The Case for Kenosha
COURTESY OF MICHAEL UNDERHILL
Down the hall from the marble plaque celebrating the commitment of a Midwestern union local to the freedom struggle of the Rev. Martin Luther King Jr., past the collages made by the children and grandchildren of proud blue-collar families highlighting more than a century of carmaking in their community, next to the posters celebrating the election of Barack Obama, a woman wearing a Yes We Did! T-shirt hands white postcards to the hundreds of shellshocked workers who pour into the United Auto Workers (UAW) Local 72 hall on the north side of Kenosha, Wisconsin.
Less than a week earlier, on April 29, the same workers had gathered at the same hall to cast 89 percent of their votes for a package of pay and benefits cuts that they were promised would "keep manufacturing jobs here in the United States." Within hours of the vote, Chrysler was forced into bankruptcy proceedings that were portrayed by Obama as a painful but necessary step to give the company "a new lease on life." Then, in bankruptcy documents describing "the new Chrysler," came the news: the company, which had already accepted more than $4 billion in federal loans and which was maneuvering to collect $6 billion more, is preparing to use this largesse to jettison the Kenosha plant and seven others while ramping up production in Mexico.
The white cards spell out the plight and the hope of more than 800 workers and their families in Kenosha, a Lake Michigan waterfront city that started making cars during the presidency of Teddy Roosevelt. "Dear President Obama," they read, "I call on you today to intervene to save the Chrysler Kenosha Engine Plant.... It would be a betrayal of your goal of investing in America if Chrysler is allowed to close the Kenosha plant and import the very same engine from Mexico."
"I've got to get a card!" shouts Jenn Jackson, an elected county supervisor who is a stalwart of the local Democratic Party, as she nudges past folks carrying handmade Save Kenosha signs. "We've got to get a message to our president about this. I don't think he understands what is at stake."
Getting a clear read on the extent to which Obama understands what is at stake in Kenosha, and the extent to which he might be willing to intervene to avert a plant closure in this auto town, will go a long way toward answering questions about the administration's commitment to save the struggling auto industry. The ongoing effort to restructure Chrysler has served as a precursor of the bigger fight over the future of General Motors, the battered behemoth of American manufacturing that has already collected $15.4 billion in federal loans but is still losing $113 million a day. GM faces a June 1 deadline to present the administration with a restructuring plan that cuts costs and reduces debt in return for more federal support. There are already strong indications that GM will follow Chrysler's lead by shutting plants and laying off US workers while using bailout bucks to shift even more production to foreign plants. With "fixes" like these, it's tough to imagine how Obama plans to fulfill his campaign promise to "revive and strengthen all of American manufacturing."
Since his election last fall, the president has taken workers in Kenosha and other auto towns across the Great Lakes states on a wild ride. Elected with the highest levels of support accorded any Democratic presidential contender in decades by the working families of Midwestern battleground states, Obama headed to the White House promising to tip the balance away from Wall Street and toward Main Street. UAW members took that commitment personally. Their industry had shed 300,000 jobs during George Bush's presidency, the result of a toxic combination of free-trade policies; poor planning and absurd choices by corporate managers; skyrocketing healthcare and pension costs; and a scorching credit crunch. Factory shutdowns and layoffs made the recession a painful reality in the industrial heartland long before it touched most of the rest of the country. The unemployment rate in Kenosha, for example, moved into double digits months ago.
If Republicans got the blame for hard times, however, Democrats were saddled with the expectation that they would deliver a turnaround. "Bush was the bankers' president," explains Bill Cobb, a 65-year-old Kenoshan who has adjusted to the downturn by delivering pizzas. "Obama's our president." But even as Obama was preparing to take office, he surrounded himself with economic advisers who seemed at best disconnected from industrial America. Oregon Democratic Congressman Pete DeFazio says the president picked economists who were "very much part of creating the problem." Instead of responding to the recession with an infrastructure-investment and productivity-driven recovery plan, DeFazio complains, the president's team kept allocating money for banks and insurance giants while manufacturing industries ground to a halt. The administration's auto industry task force does include a few members who should "get it" regarding the need to revitalize American manufacturing--particularly economist Jared Bernstein, formerly of the worker-friendly Economic Policy Institute, and Ron Bloom, who boasts unique experience as both a former investment banker and special assistant to the head of the United Steelworkers union. But with Treasury Secretary Timothy Geithner and National Economic Council director Lawrence Summers serving as co-chairs--and financier Steven Rattner as "auto czar"--there is no question that it's the Wall Streeters who dominate the task force. Joel Kotkin, a presidential fellow in urban futures at Chapman University, notes, "Very few Obama appointees have ties to the country's core productive sectors: manufacturing, agriculture, energy. Veterans of investment banking, academia or the public sector, they seem to see the economy more in terms of making media, images and trades--as opposed to actually making things."
Obama appeared to follow the Bush administration's lead at first, focusing on bailing out banks while tossing bones--enough money to avoid collapse but no more--to the auto industry. Finally, as winter turned into spring, the White House told the auto companies that Chrysler and General Motors would have to radically remake themselves if they wanted to continue receiving government support. It's not that the demand for reorganization was unreasonable; just about everyone agrees that US auto companies have been miserably managed for decades. What was unsettling was the recognition that while banks and insurance conglomerates are seen as "too big to fail," the auto industry is not similarly treasured. The kid-glove treatment accorded Wall Street was replaced by the hard line of an administration that seems, Kotkin warns, "if not openly anti-industrial" then at the very least "anxious to embrace a decidedly postindustrial future."
That dark assessment will be put to the test in Kenosha. More than in most plant-closing battles in recent history, this one is the canary in the coal mine. What happens in Kenosha may foretell the fate not just of its workers, and not just of Chrysler, but of the auto industry as a whole. "If we can't save an engine plant that has won all the awards for quality and efficiency, that has been modernized and supported by the city and the state, that has workers who have been willing to cut their pay and benefits and change their work rules in order to keep the work here, what auto plant are you going to save?" asks Rudy Kuzel, a longtime worker on the line in the Kenosha plant who in the 1980s and early '90s served as the president of Local 72. "The government's coming in, saying we have to shape these companies up and providing the money to do it. That's good. That's what we want. But if the companies use the government support, the tax money, to shut factories and move the jobs out of the country, what are we saving? The company name?"
The company name doesn't mean much to Kenoshans. They've called their auto plant by many names since 1900, when Thomas Jeffery bought a bicycle factory on the waterfront and later started mass-producing vehicles with two groundbreaking innovations: steering wheels and front-mounted engines. Historians say it was in Kenosha, not Detroit, that cars began "to look like cars." Those small, inexpensive, sometimes homely vehicles, known as Ramblers but jokingly referred to as Kenosha Cadillacs, were made by the Thomas B. Jeffery Company, then by Nash Motors, the Nash-Kelvinator Company and the American Motors Company, which George Romney (Mitt's dad) made an American success story. AMC partnered with the French firm Renault to pioneer production of fuel-efficient cars in the 1970s and eventually sold out to Chrysler in 1987.
Through most of the past century, the constant in Kenosha has been not a particular company but the union. Already organized with the American Federation of Labor when the founding convention of the UAW was held in 1935, Kenosha's Local 72 has been at the heart of the UAW ever since--and the UAW has been at the heart of a community that still proudly calls itself a "labor town." The union's passion preserved Chrysler's presence in the city in the late 1980s, when Local 72 members, working with the Rev. Jesse Jackson and other national activists, battled plans to shutter the plant. Gone are the days when more than 16,000 families took home AMC checks, but the 800 families who work for Chrysler still pump more than $50 million annually into the local economy. And Local 72 remains an essential player in Kenosha politics. Obama was just the latest politician to covet, and eventually benefit from, the UAW endorsement in this tightknit town of 90,000.
Now Local 72's future rests with Obama. Even before the president took office, Chrysler collected a $4 billion federal loan (compared with $12 billion for much larger GM) as part of the initial auto bailout. But no one thought that would be enough. Chrysler, with 54,000 employees worldwide, spent the first four months of Obama's presidency teetering on the brink of bankruptcy. The administration promised more money but only if Chrysler's lenders agreed to slash nearly $7 billion in secured debt. The four big banks that held 70 percent of the debt agreed to erase it for $2 billion, but a group of hedge funds that control roughly 30 percent of the debt held out for more money.
At the behest of the administration, Chrysler went into bankruptcy to force the hand of the hedge fund managers and clear the way for an alliance with Italian automaker Fiat. "No one should be confused about what a bankruptcy process means," Obama said. "This is not a sign of weakness but rather one more step on a clearly charted path to Chrysler's revival." Initial media reports even suggested that workers would have a real say in the direction of the new company, although that assessment proved to be overblown. A UAW-aligned healthcare trust fund will technically have a majority stake--in recognition of healthcare and pension concessions made by the union--but that does not translate into actual control. The prime movers will be Fiat chief executive Sergio Marchionne, a dynamic figure who promises fuel-efficient technology, cooler cars and better management, and the US government, which is offering as much as $6 billion in additional loans to the new company.
That money is the key to Kenosha's future, and to that of nearly two dozen Midwestern auto towns. The industry's instability has shaken the Great Lakes region, creating some of the highest unemployment figures since the Great Depression. Yet the strings that have been attached to the bailouts seem to favor downsizing-obsessed managers and foreign investors looking for cheap entry into the US market.
Obama makes a point of saying he does not want to "run" car companies. "The sooner we can get out of that business, the better off we're going to be," he argues. Unfortunately, if the government simply throws money at manufacturing firms and walks away, there are no guarantees that even the most skilled workers will keep their jobs or that their industry will make its future in the United States.
That became evident when Chrysler's lawyers filed the bankruptcy paperwork in which officials proposed to sell off--or, in all probability, close--eight Midwestern factories, including the Kenosha plant. An argument will be made that some of these plants are aging and are not on line to manufacture new or essential products. But if this country is ever going to get serious about building a green economy, the best place to start is with the efficient plants and well-trained workforces of the Big Three. And the Kenosha plant was poised to be a lead facility in Chrysler's effort to produce advanced, fuel-efficient engines.
"We've had hundreds of millions of dollars invested since 2000 to modernize this plant. We have new machinery. We have workers who were pioneers in team-based production and have been getting ready to produce the next generation of engines," says Local 72 president Glenn Stark. In 2007, when Chrysler negotiated more flexible work rules at the plant in return for a promise to produce the company's new six-cylinder engine in Kenosha, Local 72 members agreed. "We knew Chrysler was having a hard time. We made sacrifices to help the company," explained Stark. "Now Chrysler's reorganizing. It's finally got some money, thanks to President Obama, and we're as ready as any plant in the country to move into this new era. But they're telling us the Phoenix isn't coming here."
Where is that new engine going to be produced? Some will be made at a Chrysler facility in Trenton, Michigan. The rest will be produced at a plant under construction in Saltillo, Mexico, where wage-and-benefits demands are dramatically lower. GM has similar plans; the company circulated an outline for restructuring that would nearly double the proportion of GM cars sold in the United States but produced at plants outside the country.
You don't want to get UAW members started on NAFTA and the complicated web of trade policies that have devastated their industry. These workers are not naïve; they know that autos and auto parts are produced in Mexico, and that this will continue to be the case. But what they can't figure out, says John Drew, a former Chrysler employee who works for the UAW, is why, with the government preparing to spend billions of dollars to save the auto industry, Chrysler is preparing to abandon a high-performing US engine plant and move the work to another country. That's not just a betrayal of American autoworkers, says Drew. "That's a betrayal of American taxpayers."
Drew is onto something. Washington began spending trillions of taxpayer dollars under Bush to save the economy and has continued to do so under Obama. But even the most ham-handed of these interventions involve policy choices: Wall Street versus Main Street, firms seen as "too big to fail" versus those that are not so graced, old economy versus new. No one really expected Bush to "get it," let alone to do the right thing. But Obama, the former community organizer who campaigned in auto plants as he sought the presidency, is supposed to be different. He has spoken well and wisely about how "the fight for American manufacturing is the fight for America's future." But how can US manufacturing survive when Obama agrees to cut loose billions of dollars and then muses, "I don't think that we should micro-manage" the corporations that collect that money?
The president may not be able to save every auto plant and every job. But if he can't save plants like the one in Kenosha--or, more precisely, if he will not choose to save them--then he will be signaling that his approach is hands-on when it comes to writing bailout checks but hands-off when it comes to what is done with them. That signal would be a dark and dangerous one, not merely for those who may cling to pieces of the old economy but for those who imagine that a new economy will provide manufacturing jobs and the family-supporting pay and benefits that have traditionally gone with them. On the other hand, if Obama and his team signal that government investment must yield tangible and smart results--factories saved, jobs retained and industries retooled--then he will begin outlining a policy for keeping the auto industry viable and, more generally, for ensuring the future of American manufacturing.
As Kuzel speaks, workers and their families rally to save their plant. A little boy waves a sign that asks, Where Will I Work When I Grow Up?
"People may think this is just about Kenosha or the UAW. But that's what it's really about," says Kuzel, motioning toward the sign. "We're about to decide where America's going to work when it grows up."