Ford and the Auto Bailout…


The visit of President Barack Obama to Detroit yesterday gave the Administration ample opportunity to crow about the Government led auto bailout of 2008.

“If it was up to the Republican Party, Chrysler and General Motors would not have been here,” UAW Secretary-Treasurer Dennis Williams told the crowd of thousands “If it wasn’t for President Obama, we would not have the opportunity to once again build the best cars and trucks in the whole world.”

I should note that the first phase of the auto bailout was announced on December 19, 2008 by Treasury Secretary Paulson, under Republican George W. Bush, but facts don’t seem to matter these days.  As I pointed out yesterday in a review of Mr. Obama’s speech, divisiveness, catalyzed by mendacity if necessary, seems to be the tenor of the times.

The President, as well, was not shy about proclaiming the success of his program stating:  “When we stood by the auto industry, we made some tough choices that were  necessary to make it succeed,” Obama told the crowd. “Now the Big Three are  turning a profit and hiring new workers and building the best cars in the world  right here in Detroit.”

Of course, the auto bailouts did not bail out “The Big Three” but rather two of the three, one of which is now controlled by an Italian company.

Moreover, one segment of the UAW and the “Big Three” seems to be getting the shaft – Ford Motor Company and its employees.  As the following article makes clear…

Ford is the only Detroit automaker the UAW can strike. General Motors Co. and Chrysler  Group LLC have no-strike clauses from bankruptcy restructuring.

From The Detroit News:

So, not only do Chrysler – make that Fiat – and General Motors have the luxury of getting cheap government capital and a boatload of debt/liabilities eliminated from their balance sheets, they also get, compliments of the Obama Administration’s intervention, insulation from a strike.  As almost any amateur economist can deduce, this will have a depressing effect on the competitive compensation of workers at Ford.  That is, of course, assuming that we live in an economically rational world.  But, economic rationality assumes arms length relationships, and the relationship of the UAW to the three auto companies is anything but arms length given the fact that the UAW has a significant ownership stake in both General Motors and Chrysler.  In other words, there is anything but a normal bargaining relationship between the UAW and Ford.

The UAW is clearly incentivized to assist GM and Chrysler and punish Ford in the upcoming labor negotiations with the three auto companies.  While Ford UAW members seem convinced that a strike is necessary, some of them must wonder whether this action will be in their own long term best interests.

Brian Pannebecker, a production worker at the Sterling Heights axle plant and  member of Local 228, doesn’t see a compelling reason to strike and believes job  security comes from Ford’s ability to compete and remain profitable. He fears  higher labor costs put local jobs at risk.

But he feels he is in the minority. Sterling Heights voted 94.5 percent in  favor of a strike.

“Most of the guys voted no (to further cuts as part of restructuring) in  2009, they are done giving up concessions and hope to get a lot back. They will  be upset if they don’t,” Pannebecker said

From The Detroit News:

 In fact, Ford employees voted overwhelmingly to strike in a recent vote.  Moreover, the tradition of pattern bargaining, in which the UAW seeks comparable contracts from each of the auto companies, seems to be a path that the UAW is committed to, meaning that Ford, which is saddled with comparatively higher legacy costs than its rivals compliments of the Government, will have a similar operating economic structure as their subsidized rivals.  If that is the case, then Ford executives are, by implication of the UAW’s position, superior to those at the “other two” rendering complaints, such as the one quoted below, meaningless as the union themselves are taking the position that the workers are comparable.

“We gave, and management got bonuses,” said John DeShano, a member of UAW Local  900, which represents workers at Ford’s Michigan Assembly Plant in Wayne.  “That’s kind of a slap in the face to us. They’re patting themselves on the  back, saying they’re doing such a great job, but we’re the ones building the  cars.”

From The Detroit News:

The reality is somewhere in between, meaning that both the management and workers at Ford are preforming and have preformed in a superior fashion.  With the UAW clearly incentivized, however, to cut a bargain deal with GM and Chrysler and punish Ford (a pattern agreement given the government mandated economic structure of the industry would reflect that disparity), one wonders whether the long term interests, and potential superior productivity, of Ford membership can be recognized in a fashion that addresses the inequitable, government enforced economic structures and eventually compensate those superior workers.  The UAW, after all, is by implication proclaiming the the Ford worker is comparable to the GM worker and that the difference in superior corporate performance is solely the domain of the difference in managements and leadership.  On the other hand, the Administration enforced inequitable cost structures makes it more difficult to reward the superior work of Ford employees, which further illustrates the conflict of interest the UAW finds itself in both in regards to its support of President Obama’s policies and its contract negotiations with the Big Three.

One has to sympathize with each and every Ford UAW member these days.  While exercising their rights to negotiate for a larger share of the economic pie, they find themselves bargaining with Ford on the other side of the table, the UAW on their side of the table, and operating under government dictated circumstances from Washington D.C.  The only realistic solution, it would seem to me, would be for Ford workers to abandon the UAW and either form their own union or affiliate with a different bargaining organization.  That, however, in the arena of union politics, seems unlikely.

4 Responses to Ford and the Auto Bailout…

  1. AngryProgressive says:

    How can you credit the auto bailout to Bush and parcel out blame to Obama? Either it was Bush’s plan or Obama’s plan, but not both. Please be consistent.

    • Mark says:

      Andy, intent and execution are two different things. Bush proposed the bailout, but Obama and Rattner managed the structure of the execution. My criticism is that the execution is anti-competitive. Moreover, pointing out that the original bailout money was proposed by the Bush Administration simply lays bare the mendacity of the UAW Treasurer. I think I made that distinction clear above.

  2. Mark says:

    I guess a little history lesson is in order.

    The original auto bailout money providing liquidity was approved by President Bush, which lays bare the mendacious statement by the UAW Treasurer that the Republicans would have let the companies expire (a statement which in itself betrays the speakers lack of knowledge of US bankruptcy laws should the companies have entered a traditional bankruptcy process).

    As the timeline linked below points out, additional auto bailouts were approved by the Obama Administration and the structure of the bailouts and consequent, government led, abbreviated bankruptcies were dictated by the Obama team itself led by Steven Rattner, the Obama appointed Auto Czar…

    Bailout Timeline

    In other words, it is mendacious to say that the “Republicans” would have just let the industry expire and appropriate to lay blame for the eventual structure of the bailouts at the proper party – the Obama Administration.

    Morevoer, Steven Ratter the Auto Czar, the same Steven Rattner whose company admitted to bribing officials of the New York State pension fund and was subsequently barred from participating, personally, in the securities business…Steven Rattner Settles with SEC, was the architect of the structure of the bailouts. In a just world, of course, Mr. Rattner would have been convicted of fraud and spent some time in a cushy Federal prison, but what is a few felonies amongst friends?

  3. Jim says:

    A more edgy view from another writer is available here…

    Prosperity Dooms Ford

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