It's not the union; it's the economy, stupid! by Figaro Joseph
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It's Not The Union; It's The Economy Stupid! by Figaro Joseph

Some of the major newspaper organizations in the United States are having financial difficulties. Who is to blame? Answer: the union. The U.S. automakers are having financial difficulties. Who is the blame? Answer: the union. Toyota Motor, one of the main foreign automakers in the U.S., expects financial loss for the first time in seven decades. Who is to blame? Answer: the union. Oops, sorry! Toyota (in the U.S.) doesn't have a union.

Newspapers from around the country and U.S. Senators from many southern states have been on a union-bashing binge lately. They are referred to here as critics. Their favorite punching bag over the past couple of months has been the United Automobile Workers (UAW). The Denver Post, Rocky Mountain News in Colorado, and others have blamed the UAW for the financial problems that the Big Three U.S. automakers, Ford, GM, and Chrysler, are experiencing. In its December 13, 2008 editorial, "Caving to the UAW," Rocky Mountain News' editors characterized President Bush's willingness to provide a $14 billion bridge loan from the $700 billion for the Troubled Assets Relief Program (TARP) to the automakers as a "stunning capitulation" to the UAW.

During the debates in the U.S. Congress, the critics were against all forms of assistance to the U.S. automakers. They especially opposed to using money from the TARP. They argued that the TARP was to bail out distressed banks and mortgage firms. They claimed, as the editors at Rocky Mountain News maintained, the TARP is "not a public trough for private enterprises." The critics seemed to have experienced some form of amnesia, as they, in a very short period of time, forgot that Bear Sterns, Citi Group, AIG, Fannie Mae, and Freddie Mac were private entities. Their argument was, of course, inconsistent and illogical. Their inconsistency will be examined later.

Their argument was illogical because the impact of the collapse of the three U.S. automakers would be more devastating than that of the three percent Americans who are having difficulty paying their mortgages. The banks and mortgage firms can do much more to help those distressed homeowners than the federal government can. The banks can reduce the interest rates on those mortgage loans or extend the terms of the loans. For example, they can restructure a 30-year fixed loan to a 40- or 45-year fixed loan, which would then reduce the monthly mortgage payments on such a loan.

Instead of looking for serious ways in which to help the automakers, the U.S. economy as well as the global economy, many journalists from major newspapers and the southern Senators resorted to already refuted information to make the UAW look unreasonable. Some claimed that rescue talks between the companies and the union had failed because the latter "refused to allow any reduction in wages or benefits before 2011, when the current contracts with Detroit expire. The union insisted that the Big Three's total compensation (including payments supporting laid-off and retired workers) would continue to surpass that paid by foreign-based manufacturers to its U.S. workers by as much as $25 per hour" (Rocky Mountain News, 12/13/2008). These claims are inaccurate and the critics know it. They put these claims out there for one purpose—to discredit the UAW specifically and unions in general.

The UAW made major concessions to the companies, but the critics never bothered to acknowledge them. Instead, they focused on comparing the U.S. automakers with their foreign competitors that are operating here, mostly in southern states. This comparison was flawed; it's like comparing the proverbial "apple" with "orange;" and it was done to misinform the public. This deliberate manipulation of facts or misinformation campaign by the southern Senators and respected newspapers demonstrated a lack of respect for the American people; the newspapers essentially abdicated their journalistic obligation.

Apple: The Big Three have been operating in the U.S. for generations, which means they have legacy costs, benefits to their retired workers. These are people who had worked for these companies for years. In some cases, one would find several generations of autoworkers in one family. Therefore, to characterize these people's pensions and healthcare benefits as undeserving is disrespectful and plain wrong. Yes, many workers at the Big Three make about $50 an hour, but they have been working at these companies for years. Plain Joe (not Joe the Plumber) who started to work at GM 'yesterday' does not get paid that amount per hour. The average salary at GM is around $40,000, according to various sources. Orange: The foreign competitors—Honda, Toyota, and Kia are fairly recent in the U.S. and, therefore, cannot be expected to have the same level of legacy costs as the Big Three. They are located mostly in the southern parts of the U.S. where the cost of living is much lower. In addition, the critics have failed to tell the public that the foreign automakers had received considerable amount of U.S. taxpayers' money to build their U.S. plants.

Senators from the South want workers at the U.S. automakers to be paid the same as those at the foreign automakers. The Senators who are from states where factories of foreign automakers are based voted against providing loans to the U.S. automakers. These Senators included James DeMint of South Carolina, Bob Corker of Tennessee, Richard Shelby and Jeff Sessions of Alabama. According to Bloomberg.com, Germany-based Daimler AG owns two assembly plants in Alabama. These two plants are operated by Japan-based Honda and South Korea-based Hyundai. South Carolina also houses a Germany-based Bayerische Motoren Worke AG.

There is nothing wrong in having foreign automakers in those states or in the United States more broadly. What is disturbing is how disingenuous these Senators have been with respect to their opposition to assisting the U.S. automakers. These Senators claimed that their opposition to the loan to the U.S. automakers was based on their belief in the market mechanism, a mechanism that operates naturally and free of government interference, including government subsidies. The problem is that these Senators have not been true to these principles.

On December 17, 2008, Ed Wallace of BusiessWeek.com reported that Alabama gave Mercedes-Benz $250 million to build its plant there. The plant created about 1,500 jobs. This is a situation where the state of Alabama gave $250 million in various incentive schemes in return for 1,500, which puts the price per job at $168,000. This is certainly more than what workers at the U.S. automakers in Michigan make. The state of Tennessee gave Volkswagen $577 million in tax incentives to build its plan there. Mississippi gave $284 million to Toyota; and Georgia gave $324 million to Kia. These are all foreign companies that have gained a significant comparative advantage over their American competitors because of the subsidies that those states had given to them.

What is one to make of these contradictions from these Senators? Looking at these Senators' behavior in the U.S. Congress and national public affairs programs, it is clear that they are waging a war on unions and the rest of the country. They are blaming the UAW when in fact it is the U.S. economy as well as the global economy that is at heart of the problem. Toyota recently announced that it is expected to incur a loss in its auto operations of 150 billion yen this year, a figure that translates to $1.7 billion, according to The New York Times. China and industrialized countries such as Germany and England have provided financial assistance to their automakers and other important sectors. Sweden recently provided $3.5 billion to Volvo and Saab to help them cope with this global economic crisis. So, at the risk of being repetitive, the problem with the Big Three in Michigan is not the UAW; it's the national and global financial crisis.

The Senators and other critics of federal loans to the U.S. automakers understand these differences (I must assume), but have chosen to ignore them so that they can focus on destroying unions. By destroying unions in this country, they will essentially destroy the working class. Senators, please, stop your war on the working class. Please.

Figaro Joseph is a PhD candidate at the Josef Korbel School of International Studies at the University of Denver. He can be reached at fjoseph(at)du.edu. Related:

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