The Chrysler and General Motors restructuring processes, which will result in an unprecedented number of auto plant closings in the United States, the layoffs of tens of thousands of auto workers and of an estimated 100,000 employees of auto dealerships has the potential to deliver a devastating blow to local economies in communities across the Great Lakes states and the Upper Midwest.
The process is being driven by the Obama administration’s auto-industry task force, which is made up of investment bankers and proponents of off-shoring who have little or no experience with manufacturing. The task force, which is coordinating the investment of tens of billions in U.S. tax dollars in an effort to “save” the domestic auto industry is overseeing a process that will result in a dramatic shift of manufacturing from the hard-hit factory towns of the United States to foreign countries.
So where is Congress, which unlike the auto task force includes a number of representatives of manufacturing communities and working families?
That’s exactly what Ralph Nader and Multinational Monitor editor Rob Weissman are asking.
“The government-led restructuring of Chrysler and General Motors has been twice delegated — first by Congress to the Executive, and then by the President to a task force. Formally made up of cabinet officials and high-level political appointees, control over the process has in fact been delegated, without adequate standards, to a handful of special advisers,” argue Nader and Weissman, who have long histories of challenging misguided auto-industry policies. “Thus has the future of a centerpiece of American manufacturing capacity been delegated to a small unelected and largely unaccountable group arranged to avoid the Federal Advisory Committee Act.”
In an urgent letter dispatched to Senate Committee on Banking, Housing and Urban Affairs chair Chris Dodd, D-Connecticut, and House Committee on Financial Services chair Barney Frank, D-Massachusetts, Nader and Weissman write, “At the very least, the Congress must exercise its oversight powers. It should, at the very least, urge the Obama administration to defer any plans for bankruptcy or other irreversible moves until after the task force plan has been subjected to close and careful review via thorough Congressional hearings. If delay requires some additional bridge funding for GM, surely such funding with suitable equity positions is appropriate, in light of the potential risks of bankruptcy to millions of families and further governmental relief programs, and the vastly greater sums that have been so recklessly expended on the virtually condition-free Wall Street bailout.”
Nader and Weissman explain that, “Among the most worrisome components in the restructuring plan is the willingness to sacrifice U.S. manufacturing, and permit GM to increase manufacturing overseas for export back into the United States. Recent news reports indicate that the company will rely increasingly on overseas plants to make cars for sale in the United States, with cars made in low-wage countries like Mexico rising from 15 to 23 percent of GM sales in the United States. For the first time, GM plans emerged to export cars from China to the United States, in what may be a harbinger of the company’s future business model; although the company has stated after negative publicity that it will not export from China, there is no evidence that it is abandoning the business model of outsourcing production for the U.S. market, and questions remain about how binding is the recent commitment not to export to the United States from China.”
The pair pose a number of questions that the House and Senate should get answered before the the branch of government that holds the power of the purse — and thus the authority to authorize bailouts of American industries — authorizes the administration to pour billions into the accounts of corporations that are closing modernized factories, laying off skilled workers and shuttering car dealerships.
“Congress should hold deliberative hearings to protect taxpayers’ investments and seek answers to these questions, among many others:
* Is the task force right in pushing for elimination of as many brands as it has demanded?
* Is the task force asking for too many plants to close?
* Do GM and Chrysler really need to close as many dealerships as have been announced? Is the logic of closing dealers to enable the remaining dealers to charge higher prices (See, for example, Peter Whoriskey and Kendra Marr, “Chrysler Pulls Out of Hundreds of Franchises,” Washington Post, May 15, 2009); and if so, why is the government facilitating such a move? Is it reasonable and fair for GM to impose liability for disposing of unsold cars on dealers with which it severs relations, as Chrysler has apparently done?
* Has the task force evaluated the social ripple effects on suppliers, innovation, dealers, newspapers, banks and others that hold company stock and/or are company creditors, and other unique harms that might stem from bankruptcy?
* Would a government-driven bankruptcy process comport with the rights of owner-shareholders?
* Why has the task force maintained the Bush administration-negotiated obligation for unionized auto workers at GM and Chrysler to accept wages comparable to those in non-unionized Japanese company plants in the United States? This requirement is especially troubling given the low contribution of wages to the cost of a car (10 percent), and that it may set off a downward spiral of wages, with the non-union plants no longer needing to compete with union wages, and union wages following those in non-union plants.
* Is the task force obtaining guarantees that, after restructuring with U.S. taxpayer financing, GM cars sold in the United States be made in the United States? If not, why not?
* How will bankruptcy affect GM’s overseas operations, with special reference to China and GM corporate entanglements with Chinese partners? Are they and their profits being exempted from the restrictions and cutbacks imposed on domestic operations? If there is such a disparity, is it reasonable and unavoidable?
* How will bankruptcy affect GM’s obligations to parties engaged in pending litigation in the courts with GM regarding serious injuries suffered because of design or product defects?
* What guarantees is the task force obtaining to ensure that the GM of the future invests in safer and more fuel efficient vehicles, and what investments will the new company make in ecologically sustainable technologies? How will a potential bankruptcy filing affect, ignore or preclude any such future investments and commitments?”
Nader and Weissman are right.
It makes sense for the federal government to follow the lead of other industrialized nations and assure that vital manufacturing sectors — and the communities that rely on them — survive a global economic downturn.
As such, it is not the federal intervention but the quality of that intervention that is in question.
The Obama administration’s approach is wrongheaded and destructive to the future prospects for job retention and creation in the auto sector, and for the communities that rely on this industry as an essential underpinning of their local economies. If implemented, it will lead to spikes in unemployment, dislocation and a weakening of domestic manufacturing and the broader real economy — as opposed to Wall Street’s paper economy, with its enthusiasm for downsizing, layoffs and off-shoring.
Congress has the authority, and the responsibility, to make sure that an unelected, unaccountable and profoundly misguided auto task force does not steer the nation’s manufacturing sector into oblivion.