Lemon Socialism or Lemonade

N. Lichtenstein: Lemon Socialism or Lemonade?

ALTHOUGH BOTH the U.S. Treasury and the United Automobile Workers are soon to own a controlling interest in General Motors and Chrysler, no one in the union, among the Democrats, or on the American left is cheering. For decades the UAW pushed and prodded Detroit auto executives—across the bargaining table and on the picket line—to win a bit of leverage for the union when it came to product development, plant location, and new investment. But the answer was always a big no. Indeed, when on the eve of the Second World War, Walter Reuther, UAW’s legendary postwar president, prodded General Motors to convert its auto assembly lines to warplane production, he got the big brush off. “If Reuther wants a job in management, we’ll give it to him,” replied GM president Charles Wilson, but as a union official, production decisions were none of his business.

Likewise, government officials have also had a hard time influencing Detroit. It has taken decades for Congress and the EPA to prod the companies into adopting even modest design safety mandates and mileage standards. Ralph Nader got his start criticizing cars that were “unsafe at any speed.” Forty-five years later, his acolytes still have plenty of work to do.

But money talks, and the government and labor unions—who have long sought a kind of shared governance of these corporations—now have control of two of the great American manufacturing icons—Chrysler and GM. If this is lemon socialism, well at least there is always the possibility of making some lemonade.

But President Obama says he does not want to be an automotive engineer, which means that despite their loss of financial control, the old management team, after just a few symbolic firings, will be allowed to work its will at both companies. For Chrysler, this means, at best, extinction within the larger Fiat, which will absorb the old firm. As many as six factories are to be shuttered, although the Chrysler dealer network will remain largely intact because it is essential to get Fiat products into the North American market.

For General Motors workers, Obama’s abdication represents a social and economic disaster, both on the production and distribution sides of the business. GM will slash its dealer network by 42 percent and possibly layoff 21,000 additional production workers. Over the last two decades, GM has already shed tens of thousands of jobs—mainly by creating spin off companies that replace formerly integral elements of the company’s supply chain, including parts plants, axel foundries, and most recently its finance arm, GMAC. Now, under the reorganization plan demanded by team Obama, the company proposes to double the number of vehicles it will import from overseas factories from 372,000 to 737,000 within four years. That is the equivalent to the annual output of four domestic assembly plants. By 2014, GM will be importing, under its own brand name, about one quarter of all the cars it sells in the United States. So even if all goes well, GM will begin to look like Nike, a company which designs shoes and apparel at home but outsources everything else to factories owned by Chinese entrepreneurs in the Far East.

If President Obama wants a viable domestic auto industry, one that actually employs hundreds of thousands of Americans with well-paying jobs, he is going to have to do a bit of social engineering. In years past, the UAW would have had a raft of ambitious plans from which the president and the public could choose: plans to convert auto plants to the production of houses and railroad cars, plans to build small cars even before Volkswagens were popular, plans to expand social security and establish a system of national health insurance that would simultaneously redistribute wealth and relieve the auto companies of what Wall Street now calls their burdensome “legacy costs.”

Unfortunately, the UAW is today but a shadow of its old self. With but 430,000 workers, the union has less than a third of the membership it commanded in the late 1970s. Indeed, the UAW–whose leaders once proclaimed it the “vanguard in America”–is today practically bereft of social vision. Ironically, it was yet another union defeat, couched as an effort to save the industry, that set the stage for the millions of auto company shares the UAW will soon inherent. Eighteen months ago, the Detroit Big Three insisted that they had to put a cap on their health care legacy costs in order to compete with Toyota and Honda. So the UAW agreed to take responsibility for a health care trust fund into which the companies would pay nearly a $100 billion over the next decade. But now that at least two of these companies are broke, the UAW will have to take half payment in shares that are nearly worthless.

What is clear today is that the preservation of the auto companies, as brands or actual manufacturing entities, stands at variance to the maintenance of a viable domestic auto industry—not to mention the well being of the workers who build the cars and trucks. So the first thing the UAW should do is to rouse itself from passivity and shout a loud “NO!” to Obama’s bankruptcy/bailout plan. And if some courageous Democrats—burned by the Treasury Department’s appeasement of the banks—join that blue-collar chorus, so much the better. A couple of plant occupations, along the lines pioneered by the Chicago workers who occupied their window and door factory, would add a bit of frisson to the ensuing debate over the purposes to which a set of far-from-private American companies are permitted to spend billions of taxpayer dollars. Whether Obama and his economic team like it or not, we are now revisiting the Depression-era terrain upon which phrases like economic planning, industrial policy, and social reconstruction take on real meaning. We should be eager to rejoin that debate.

Nelson Lichtenstein is the author of The Retail Revolution: How Wal-Mart Created a Brave New World of Business (Metropolitan Books/Henry Holt).