of the problem, but they fail to understand some inconvenient truths. According to the latest figures from the U.S. Commerce Department, every worker in Big Three factories could work for free and only shave 5 percent off the cost of their cars. The auto companies pay as much for hubcaps and fenders as they do in wages.

    Data from the Harbour Report - the industry's gold standard - reveal that even including their benefits, labor costs in the Big Three's plants account for less than 10 percent of the sticker price.

    No matter how you cut the numbers, demolishing auto workers' living standards will not transform the industry. The Big Three have been trying for years. They have slashed at least 200,000 jobs since 2004, and last year they wrung billions of dollars in concessions from the United Auto Workers. The union instituted a second-tier wage of $14.50 an hour for new hires, lower than pay in the nonunion, foreign-owned auto companies in the South.

    The impact is all too apparent in auto communities across the Midwest. Forty thousand Detroit homeowners are in foreclosure, and the unemployment rate has hit double digits in many auto towns. That suffering will multiply if one of the Big Three collapses, or if retired auto workers are punished for decisions they had no hand in.

    Automakers' decisions have been disastrous. While competitors developed gasoline-electric hybrids, Detroit mined the gas-guzzling truck and SUV market, making $104 billion in profits between 1994 and 2003. Wall Street and Congress weren't calling for more research and development or curbing the company's dividend payments and high-flying executive salaries back then.

    Pundits crow for us to "Dump Detroit," but they don't advertise that through a bailout or the bankruptcy courts taxpayers will shoulder the burden of the automakers' colossal missteps.

    Washington shouldn't back into a bailout - it should jump in feet-first. What's needed is not a half-measure, a cash infusion in exchange for selling the corporate jets. Now is the time to take a sweeping look at the country's needs.

    Our first steps should confront global warming and oil dependence through a comprehensive overhaul of the transportation system. Federal policy hasn't changed since the 1950s, when gas was a nickel a gallon.

    Detroit, the Arsenal of Democracy, retooled in a matter of weeks when we needed tanks, not cars, in 1941. We could produce this century's answer to the interstate highway system and build mass transit and high-speed trains.

    That same sense of urgency is needed for vehicles that don't run on petroleum. If American engineers can build satellites that read your license plate from outer space, they can develop an alternative to the gasoline engine.

    Automakers need direction as much as financial support from Washington, just as Japan's government molded Toyota into a world-class performer.

    In every other industrialized nation, government has stepped in and given their auto companies a significant edge. Most important, they all adopted national health care and pension systems decades ago.

    General Motors alone provides health coverage to a million people - workers, retirees and families. The annual price tag is about $5 billion, which, as CEO Rick Wagoner is fond of pointing out, is more than GM spends on steel.

    That burden could be lifted, to the benefit of 47 million uninsured Americans, by adopting a Medicare-style program for everyone. It would save the nation as much as $350 billion per year now spent for insurance companies to shuffle paper and deny claims.

    The fate of the Motor City captivates us because it speaks to our future. For 30 years, politicians have bowed to Wall Street, sitting by while wages for most workers stagnated. Big Three workers have maintained their living standards better than most, in no small part because they have a union. In a country where investment bankers gave themselves $30 billion in bonuses last Christmas, have we reached a point where $58,000 a year with benefits is too much to ask?

    We once promised the pursuit of happiness to all, including the workers who make our factories run, not just those who trade credit default swaps. Now more than ever, we need to recapture that spirit with a thoroughgoing plan to rescue the environment, care for the sick and transform transportation.

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    Mark Brenner and Jane Slaughter work for Labor Notes, an independent monthly labor magazine in Detroit. It receives no support from the United Auto Workers.

Last modified on Friday, 02 January 2009 14:55